IT outsourcing is a phrase used to describe the practice of seeking resources, or subcontracting, outside of an organizational structure for all or part of an IT (Information Technology) function. An organization would use IT outsourcing for functions ranging from infrastructure to software development, maintenance and support. For example, an enterprise might outsource its IT management because it is cheaper to contract a third party to do so than it would be to build its own in-house IT management team. Or a company might outsource all of its data storage needs because it does not want to buy and maintain its own data storage devices. Most large organizations only outsource a portion of any given IT function.
IT outsourcing is the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes.
Outsourcing, which also includes utility services, software as a service and cloud-enabled outsourcing, helps clients to develop the right sourcing strategies and vision, select the right IT service providers, structure the best possible contracts, and govern deals for sustainable win-win relationships with external providers.
Outsourcing can enable enterprises to reduce costs, accelerate time to market, and take advantage of external expertise, assets and/or intellectual property.
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F.A.Q about IT outsourcing
What Is Outsourcing?
Outsourcing is the process of engaging a third party individual or organization outside of your company, either locally or internationally, to handle certain business activities for you. It is a common business practice that allows companies of all sizes to grow as and when they need it, without major risk or investment.
What Is IT Outsourcing?
IT outsourcing is the practice of hiring resources outside of an organization to handle certain information technology functions. Companies often outsource data storage because it is cheaper to contract a third party than to buy and maintain their own data storage devices and facilities.
What are the most commonly outsourced IT functions?
- Web development
- Software and application development
- Website/application maintenance or management
- Technical support
- Database development and management
What are IT Outsourcing examples?
The individual or company that becomes your outsourcing partner can be located anywhere in the world — one block away from your office or on another continent.
A Bay Area-based startup partnering with an app development team in Utah and a call center in the Philippines, or a UK-based digital marketing agency hiring a Magento developer from Ukraine are both examples of outsourcing.
Why do companies outsource?
Here are a few common reasons that can help explain the trend:
- To reduce cost. More often than not, outsourcing means saving money. This is often due to lower labor costs, cheaper infrastructure, or an advantageous tax system in the outsourcing location.
- To access skills that are unavailable locally. Resources that are scarce at home can sometimes be found in abundance elsewhere, meaning you can easily reach them through outsourcing.
- To better use internal resources. By delegating some of your business processes to a third party, you’ll give your in-house employees the opportunity to focus on more meaningful tasks.
- To accelerate business processes. When you stop wasting time on mundane, time-consuming processes, you’ll be able to move forward with your core offering a lot faster.
What are the benefits of outsourcing?
- Reduced expenses. You get to enjoy significant cost savings when you outsource to a country with lower production costs: a lower cost of living for employees, meaning lower salaries, as well as lower infrastructure and operational costs.
- Access to a global talent pool. Outsourcing allows you to reach professionals that may be in short supply or unavailable locally.
- Significant time savings. When you partner with an outsourcing vendor, you don’t have to advertise for, interview, select, and train new in-house employees, all of which can be very time-consuming.
- Ability to upscale fast. You’ll be able to work with new clients and take on new projects without having to spend time on the processes described above.
- Uninterrupted workflow. Your business will function round the clock thanks to the time difference between the in-house team and the outsourcing vendor’s team.
What are the disadvantages of outsourcing?
- Time difference. This can be a curse as much as a blessing, and in the worst cases it can significantly hamper the communication flow between you and your outsourcing partner.
- Language barriers can result in miscommunication and wasted effort unless you and the vendor you partner with have at least one language in common.
- Different work habits, which can be the result of different cultural environments, can interrupt your established workflow and will definitely need getting used to.
- Long distances between you and the outsourcing vendor can turn business trips into an expensive and tiresome experience.