What is Outsourcing?

outsourcing, outsource.Outsourcing, which by definition is the transfer of ownership of a process to another company, is not a new concept—almost every organization outsources some aspect of its business. A paint company may outsource the manufacture of its paint cans; a mobile network may outsource its billing and collection activity; an auto manufacturer may outsource its data center; a Fortune 500 company may outsource its benefits administration; and a consumer goods company may outsource its recruitment process. Outsourcing is really about letting experts do what they do best, leaving the business to focus on its core strengths. The most popular forms of outsourcing are information technology outsourcing (ITO) and business process outsourcing (BPO).

The advantages are fairly clear. Outsourcing can improve the quality of service since experts provide it using specialized tools, processes, facilities and talent. Organizations that outsource their IT requirements don’t have to spend on recruitment, training and retention of the talent that may not necessarily see a robust future in a non-technology company. As an added benefit, outsourcers find that it enables them to stay nimble. IT outsourcing is about acquiring high-quality services that are predictable and reliable at costs that won’t break the bank.

Access to service innovation is another outsourcing benefit. Service providers have the time, talent, industry understanding and investments to explore innovations. Those who outsource have the luxury to leverage those innovations.

Practically every aspect of IT can be outsourced—from the humble and low-tech IT helpdesk to cutting-edge technology R&D. Product design, architecture, coding, testing, integration, localization, support, maintenance and end-of-life functions can all be outsourced.

Measures for effective outsourcing

There are seven steps to effective outsourcing:

  1. Consider what to outsource and the expected returns from the outsourcing
  2. Create a strategy that addresses safe and manageable steps to ensure effective outsourcing without affecting business continuity
  3. Create a strategy for outsourcing that protects intellectual property
  4. Decide on an appropriate outsourcing partner
  5. Develop appropriate contracts that allow flexibility, define SLAs and management and governance practices
  6. Treat your outsourcing provider as a partner with the same goals of making your business successful

In addition, project management skills, leadership support, cultural alignment and effective communication are the foundations on which great outsourcing practices are built.

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