What is Outsourcing, what does it consist of and what are some advantages and disadvantages.
These days, you can contract out everything from laundry to internet security — a practice widely termed as “outsourcing”. So what exactly is outsourcing in business, and specifically in the tech industry? In this article, we list the pros and cons of information technology 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 from outside of an organization to handle certain information technology functions. For instance, companies often outsource data storage because it is cheaper to contract a third party than it is to buy and maintain their own data storage devices and facilities.
The most commonly outsourced IT functions include:
- Web development
- Software and application development
- Website/application maintenance or management
- Technical support
- Database development and management
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.
Reasons for Outsourcing What exactly prompts companies to hire people that work for third party organizations? Why do companies outsource? Here are a few common reasons that can help explain the trend:
- Cost reduction. 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.
- Access to 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.
- Better use of 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.
- Accelerated 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.
The Advantages and Disadvantages of Outsourcing
The Benefits of Outsourcing
- Reduced expenses. You get to enjoy significant cost savings when you outsource.
- Access to a global talent pool. Outsourcing allows you to reach professionals that may be in short supply or unavailable locally.