IT outsourcing is a popular trend that has been around for years. It's also used as a political football since many individuals equate IT outsourcing with offshoring (outsourcing jobs overseas). Regardless, because of the advantages IT outsourcing offer companies, outsourcing is here to stay.
IT outsourcing can be defined as using information technology to contract or subcontract work to companies or contractors outside of the organizational structure. With the internet and information technology, geographically dispersed individuals can interact and collaborate as though they were co-habitants in a downtown highrise. IT outsourcing simply takes advantage of this reality.
By outsourcing work to the lowest cost producer as opposed to paying wages and benefits to employees, companies reduce their operating cost. Also, the company or contractor on the other end of the contract often specialize in their field of expertise. So, companies save money as well as get a high quality of service.
Loyalty and relationship building sometimes suffers when companies outsource. The companies who provide the outsourcing services often have multiple clients. So, they are not loyal to any one company or the employees who work for that company.
Generally, companies outsource the function which does not represent their core competency. For example, a software development company may outsource the payroll function because payroll has nothing to do with software development.