The word outsourcing is often heard in the world of business today. It is something which has affected the business of almost every nature and every nation. Outsourcing is occurring in almost every country of this world to some extent. There are some leader countries in this field of outsourcing such as India and China. Before moving towards the topic of this article let us first understand what outsourcing is.
What is Outsourcing?
When discussed in simple words outsourcing is simply "a formal agreement with a third party to perform a service for an organization". A more comprehensive definition for outsourcing would be that outsourcing is the concept of taking internal company functions and paying an outside firm to handle them. It is basically done for the following major reasons:
-To save money in terms of lowering costs
-To improve quality
-To free company resources for other activities such as focusing more on competencies
The concept of outsourcing began with the data-processing industry and today it has spread to vase areas which comprise of tele-messaging and call centers. It would not all be wrong to say that outsourcing is the surge of the next generations. Another name used for outsourcing is off shoring which has the same meaning as outsourcing.
Technically speaking, outsourcing is not merely the contract with a third party to perform a service for an organization, but it also involves transferring a significant amount of management control and decision-making to the external supplier. The process of outsourcing is very much formal like other business processes and it always includes a considerable degree of two-way information exchange, coordination, and trust.
The concept of outsourcing gained popularity in the mid 1990?s since then the trend of outsourcing has increased to a great extent. The reason for this increase in the popularity of the concept of outsourcing was the rapid growth in the number of high-tech companies in the early 1990s that were often not vast or large enough to incorporate and run large customer service departments of their own.
Different Techniques of Outsourcing
The concept of outsourcing was adopted by different organizations in different methods such as in some cases the companies who desired to outsource their customer service:
-Hired technical writers in order to write simplified usage instructions of their products
-Index the key points of information
-Contracted with temporary employment agencies to search for, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls.
The most wide spread method of outsourcing being adopted throughout the world is of call centers. The people employed at the call centers answered the query calls of the customers, where the information needed to assist the calling customer was indexed in a computer system. In most cases the agents were not liable to tell the customers that they were not directly associated with the original manufacturer.
Outsourcing IT
Outsourcing IT is defined as using outside vendors to create, maintain, or reengineer IT architectures and systems. The methods of outsourcing that have been discussed earlier in this article are those which have now become old, one of the latest one is outsourcing IT. The process of outsourcing IT involves the effective management and operation of information technology assets of corporations from a remote location. To explain this concept, consider the example of the management of a computer network of a large corporation which includes outage monitoring, alarms monitoring, remote monitoring of data centers, etc. The nature of these operations is complex and requires a real-time support when needed. Hence it can be assumed that such processes cannot be easily outsourced to places where there is a big difference in the time zones. Such tasks are outsourced to comparable time zone locations, which are competitive.
Outsourcing IT- Is it the best option for your organization?
From all the facts discussed above we can gather that outsourcing IT is beneficial for organizations in many ways out such as:
-Lower costs, which might be due to economies of scale or lower labor rates
-Variable capacity
-The ability to focus on core competencies by ridding yourself of peripheral ones
-Lack of in-house resources
-Getting work done more efficiently or effectively
-Increased flexibility to meet changing business and commercial conditions
-Tighter control of budget through predictable costs
-Lower ongoing investment in internal infrastructure
-Access to innovation and thought leadership
-Possible cash influx resulting from transfer of assets to the new provider (The ABC's Of Outsourcing)
All of these facts contribute largely to the efficient working of an organization.
Now the question stand that is outsourcing IT the best option for your organization?
To decide on the answer for this question, the organization who desires to outsource its IT must consider the following aspects first:
-Does the organization posses the internal resources to run existing mission-critical systems efficiently?
If the answer to this question is no, then outsourcing IT would be a good step for the organization. As the organization does not have the internal resources that are required to manage its information systems, outsourcing IT would have a positive impact on the efficient running and operation of these systems.
-Is the organization as a whole ready to consider high degrees of organizational and cultural change, in terms of managing its IT operations?
Only when the answer to this question is yes, outsourcing IT would prove to be beneficial for the organization as the people working in the organization would readily adapt to the changes occurring as a result of the IT being outsourced to a third party and work according to the changes
-Does the organization continually need to develop new business and technical interfaces for its day-to-day operations? If yes, is it really more cost-efficient to deploy internal staff to execute these tasks?
When these questions are discussed, it has been observed that if the organization requires dynamic changes in its business and technical interfaces continually, it is better to outsource its IT in order to manage these dynamic changes
-Based on needs and budget, to what extent will the organization's IT functions be outsourced? (Lam, Outsourcing IT - Is it the Best Option for your Organization)
The organization also needs to decide on the budget and need of its IT functions to be outsourced, it may not be necessary to outsource all of the IT tasks, some minor ones could be performed by the organization itself.
The process of outsourcing IT is not as simple as outsourcing of customer services or other such tasks. It is a complex decision. The decision should be based on a solid understanding of departmental performance. It can be said without doubt that outsourcing IT is the best option for your organization if it lowers costs and increases the efficiency of the IT systems of the organization, such that its productivity increases. It has been found be studies that through the process of outsourcing IT organizations become able enough to formulate competitive strategies that will have a positive impact on their financial positions in the ever competitive global marketplace.
The company which desires to outsource IT must also realize the fact that the total amount of an outsourcing contract is not the exact representation of the money and other resources that the company would be required to spend while it outsource IT functions to a third party.
The Best Places in the World to Outsource IT for organizations
As it has been observed by considering the outsourcing trends in this era, India seems to be leading the outsourcing industry but when we talk specifically in terms of outsourcing IT, United States is the best place, according to A.T. Kearney Global Services Location Index 2005. This index also identified Singapore as the Best IT services business environment. India and China also dominate over the IT services in the Asian region to less extent. Other attractive destinations for outsourcing IT are Central and Eastern Europe but the costs are higher there (The ABC's of Outsourcing). |
