Outsourcing in IT Domain

In a business world defined by speed, expertise, flexibility and innovation, outsourcing has become an effective tool to achieve success and cut costs. Outsourcing refers to the process wherein a company contracts its work to another company to provide services that might otherwise be performed by its own in-house employees.

Many large companies now outsource jobs such as call center services, e-mail services, payroll, accounting and even training. These jobs are handled by separate companies that have adequate expertise in each of these services and are more often located overseas.

The commonly outsourced IT services are generally classified into 4 broad categories

IT Services

include packaged software support and installation, systems integration, processing services, hardware support and installation and IT training and education.

Engineering Services

include Industrial Design, Design Validation and Testing, Industrialization and Prototyping.

IT Enabled Services

are Back Office Operations, Data Processing, Call Centers, and Business Process Outsourcing BPO’s.

E Business (electronic business)

is carrying out business on the Internet; it includes buying and selling, collecting and disbursing payments.

The several reasons why IT outsourcing works are-

• The principal reason of outsourcing is that it reduces the cost of a business process and allows the management to concentrate over its core areas of competency
• Outsourcing allows for consistency on two fronts. First, there is a dedicated staff for a particular business function and secondly, a volume increase or decrease in the business process does not affect the company’s performance.
• In many fields, and particularly in the IT sector, access to the most current technology is often a prohibitive investment and outsourcing allows a company to take advantage of this, without the substantial investment required.
• Outsourcing also reduces the dependency upon internal resources and increases the flexibility to meet the changing business and commercial conditions.
• It also brings in sometimes the much needed expertise that the company might be lacking-in-house!
• Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries

But there are some pain areas or issues that need to be looked into as well:-

These are those concerns that have often been talked about by the anti-outsourcing lobby, but these do warrant a mention and one cannot overlook the issues.

Losing jobs….
The first and foremost area of concern for any firm that outsourcing may reduce the jobs at home and due to cheap labor available in developing countries the outsourced jobs may never return to their country of origin, permanently degrading the economy.

Losing touch…
Secondly, outsourcing often eliminates direct communication between the company and its clients. This prevents a company from building solid relationships with its customers, and often leads to dissatisfaction on one or both end and keeps the company unaware of the real customer feedback.

Losing in-house talentLoss of internally generated talent is yet another problem associated with the outsourcing as it may hamper the growth of an employee by depriving him of the experience he would have gained by handling the business issue himself then by passing it over to some outsourcing firm based thousands of miles apart.

Losing sensitive data
Information theft is a real grave danger and any sensitive information is even more vulnerable in the hands of the outsource provider.

Over-Pricing
One price for everything sounds great until something changes and the provider charges whatever it wants because there is no pricing transparency and no standardization in pricing.

Poor quality
This is the real danger of outsourcing, and not the exodus of jobs. It is the permanent damage to the software industry due to poor quality products at cheap rates.

Is the quality of outsourced software sufficient and consistent enough to make it worth the effort it takes to move development projects out of the country? For some industries, the answer is yes, but for the software sector the answer is no.

Is the quality of outsourced software sufficient and consistent enough to make it worth the effort it takes to move development projects out of the country? For some industries, the answer is yes, but for the software sector the answer is no.

Thus before a company decides to outsource its business process, it must examine all the factors carefully. It may not happen that outsourcing becomes a reason for the company to lose millions instead of saving thousands!