What is outsourcing?

Outsourcing is nothing more than obtaining resources that are not obtainable within the organization. When an organization is holding a meeting they outsource the lunch, because it does not make business sense to build a kitchen, stock it with items and employees for a once a month meeting. A prime example of outsourcing at its finest is our daily lives.

Think about what occurs in your daily life. Are you able to drill and refine petroleum in your back yard? No. So you outsource the fuel requirements for your car and home to another organization. However, the outsourcing you may be expecting to read about are the job loses to overseas organizations. Except the term used in many circles for that type of outsourcing is off-shoring.

Off-shoring is used by several organizations to reduce labor costs. The easiest jobs to off-shore are information technology jobs. The reason is because of the World Wide Web and the commoditization of bandwidth. Another reason is the lack of face-to-face interaction between the information technology community and customers.

Management needs to consider a major downside to off-shoring; the ability to develop emerging markets. It generally takes two years to bring an off-shored department up to the point the parent organization starts to experience returns on the investment. Think about all the changes that have occurred over the past two years in regard to business and e-commerce. Do large organizations have the ability to shift that rapidly if they have off-shored their information technology?

Large organizations are starting to falter because they are unable to meet the demands of emerging markets. There is a boom occurring with small technology based organizations. The reason for the boom is the small business’s ability to shift in mid-stream to address emerging markets. Another reason is the small business’s ability to avoid the bureaucracy of larger organizations.


Mikhail Kniaziewicz, MIS

Tags: ,

Comments are closed.