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Information Technology Outsourcing

By Edited Nov 13, 2013 1 2

Outsourcing has always had a rich tradition in the world of business, pre-outdating technology. Manufacturing companies have been outsourcing their logistics and distribution systems for decades affording them the time and effort to concentrate on their core business and let the outsourced service be catered for by experts. In Ireland for example outsourcing has been widely adopted by the ESB and Eircom particularly in the last decade. In the past, especially with regards to Eircom all of their tasks were carried out by employees who were specifically trained to do the job, since its privatisation however they have reduced the need for such staff and outsourced most of their services provided. The only remaining specific area which Eircom still has core employees with regards the technical side of the business is the planning departments. Recently the ESB have outsourced the upgrade of their networks to Transmission Link Ireland.

 Outsourcing is defined as being the practice of subcontracting whereby one company hires another to manage, maintain and run some portion of its business. With the recent emergence of eBusiness and ICT companies are now outsourcing their IT requirements, saving them time and money.

 Why do companies get involved in eOutsourcing? The considerations that managers have with regards to implementing their Information Systems are many. The most important one of these is justifying the cost of the system as well as weighing up time, risk and other factors like managing change. With their strategic plan in mind a company will know exactly what they must achieve however the problem lies with the question “How will we achieve it?”

 For most companies regardless of the Industry they are involved in will not have the skill necessary to develop and maintain their systems and eRequirements therefore they will have to outsource. Traditionally this has meant getting involved with local vendors who develop onsite and often charge elevated rates knowing that you have no other option to develop your system. Oftentimes you are being offered off the shelf products without the required level of customization and analysis. The benefits and low risks of eOutsourcing have since been highly improved. With today's competitive market third party vendors now offer many benefits including cost efficiency, high levels of service, total customization and personal guarantees as well as being far less a risk than in the past with high standards of developer skill and service quality. 

This has been facilitated with the aid of the Internet enabling companies access to an international marketplace offering them a multitude of choice when in comes to the tendering of contracts and outsourcing where companies are very eager to do business. Countries like the USA who were traditionally perceived to be the leaders in technology have out-priced themselves in today's market. Instead countries like Estonia and Bulgaria and indeed India are being recognized as offering high-quality eSolutions. This is due to an excellent workforce who are highly motivated, skilled and educated and are much cheaper than their counterparts. Also the European countries have nodal locations within mainland Europe offering solutions closer to home where the cultural divide is much less between Application Service Provider/Vendor and customer than if the service was outsourced to India.

eOutsourcing which was highlighted by IBM’s Chairman Louis Gernster as “the next big wave in the fast moving IT Market” has great promise in the near future. ASPs and location independent vendors now offer companies the opportunity for customized, offsite development without the risk and cost worries that was associated with IT in the past. With leading companies like BMW now at the forefront of eOutsourcing it will only be a matter of time before it becomes commonplace and the defacto standard in the market.


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Comments

Mar 20, 2012 10:50am
southerngirl09
Very interesting article. But I wonder what the long-term effect will be in not having an in-house IT.
Mar 20, 2012 12:24pm
donnachac
Thanks! I think this seems to be the general direction that the industry is going. More and more services will be accessible from the cloud with varying business models associated with them. The benefits of this approach are obvious for the smaller companies with less infrastructure and management costs but on the other hand will they be giving away control?
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