Shedding light on the ambiguity surrounding IT outsourcing

A recent survey issued by the National Outsourcing Association (NOA) revealed that only 27% of UK citizens associate ‘a local computer company providing IT support to small businesses’ with ‘outsourcing’. However, 58% cited ‘a bank opening a call centre in India’ as an example of outsourcing – which it is not. Clearly misunderstanding the term, only 19% of respondents believe that outsourcing could help get the UK out of recession. These findings are quite worrying at a historical moment where this practice is not only important, but often vital for a company to survive in the current market.

The outcome of this ‘Public perception of outsourcing’ survey shows how outsourcing is often confused with offshoring, which generally has a negative connotation for UK citizens. Offshoring means relocating a department, certain business operations or functions to a less expensive country abroad, typically outside Europe. If this is managed by a third party, it is technically a type of outsourcing, although not the only one. If it is still managed by the organisation, then it is not, by definition, outsourcing – just a captive offshore project. With increasing concerns over job losses in this difficult economic climate, it is not surprising that 80% declared they believe ‘outsourcing hinders British businesses’ when they only have offshoring (outsourced or not) in mind.

This necessitates explaining more thoroughly what outsourcing is and how it can help the UK economy, from SMEs to large enterprises and across all sectors. IT outsourcing in particular, when correctly and appropriately implemented, does not negatively affect business growth. On the contrary, it can help organisations operate better with a more cost-efficient and productive IT service, allowing better forecasting of operational costs as well as possible cost savings, even potentially creating a competitive advantage.

Outsourcing, put simply, is the practice of contracting out certain business functions or operations to a third party and purchasing them as a service, rather than having them in-house. This has been common practice in business for a long time, and has only recently increased in the field of IT, becoming a buzzword.

In IT outsourcing, many different models exist. A third party may be involved  in just the provision of a couple of temporary staff for busy periods, holiday cover, or just a few more skilled engineers to take care of a new technology or a particular project. The outsourcing service might only cover a portion of services such as database, server or email management, or just the out-of-hours IT support. An outsourced or managed service can be shared between more than one company (shared service) or just dedicated to one.

The IT outsourcing type or model depends on factors such as scope, needs and level of control. An IT Service Desk is fully outsourced when the department is completely managed by a third party, and is set on another site to the core business. This could be in the same city, country or abroad – the term ‘nearshore’ outsourcing indicates that it is close to home, which could include other countries in Western and Eastern Europe, while ‘offshore’ normally means far away, in countries like India, China and Brazil. An organisation could choose to only outsource certain functions, for instance 1st line support or Server management. A managed service, instead, is when the Service Desk or part of it are managed by a service provider, but on the client’s site – with staff normally being transferred into the other company with the same conditions and rights through the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). The presence of various IT staff employed and managed by more than one organisation (some in-house and some by one or more service providers) creates a co-sourced environment.

Although many types and models exist, they all have the same benefits in common: IT outsourcing is a way to gain immediate access to skills and expertise that might not be present internally, even just for a period or the hours needed. It is cheaper than doing it in-house, as the expenditure would be at a fixed cost and not variable, including any training and management costs that are necessary to meet the targets set. It can add value to the company: with sector experts taking care of one particular area of IT or all of the Service Desk, the organisation is free to concentrate on more strategic tasks and on their core business, including fewer day-to-day management worries, and more time released to focus on improving their organisation.

By increasing the awareness of what outsourcing truly is and what it can do for businesses, UK citizens can understand how big an opportunity this is to help the British economy in these difficult times. The fact that the practice is increasing every year among businesses large and small is a clear indication that more and more organisations are seeing value in outsourcing – the trend will definitely not stop!

Jennifer Grant, Service Delivery Manager

This article is on Sourcing Focus: http://bit.ly/KPtysb

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