Information on IT Outsourcing
IT outsourcing is the transfer of IT related tasks, services or projects to an external vendor. Businesses may outsource domestically, near-shore, onshore or offshore. The strategy used will depend on a number of factors including cost, opportunity and resource availability and ability. Outsourcing creates a partnership between the vendor and the client company and can provide positive potentials such as shared financial risks; however, outsourcing can be costly if strategic analysis of outsourcing is not thoroughly completed.
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Benefits
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In addition to realizing cost-saving benefits, companies engaging in IT outsourcing leverage themselves to compete with larger or more established competitors. Businesses may outsource to companies who specialize in specific project types and who are able to focus on the outsourced tasks. Companies may start projects more quickly because in-house backlog is eliminated or becomes irrelevant since waiting for in house staff to complete other pending projects is no longer necessary. Additionally, outsourcing noncore tasks to external companies allow companies to focus attention on core products and increase efficiency.
Geography
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In a 2010 press release, referring to one of its recent "Top Ten" analyses, Gartner, Inc. crowned China and India the undisputed leaders of offshore IT and business process outsourcing services in Asia. Countries such as Australia, New Zealand and Singapore made Gartner's top ten list but cost benefits for these countries are not as lucrative as India and China. The other countries on Gartner's top ten were Malaysia, Indonesia, the Philippines, Thailand and Vietnam.
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Considerations
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Some considerations for IT outsourcing include project goals and costs, project time frame, the service company's credentials, cultural and language barriers, how security will be maintained and how the project responsibilities will be distributed. Human cost is also an important consideration. In an article discussing the cost of outsourcing, CIO.com mentions that employee response to outsourcing is often overlooked. The concern is that the psychological impact on internal employees could lead to reduced employee morale and lowered internal productivity if employee communications regarding outsourcing are not handled appropriately.
Misconceptions
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Computerworld.com mentions that businesses are now aware that outsourcing is not synonymous with off-shoring. While low-level skills such as coding provide opportunities for savings in wages when these tasks are sent to countries where the same skills are less costly, navigating cultural and language barriers may present difficulties. To avoid the difficulties that outsourcing a project off shore may present, businesses may choose to keep certain tasks such as management and system architecture onshore.
Warning
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If you are considering outsourcing, keep in mind that external employees will be privy to your company's data and the servicing company may not necessarily have security policies that meet your company's security efforts. Security issues can develop even at the coding level. PC World blames the rising tide of software vulnerabilities on code outsourcing. Companies considering outsourcing for long term strategies must consider security because when an IT area or set of tasks are outsourced, another company obtains control of the originating company's processes.
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References
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Comments
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very nicely written article. covers all the different aspects of IT outsourcing. It would be good if there will be more information on the cost savings that the companies have when they outsource.
