WHAT IS OUTSOURCING?
Simply put, outsourcing is the contracting of a third party to manage a non-core business process more effectively and efficiently than can be done in-house.
The extent of outsourcing
The size of the worldwide outsourcing industry was estimated by research organisation Dataquest to be more than $US100 billion in 2001 and growing at 20 percent per annum. Some Australian analysts estimate the proportion of large to medium enterprises outsourcing IT functions will have grown from around 25 percent in 1997 to more than 50 percent by 2001.
A survey of the London Stock Exchange FTSE Index over a period of three years found a generally positive relationship between high levels of outsourcing and enhanced stock market performance. This does not prove that outsourcing and performance are directly related, but it does suggest well-run companies see outsourcing as a sound management practice.
The fact is that outsourcing is here to stay, and those that use it most effectively will reap the benefits of their foresight and good management.
The benefits of outsourcing
•Taking the IT function to a level of competence higher than achievable in-house
•Facilitating best practice and best-of-breed implementation
•Leveraging ‘business critical’ infrastructure
•Extending global reach and standardisation of IT
•Converting fixed costs to variable costs
•Disposing of overvalued assets
•Reducing procurement management costs
•Improved service levels to both customers and staff