The business of outsourcing

When any form of business grows beyond envisioned limits, certain business processes have to be ‘outsourced’ or ‘contracted’ to third parties for the smooth running of the organisation. It is the natural and logical way to expand business and let resources be aimed at doing specific jobs. With IT companies spreading their wings from product to cloud computing and database solutions to gaming, outsourcing has become necessary and critical to the company’s functioning.

IT outsourcing is an area that has garnered much interest thanks to information technology’s growing reach. According to research, IT outsourcing has crossed the $200 billion dollar mark in 2013. Today, almost all IT business processes can be outsourced. Whether it is recruiting, handling back office operations, testing, managing data centres, handling legal issues, security management or HR tasks. There are scenarios where the entire IT leg of an enterprise is outsourced to an IT company because the enterprise may itself be a non IT firm. More often than not outsourcing comes into picture when the enterprise doesn’t want to invest resources and capital to manage a part of their functioning model because – a) it’s out of their expertise domain or b) it’s more cost effective to get it managed by someone else.

Outsourcing is all about saving money while getting the job done by another entity. Taking this into consideration globally, companies are in search of resources and staff that do the job in comparatively less capital. Asian and Latin American companies are preferred for outsourcing, over other companies located in other parts of the world.
Companies and enterprises that provide and offer services to IT firms are known as ‘Service Provider’. A service provider can offer services and service all the outsourcing needs of an IT firm. Legal, communication, storage, processing, internet facilities, data centre management –service providers cater to a wide range tasks. Everything from taking care of recruitment of employees, their initial job training, marketing promotions and travel arrangement of executives, disaster recovery and management, application running, internet connectivity to procurement of security personnel is handled by service providers these days.

The main focus while outsourcing is on saving revenues. Operational costs and risks are greatly reduced when any IT function is outsourced. The standard trend is to outsource the non-core IT functions to companies specializing in them. Given the need for customer centric approach, vast amount of data related to each web user and the need to address and recuperate from a disaster in minimum time, some IT functions are more common than the other. Data Centre management and disaster recovery are one of the most common outsourced functions. The capital to build, run and control a data centre, even for a midsized IT firm is huge. As a result it is almost logical and far more cost effective to outsource the data centre running. Whether it an absolute power shutdown or a fatal error that brings the system to a screeching halt, IT disasters are dreaded more than anything else.

Given the boom in IT outsourcing there’s cut throat competition among service providers to cinch big deals and foster long term contracts from IT and non IT big wigs. What started as a small parasite domain that was dependent on IT has itself grown into an industry. Outsourcing is here to stay.