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IT Outsourcing Advantages And Trends

IT outsourcing as an industry came of age during the Y2K crisis. Companies with massive amounts of data and programs had to convert all of it to ensure compliance, and the clock was literally ticking towards doomsday. The only solution was to outsource all the work so that computers would not go belly-up at midnight on Dec 31, 1999.

As the world welcomed the new century, IT managers and their corporate overlords were busy counting the millions they saved by pushing out all the manual data entry work cheaply to outside contractors. Since then, globalization and technology innovations have made the world a much smaller place. This has allowed for many more functions to be outsourced.

Today, the outsourcing industry, which includes everything from IT Outsourcing to business processes (BPO), healthcare (transcription) and finance/accounting, is worth $6 trillion. It is valued at $4 trillion in the US. The industry didn’t get so big just because it saves a few pennies. Turns out there are quite a few additional benefits available to companies who outsource their IT functions.

For starters, the company can focus on core activities instead of having to worry about network security, software licensing and hardware upgrades. Another big motivator is the need to keep the workforce flexible and the ability to downsize as and when required. When a company puts a new employee on the payroll, it has to deal with a whole bunch of regulations and union laws.

When the same work is done by an outside contractor, there is no need to worry about minimum pay, working hours, unemployment insurance, health and retirement benefits, etc. The company can reduce or increase its workload as required, without having to hire or fire anyone. This is even more critical when the company is in start-up phase or expanding into a new product or market.

A new company or division that outsources all its work from the start does not have to allocate budgets for IT infrastructure and staffing. This reduces the risks associated with the venture. In fact, this particular aspect of being able to eliminate an entire in-house department is the basic concept that is fueling the fast growth of cloud computing.

This is the latest trend, wherein everything is offered as a hosted “pay as you go” service. Companies big or small can make use of the same information technology infrastructure, platforms and software, and only pay for what they use. Use of such professional IaaS, PaaS or SaaS providers also improves performance as companies are able to use massive computing capabilities which they would never be able to afford in-house.

Companies who outsource in the traditional sense may also place some of their own employees with the contractor, so that they get trained and learn how to do the work. Another method is for a company to set up a subsidiary or partnership venture overseas, where it can get cheap labor with no regulators, labor unions or tax men breathing down their necks. The industry is still evolving, but one thing is for sure – IT outsourcing is here to stay, in one form or another.

Be the first to comment - What do you think? Posted by Telecom Consultant - April 5, 2012 at 8:01 PM

Categories: IT Tags: IaaS, IT, IT Outsourcing, PaaS, saas