Outsourcing : Good or Bad move ?

Definition of outsourcing

Outsourcing is a business practice in which services or functions are leased to a third party on a contractual or ongoing basis. In IT, an outsourcing initiative with a technology provider can involve a range of operations, from the entire IT function to discrete, easily defined components, such as disaster recovery, network services , software development or quality assurance testing. Companies can choose to outsource their services onshore (in their own country), nearshore (to a neighboring country or in the same time zone) or offshore (to a more distant country). Nearshore and Offshore outsourcing are traditionally sought to reduce costs.

Outsourcing Services

Business process outsourcing (BPO) is a general term for the outsourcing of a specific business process task, such as payroll. BPO is often divided into two categories: back-office BPO, which includes internal company functions such as billing or purchasing, and front-office BPO, which includes customer-related services such as marketing. or technical support. IT outsourcing is a subset of business process outsourcing and is traditionally divided into two categories: infrastructure outsourcing and application outsourcing. Infrastructure outsourcing can include service desk capabilities, data center outsourcing, network services, managed security operations, or overall infrastructure management. Application outsourcing can include the development of new applications, maintenance of existing systems, testing and quality assurance services, and the implementation and management of packaged software.

Advantages and Disadvantages of Outsourcing

The business case for outsourcing varies depending on the situation, but the benefits and risks of outsourcing often include:

ADVANTAGES OF OUTSOURCING

RISKS OUTSOURCING

Lower costs (due to economies of scale or lower labor rates) Increased efficiency Variable capacity Increased focus on strategy/core skills Access to skills or resources Increased flexibility to respond to changing business conditions Accelerated marketing Reduced ongoing investment in internal infrastructure Access to innovation, intellectual property and thought leadership Possible influx of liquidity resulting from the transfer of assets to the new service provider

Slower turnaround time Lack of business or domain knowledge Language and cultural barriers Time zone differences Lack of control