IT OUTSOURCING
The trend in outsourcing continues to grow – both in the number and value of outsourcing transactions and in the variety of services which are outsourced.
The pressures which lead organisations to outsource show no signs of slackening and cost savings remains a major incentive. However, other factors are increasingly influencing the decision to outsource – access to innovation, increased speed to market, and service quality are proving equally as important as cost savings.
Outsourcing involves the transfer of the responsibility for carrying out an activity (previously carried on internally) to an external service provider. The service provider in turn provides services back to the customer against agreed service levels for an agreed charge. In many outsourcings the transfer of the activity involves the transfer of staff and assets (see the employment section below).
Outsourcing is often characterised as having 3 distinct phases:
- The customer transfers the existing service to the service provider;
- The services are provided by the service provider;
- Termination/expiry, which may involve either:
What are the pros and cons of outsourcing?
The reasons for outsourcing IT are varied but some of the most frequently cited drivers include:
- Reducing IT costs through efficiencies and economies of scale on the part of the service provider
- Access to world-class IT skills, experience and resources
- Removing non-core business
- Minimising sizeable capital expenditure on IT infrastructure
- Certainty of future IT spend
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