Introduction to IT outsourcing

What is Outsourcing?

“Outsourcing is the use of external agents to perform activities that were previously performed within the organization”.

For the IT organization, there are two kinds of outsourcing, IT outsourcing and business process outsourcing. By IT outsourcing we mean outsourcing the development of relatively large software development projects. For example, hiring a few consultants to serve as internal members of the IT organization is not really IT outsourcing.

Business process outsourcing, on the other hand, can include outsourcing of a call center or help desk function, or even the computer security function.

Why Outsource?
IT outsourcing is generally done for cost savings, to achieve a better focus on the core business, or because the internal IT function is considered to be inefficient, ineffective or incompetent. From an economic standpoint, if an IT activity can be considered a commodity, then there is little justification for performing that activity internally. In these cases a focused vendor should be able to provide the service at a higher level of quality, lower cost, or both . In other words, outsourcing takes advantage of the economies of scale of another business that specializes in that domain.

Who should Outsource?
The needs of each organization are different and a lot of points need to be considered before taking such a decision. It is impossible to generalize. Sound management judgment is necessary to make the decision.

Whom to Outsource?
The vendor must be a trusted one. Check for references. You also must be very careful about protecting your brand both through accountability for the actions. Attention must be paid to the legal organization of the potential of the vendor. Whether the outsourcing is domestic or foreign, the chemistry and culture of the vendor and client have to mix. Remember that the vendors to whom you outsource should view your company as a long term partner rather than a short term client. [ A majority of work is outsourced to IT savvy destinations like . You can also outsource to . There are several application service providers available.

How to Outsource?
Many companies fail in the execution of strategic outsourcing. There are a number of ways in which they can fail. For example, organization culture mismatches lead to failure. In addition, morale damage may occur due to any layoffs that might be involved.
Yet another reason for failure is outsourcing software for the wrong reasons. For example, outsourcing cannot absolve you of your responsibility. You can’t outsource your problems.

For each successful project, there was a detailed process of project definition and specification development. This ensured that the project methodology, scope, schedule and deliverables were unambiguously defined and understood by both parties. Contract negotiations served as a mechanism for building shared understanding.

Related Links

How outsourcing is a cost effective solution for your application development needs
Maintaining quality of software in outsourcing
IT outsourcing services for custom software development

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