Approaches to Outsourcing,The Various Approaches to Outsourcing,IT Outsourcing Approaches

Approaches to Outsourcing - The Various Approaches to Outsourcing, IT Outsourcing Approaches

The Various Approaches to Outsourcing


It is important to understand the various approaches to outsourcing, so that the most appropriate one may be chosen.

The broad categories of outsourcing are as follows:

  1. Application software outsourcing, 
  2. Infrastructure outsourcing, 
  3. Business Process Outsourcing, 
  4. Manufacturing outsourcing

1.  Application Software outsourcing

Perhaps the most sophisticated and skilled category of outsourcing, this has been gaining popularity over the last two decades. The reason for this is not difficult to understand. Software development has helped firms become more efficient and productive by reducing time and expenditure. Initially, companies in Western Europe and America carried on development of application software internally. Soon the demand for software resources became very huge. These countries began to face a dearth of software resources. At the same time in developing countries like China and India, a vast pool of software engineers and computer scientists was available. They were the product of heavy investments made in the education sector in these countries. They were cheaper than their counterparts in Europe and America were, and continue to be so. Outsourcing to these countries was smartest solution available.

Within the framework of application software outsourcing, the companies that want to outsource, have to decide on the various options that have evolved over a period. Companies can outsource either their complete software application needs or just a part of their needs to the vendor. They may even resort to outsourcing as means of strengthening the software resources already at their disposal. Most companies usually rely on their own resources to develop and create software, while they outsource the maintenance of the traditionally used software to vendors.

Another choice the outsourcer has to make is the location of the vendor. The outsourcer and the vendor may work from the same premise or at not so far a place from the outsourcer, or at a distant place. Usually it is a combination of both these options.

In addition to this, the outsourcer has to decide whether it wants to outsource to a company that is CMM certified or not. CMM or Capability Maturity Model is a set of scales used to certify an outsourcing company. The outsourcing company may seek the certificate, which is given to it based on the maturity, consistency and rigors involved in the processing.

The software outsourcing firms have to provide a variety of services like maintenance and enhancement of the older soft wares, developing new ones, and quality assurance testing.

2.  IT Infrastructure Outsourcing:

This involves operating a network connecting the various sites of the company. The outsourcer will be responsible for relevant software and hardware components, their installation and maintenance, data communication, data storage and recovery, security, internet connection, printers, laptops. In most cases, I T infrastructure outsourcing companies are located on shore (near the client company's location).

3.  Business Process Outsourcing:

This is perhaps the broadest form of outsourcing. I t is an IT enabled outsourcing. BPOs perform a wide variety of activities.

  • Processing of tax transactions, checking tax claims
  • Accounting bills (receivables and payable billing)
  • Customer support
  • Telemarketing
  • Medical transcription
  • Market research and analyses
  • Language translations
  • Warehousing
  • Keeping track of human resources- their recruitment training, and payment.

4.  Manufacturing Outsourcing: 

Perhaps the oldest form of outsourcing, manufacturing outsourcing relates to the production of parts manufacture or finished goods. They are done either on shore or offshore. The big companies in U.S.A depend on companies located in other countries for components used in manufacture certain goods. They may outsource the manufacture of such components or even set up their own factories in other countries for this purpose.

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