IT outsourcing is a way for companies to pass the day-to-day running of their IT business processes to third-parties.
Although not uniquely a technology concept, outsourcing IT has become a key consideration for all IT directors.
Most business processes rely heavily on technology, thus IT outsourcing became a popular option in the 1990s. Companies identified the capital, time and space-savings associated with reductions in staff, training, equipment and work environments as advantages of outsourcing IT.
An outsourcer has highly trained engineers and consultants with expertise in particular technologies and business processes. Businesses harnessing outsourcing negate the need to invest heavily in the recruitment of qualified staff as well as the training of existing workers. IT outsourcing also addresses the problem of skills shortages which regularly slows the delivery of IT projects.
The avoidance of expensive recruitment activities, and all the costs associated with permanent staff, meant IT outsourcing was seen as a cost cutting measure.
However, businesses are now viewing outsourced IT as an opportunity to create new business through improved performance such as better customer relationships.
As a consequence IT outsourcing comes in many forms. A bank may outsource its call centre operations to an offshore location such as China or India. The same bank could decide to hand over the management of its entire IT infrastructure or even its application development to a partner. A council could put management of its contact centre in the hands of a third-party specialist, while an SME could decide to outsource its IT security function to keep up with rapidly changing threats.
As well as different types of IT outsourcing, key questions faced by IT directors when outsourcing IT services, include whether to offshore, nearshore, or onshore.
Outsourcing IT does, however, present different challenges. Learning how to manage relationships with outsourcers, engaging in industrial relations disputes with outsourced workers and designing service level agreements are a few.
Major outsourcers include; EDS, Accenture, Unisys, BT, CSC, Capita, PricewaterhouseCoopers, Fujitsu, LogicaCMG and CapGemini.
IT outsourcing news stories
February 2008: Government outsourcing IT to overcome skills shortage >>
January 2008: Shell to outsource hundreds of UK IT jobs >>
January 2008: UK firms continue to pick India for outsourcing >>
January 2008: AA brings datacentre back in-house to cut costs >>
January 2008: LogicaCMG creates new outsourcing division >>
November 2007: Deutsche Bank outsources to HCL Technologies >>
August 2007: Lloyds TSB to outsource 210 IT roles to India >>
July 2008: British American Tobacco outsources network security >>
May 2007: Tesco signs £18m IT contract extension >>
May 2007: Allianz signs outsourcing deal with Fujitsu >>
May 2007: Hewden updates network and services with renewed BT deal >>
May 2007: Dorset Council signs services deal for contact centre >>
April 2007: Vodafone consolidates to reduce spend on app development >>
April 2007: PricewaterhouseCoopers reveals faults in Swansea Council's 83m outsourcing >>
April 2007: Indian outsourcers make inroads into continental firms >>
March 2007: Prudential looks to axe 600 jobs from UK in-house IT >>
February 2007: Lloyds TSB to cut 245 back-office jobs >>
February 2007: Credit Suisse considers massive switch to offshore >>
January 2007: NCR offshores ATM production >>
July 2006: NAO reveals profit margins of outsourcers >>
March 2000: Skills crisis to hit Europe >>
March 2000: Study criticises IT outsourcing >>
February 2000: Software development contract goes to India >>
IT outsourcing features
How to mitigate the security risks of outsourcing >>
How to manage a globalised IT workforce >>
How to ensure outsourcing success >>
How to maintain the outsourcing relationship >>
Outsourcing customer care >>
Outsourcing: why do IT yourself >>
Outsourcing IT career progression >>
Shortage of net skills could hamper UK growth >>
Too many SLAs do not measure up >>
IT outsourcing links
The UK National Outsourcing Association >>
Wikipedia: Outsourcing >>
The Register: Outsourcing won't save you money >>
BBC: India dismisses outsourcing fears >>
Outsource solutions and business process outsourcing: The outsourcing toolkit >>
DRQ software house: Why outsourcing? >>
CBC News: Outsourcing >>
IT outsourcing blogs
Outsourcing blog: discuss outsourcing with other professionals >>
The outsourcing weblog >>
IT outsourcing video
Outsourcing: a comic view >>
The Simpsons: Indian outsourcing >>
Professor Paul Strassman, George Mason University: Is outsourcing profitable?
Outsourcing and resourcing - India >>
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This was first published in May 2007