Information technology outsourcing

Last updated

Information technology (ΙΤ) outsourcing is a company's outsourcing of computer or Internet related work, such as programming, to other companies. It is used in reference to business process outsourcing or BPO, which is the outsourcing of the work that does not require much of technical skills.

Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another.

Computer programming process that leads from an original formulation of a computing problem to executable computer programs

Computer programming is the process of designing and building an executable computer program for accomplishing a specific computing task. Programming involves tasks such as: analysis, generating algorithms, profiling algorithms' accuracy and resource consumption, and the implementation of algorithms in a chosen programming language. The source code of a program is written in one or more languages that are intelligible to programmers, rather than machine code, which is directly executed by the central processing unit. The purpose of programming is to find a sequence of instructions that will automate the performance of a task on a computer, often for solving a given problem. The process of programming thus often requires expertise in several different subjects, including knowledge of the application domain, specialized algorithms, and formal logic.

Contents

IT outsourcing drivers

IT outsourcing refers to outsourcing all or parts of IT functions to an external party. Information technology outsourcing is a subset of business process outsourcing (BPO). [1] The reasons for IT outsourcing include lack of resources and cost reduction. IT outsourcing is sometimes called IT enabled services (ITES) outsourcing. [2]

Overseas ITO

Asia

The typical destinations of overseas IT outsourcing are India [3] and Philippines for the American and European companies and China and Vietnam for the Japanese companies.

Vietnam Country in Southeast Asia

Vietnam, officially the Socialist Republic of Vietnam, is the easternmost country on the Indochina Peninsula. With an estimated 94.6 million inhabitants as of 2016, it is the 15th most populous country in the world. Vietnam is bordered by China to the north, Laos and Cambodia to the west, part of Thailand to the southwest, and the Philippines, Malaysia, and Indonesia across the South China Sea to the east and southeast. Its capital city has been Hanoi since the reunification of North and South Vietnam in 1976, while its most populous city is Ho Chi Minh City.

A combination of high overhead in the United States and strong cultural ties between the domestic and Asian information technology industries have led many companies to outsource labor-intensive software programming to Asia and Eastern Europe.

United States Federal republic in North America

The United States of America (USA), commonly known as the United States or America, is a country composed of 50 states, a federal district, five major self-governing territories, and various possessions. At 3.8 million square miles, the United States is the world's third or fourth largest country by total area and is slightly smaller than the entire continent of Europe's 3.9 million square miles. With a population of over 327 million people, the U.S. is the third most populous country. The capital is Washington, D.C., and the largest city by population is New York City. Forty-eight states and the capital's federal district are contiguous in North America between Canada and Mexico. The State of Alaska is in the northwest corner of North America, bordered by Canada to the east and across the Bering Strait from Russia to the west. The State of Hawaii is an archipelago in the mid-Pacific Ocean. The U.S. territories are scattered about the Pacific Ocean and the Caribbean Sea, stretching across nine official time zones. The extremely diverse geography, climate, and wildlife of the United States make it one of the world's 17 megadiverse countries.

Although Eastern Europe has created a lot of competition for India in recent years, India has always been a major player in information technology (IT); they even make their own supercomputers for predicting monsoons. It wasn't until the Y2K bug emerged that the need for legions of cheap programmers really arose, however, and American companies began to see the potential for outsourcing overseas. After Y2K the IT service industry exploded, with American companies outsourcing everything from data entry to customer service to India and other Asian countries.

Despite its distinct advantages for companies looking to outsource their IT services, India's volatile political climate and rampant corruption present problems. Some of the 185 Fortune 500 companies that outsource software to Asia are choosing places like Vietnam or China with more predictable politics and less corruption. The Vietnamese government has succeeded in retaining a low cost, lower risk market, while significantly improving income, per capita. A series of educational measures and incentives have also been applied to promote the technology sector. In addition, Vietnam is exceptionally attractive due to competitively low salary of the technically skilled workforce.”While not the cheapest outsourcing destination, Vietnam is still very competitive when compared to other global locations, especially, as wage rises in India and China. This is what contributed to it surging up the rankings, to take first place in 2015,” commented Richard Middleton, Cushman & Wakefield’s head of occupier services for Asia Pacific, Middle East and Africa,. [4]

Thailand was ranked as the 6th best IT outsourcing country in 2016. [5] It benefits from a combination of low costs and good infrastructure. Thailand could be ranked higher with improved English language ability among skilled workers.

Other (mainly American) companies that outsource their customer service are finding that their customers prefer the Americanized English of the Philippines to the British English that predominates in India, though all of these countries have their drawbacks, from censored Internet lines in China and Vietnam to Muslim militancy in the Philippines.

Despite the hiccups the IT service industry continues to grow as the software industry becomes more competitive and U.S. companies try to reduce overhead. The Asian IT service market is still in its infancy, but in 2008 industry think tank Nasscom-McKinsey predicted a $17 billion IT service industry in India alone. [6]

Latin America

Countries like United States and Canada usually seek nearshore outsourcing in Latin American countries like Mexico, Guatemala, El Salvador, Panama, and others because of a closer cultural match and timezone.

Eastern Europe

In recent years Eastern Europe has also become a common ITO destination. [7] ITO to Eastern Europe allows Western European and North American companies to nearshore, remote insource, and in general benefit from timezone and cultural proximity. Countries like Belarus, Russia and Ukraine are common destinations for ITO within Eastern Europe. [8]

Outsourcing IT to Eastern Europe has been on the rise because of the low-cost but highly skilled labor available in this region, as well as its geographical and cultural proximity. At first, many companies chose to outsource to more traditional Asian destinations. However, as software development and security needs grew, along with a preference for geographically closer partners, Eastern Europe became a more common destination for ITO. [9] In 2009, the number of IT professionals working for an ITO company in the Central-East European Region (not including Russia), reached 95,000; this number represents a 9% growth for countries like Ukraine. [10]

United States of America

Although many associate outsourcing of the IT industry to be leaving America, the United States does receive a wide variety of outsourcing work from other countries. A 2009 study on oDesk employment [11] had the United States ranked #3 in countries that received outsourced work. This is credited to the enhancements in cloud computing, and the high evaluation marks that United States located workers have and continue to receive. The adverse effect that the American economy has brought to the American worker, has also increased the demand for seeking employment in other countries. Prior to 2008, the need was not that high, as the average American worker was able to find work within the 50 domestic states.

See also

Related Research Articles

Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Typically this refers to a company business, although state governments may also employ offshoring. More recently, technical and administrative services have been offshored.

HCL Technologies information technology consulting, outsourcing services and software development company

HCL Technologies Limited is an Indian multinational technology company, headquartered in Noida, Uttar Pradesh, India. It is a subsidiary of HCL Enterprise. Originally a research and development division of HCL, it emerged as an independent company in 1991 when HCL ventured into the software services business.

Knowledge process outsourcing (KPO)

Business process outsourcing in the Philippines

One of the most dynamic and fastest growing sectors in the Philippines is the information technology–business process outsourcing (IT-BPO) industry. The industry is composed of eight sub-sectors, namely, knowledge process outsourcing and back offices, animation, call centers, software development, game development, engineering design, and medical transcription. The IT-BPO industry plays a major role in the country's growth and development.

Farmshoring is the shifting of employment from abroad into rural communities across the United States. It is conceptually similar to onshoring which can be defined as "the act of transferring some of a company's recurring interval activities and decision rights to outside providers, as set in a contract". Farmshoring refers to a specific variety of outsourcing where, as well as services being sourced outside of the contracting company, they are outsourced from urban to rural locations.

Business process outsourcing to India refers to the business process outsourcing services in the outsourcing industry in India, catering mainly to Western operations of multinational corporations (MNCs).

On-demand outsourcing is a trend in outsourcing wherein major internal operations processes of a company are being shifted to a provider that is paid for by the number of transactions involved. The business transferring the services pays for the quality, special skills and the competence of the service provider's employees. There has been an expansion of the outsourcing concept to include on-demand outsourcing. This refers to the process undertaken by business managers to adopt an outsourcing policy that ensures that the specific business and supplies including technical manpower are accessed as the need arises. It focuses a business strategy to improve its goods and services and to drive a business towards quality improvement.

In software engineering, offshore custom software development consists in offshoring the software development process in a country where production costs are lower, thus decreasing budget spending.

Global sourcing is the practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. A large number of Information Technology projects and Services, including IS Applications and Mobile Apps and database services are outsourced globally to countries like Pakistan and India for more economical pricing.

Softtek Mexican private company of IT services

Softtek is a Mexican-based information technology company, operating in North America, Latin America, Europe and Asia. As of 2010 it was the largest private IT vendor in Latin America. Headquartered in Monterrey, Mexico, the company has 12,000 associates in Mexico and abroad. The company offers application software development, testing, security and support; business process outsourcing (BPO); and IT infrastructure management, security and support to more than 400 corporations in more than 20 countries. It also acts as a value added reseller (VAR) for SAP SE, Informatica, Cognos, Business Objects and other software products. The company has trademarked the term "nearshoring" to describe the provision of outsourced services to customers in other countries that are in proximity.

Software Testing Outsourcing is software testing carried out by an independent company or a group of people not directly involved in the process of software development.

WNS Global Services

WNS Global is a global business process management company headquartered in Mumbai, India. It has more than 34,000 professionals working in 52 "delivery centers" across the world, including India, United States, United Kingdom, China, Costa Rica, Philippines, Poland, Romania, South Africa, and Sri Lanka. Adrian T. Dillon is the Chairman of the Board and Keshav R Murugesh is the group CEO.

Outsource Partners International (OPI) was acquired by EXL in June 2011. The acquisition marked the end of F&A outsourcing of OPI. OPI was a multinational company with headquarters in New York, NY and Los Angeles, CA. It operates from more than a dozen global locations throughout the US, UK, India, Bulgaria, and Malaysia. OPI was formed in 2002 through the acquisition of big four accounting firm's Business Process Outsourcing (BPO) division and itAccounts, a finance and accounting BPO company with an offshore F&A outsourcing facility in Bangalore, India. It offers finance, accounting and tax outsourcing services.

The Offshoring Research Network is an international network of researchers and practitioners studying organizations in their transition to globalizing their business functions, processes and administrative services. The ORN conducts annual surveys tracking global sourcing strategies, drivers, concrete implementations and plans across all business functions and processes.

Banking business process outsourcing or banking BPO is a highly specialized sourcing strategy used by banks and lending institutions to support the business acquisition and account servicing activities associated with the customer lending lifecycle. These specific BPO services are usually offered through multi-year service-level agreements for all or portions of the credit card lending, consumer lending or commercial lending segments of the financial services market. Some larger financial services organizations choose to extend their sourcing strategy to include other outsourced services such as ITO systems and software, human resources outsourcing and benefits services, finance and accounting outsourcing (FAO) services, procurement or training outsourcing.

Backsourcing is the process of bringing previously outsourced jobs back under the roof of the company to be performed internally.

The term robotic automation or robotization refer to the automation of industrial and business processes using robots, of various guises. Robotic automation software refers to a class of software products used in that latter, clerical, context.

Robotic process automation is an emerging form of business process automation technology based on the notion of software robots or artificial intelligence (AI) workers.

Information Technology in Sri Lanka refers to the business process outsourcing, knowledge process outsourcing, software development, IT Services and IT education in Sri Lanka. Sri Lanka is ranked among the top 50 outsourcing destinations by AT Kearney, and Colombo is ranked among "Top 20 Emerging Cities" by Global Services Magazine. The export revenue of this industry grew from USD 213 million in 2007 to an estimated USD 720 million in 2013.

The business process outsourcing industry in China including IT and other outsourcing services for onshore and export markets surpassed 1 trillion yuan in 2016 according to the Ministry of Commerce (MOC).

References

  1. ↑ "IS/IT outsourcing practices of small- and medium-sized manufacturers". International Journal of Accounting Information Systems. 5: 429–451. doi:10.1016/j.accinf.2004.04.006.
  2. ↑ ITES: Business Models, http://www.slideshare.net/amitanshu/ites-business-models
  3. ↑ Outsourcing Opportunities in India , https://arcgate.com/ai-training-data-outsourcing
  4. ↑ VIETNAM TOPS C&W GLOBAL OUTSOURCING LOCATION INDEX FOR FIRST TIME, http://www.cushmanwakefield.de/en-gb/news/2015/03/business-process-outsourcing/
  5. ↑ IT Offshore Outsourcing Opportunities in Thailand, https://iglu.net/it-offshore-outsourcing-opportunities-in-thailand/
  6. ↑ Global Sourcing of Business and IT Services, https://books.google.com/books?id=_IHStt6MRukC&lpg
  7. ↑ Tagliabue, John. "Eastern Europe Becomes a Center for Outsourcing" New York Times , April 19, 2007. https://www.nytimes.com/2007/04/19/business/worldbusiness/19prague.html?pagewanted=all&_r=0
  8. ↑ Ukrainian Hi-Tech Initiative. Dec. 3rd, 2010. http://hi-tech.org.ua/intetics-sponsors-research-2010/
  9. ↑ Hoch, Detlev et al. McKinsey Quarterly, Dec 2006. "The overlooked potential for outsourcing in Eastern Europe" http://www.mckinseyquarterly.com/The_overlooked_potential_for_outsourcing_in_Eastern_Europe_1884
  10. ↑ Hall, Kathleen. "Why more businesses are nearshoring in Eastern Europe" Computer Weekly, July 2011. http://www.computerweekly.com/feature/Why-more-businesses-are-nearshoring-in-Eastern-Europe
  11. ↑ By Wadhwa, Vivek. "Outsourcing Benefits U.S. Workers, Too" Bloomberg Business Week , August 2, 2009. http://www.businessweek.com/technology/content/jul2009/tc20090731_382752.htm
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.