In business outsourcing is the “practice of hiring a party outside a
company to perform services or create goods that were traditionally
performed in-house by the company’s own employees and staff,” (Twin,
2022). One of the main reason a company outsource is to reduce and
control the cost of operation and improve the businesses focus.
Outsourcing also increases efficiency for time consuming functions,
that the company may not be able to allocate resources for. Offshore
outsourcing has the potential to lower labor costs in countries where
cost of living in developing countries can significantly help to boost the
company’s profits. The developing countries that gets offshoring and
considered to be the best includes India, China, the Philippines, Poland,
Hungary, Ukraine, Brazil, Argentina, Egypt, and South Africa.
One of the risks of offshore outsourcing is the lack of control. A
business can maintain control of an in-house team that execute a
business process, however there is no control when an external agency
perform these same functions. Offshore outsourcing of various
information system functions will be associated with a few risks with
regards to confidentiality and privacy. The laws and regulations may
differ from country to country, which can make it difficult for
companies to ensure the privacy of their customers’ personal
information is adequately protected. Companies face another risk of
offshore outsourcing if providers does not have the same commitment
to privacy and security, this could lead to breach of privacy and the
mishandling or leak of information.
An organization has the duty or responsibility to protect the
privacy of its customers personal information by keeping up-to-date
protection on their computer database to prevent information from
being compromised and limit exposure of what information can be
accessed through the internet. It is the responsibility of the organization
to assure that any policy, plan, or procedure is written and implemented
in accordance with and designed to maintain compliance with federal,
state, and regulatory laws and policies. Any data breach to an
organization will cause considerable damage to the organization’s
reputation. The intellectual property of an organization is essential to
competitive advantage and success of the organization, therefore
confidentiality and privacy should be protected by “(1) identify and
classify the information to be protected, (2) encrypt the information, (3)
control access to the information, and (4) train employees to properly
handle the information,” (Romney et al., p. 369, 2021).
To mitigate risks, an organization should carefully select the
appropriate offshore outsourcing partners and ensure that a robust
contract and security measures are in place. Prior to offshore
outsourcing a thorough risk assessment of the company should be done
to ensure that they can manage the outsource information systems
functions. An assessment conducted should consider the laws of the
home base country as well as the partnering company country of any
history with data security and privacy. The organization should ensure
that the partnering company implement the appropriate security
controls to protect customer information that is in line with their own
and with industry standards. The current industry standard utilizes ISO
27001 framework, which is “an information security management
standard that structures how businesses should manage risk associated
with information security threats; including policies, procedures and
staff training,” (ISO 27001, Information Security Management Standard
Simplified, 2022). The ISO 27001’s framework is an international
standard for information security that outlines the best-practice
approach, which helps an organization to manage their information
security by addressing the people, processes, and technologies.
References:
Bhadja, D. (2022, May 18). Best Offshoring Destinations. Valenta AI.
Retrieved December 5, 2022, from https://valenta.ai/best-
offshoring-destination/
Gluck, S. (2017, November 21). Benefits Vs. Risks of Outsourcing IT
Services. Small Business - Chron.com. Retrieved December 6,
2022, from https://smallbusiness.chron.com/benefits-vs-risks-
outsourcing-services-2504.html
ISO 27001. (n.d.). Retrieved December 6, 2022, from
https://www.itgovernance.co.uk/iso27001
ISO 27001, Information Security Management Standard Simplified. (2022,
May 24). ISMS.online. Retrieved December 6, 2022, from
https://www.isms.online/iso-27001/
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2021).
Accounting Information Systems (15th ed.). Pearson Education, Inc.
Twin, A. (2022, June 18). Outsourcing: How It Works in Business, With
Examples. Investopedia. Retrieved December 5, 2022, from
https://www.investopedia.com/terms/o/outsourcing.asp
