Outsourcing it is the use of external service providers to effectively deliver IT enabled business process, application services and infrastructure solutions for business outcomes.
There are 3 types of outsourcing:
- Bodyshop outsourcing- it is a situation where management uses outsourcing as a means of meeting short term requirements e.g. short term requirement e.g. shortage of in-house skills to meet a temporary demand e.g. installing IT infrastructure lie CCTV
- Project management outsourcing– it is employed for all or part of a particular project such as developing a new IT project or management consultancy.
- Total outsourcing- it is where the outsourcing supplier is given full responsibility of a selected area e.g. cleaning
Drivers of outsourcing
- When there is no enough a skill or resources to perform a specific task
- To concentrate on core activities of the organisation.
- When cost of outsourcing is less than that of in-house development.
- If you want to use new technology in an organisation
Advantages of outsourcing
1. To concentrate on core activities of the organisation
2. It enhances accuracy- outsourcing will improve work accuracy in terms of given deadline on a project and also the selected potential supplier would deliver accurate results in a given time schedule
3. Access to new resources. Companies outsource because they don’t have access to the required resources within the organisation e.g. if an organisation is viable and important alternative to building the needed capability from the ground upwards.
4. Access to world class capabilities- by the nature of their specialization, outsourcing providers brings extensive worldwide class resources to meeting the needs of their customers.
5. Shared/Shifted risks- There are risks associated with the investment in an organisation. When companies outsource, they can shift the risk to the suppliers since suppliers are specializes and can manage risks.
6. There is flexibility- when you outsource you don’t have to spend time recruiting and training employees for a short term period.
7. Reduced operational and recruitment costs.
8. Time saving- software development takes less time when people are working on it around the clock hence the customer is getting his product on time and be able to compete with his or her competitors.
Disadvantages of outsourcing
1. Loss of control of operations by management.
2. Information may leak to competitors.
3. Bad for employee’s morale- Outsourcing sometimes often results in layoffs or transfer of existing employees. Such displacement can set a bad morale to employees and can even cause staff to fear for their employment opportunities.