Outsourcing is an organizational solution, transfer of certain business functions or parts of the business process of the enterprise to a third party contractor. The third party contractor performing these functions is called the outsourcer. It can be both an individual and an entire organization.
With respect to the client territory the outsourcing may be internal or external.
External outsourcing means provision of services on the territory of the provider using his infrastructure and personnel. Internal outsourcing means provision of services to the client on his territory. The form of outsourcing is being chosen depending on the client’s needs. The first and the most common form of internal outsourcing is provision of dedicated resources on the client’s territory. In this case the provider company acts as a “recruitment agency” providing qualified personnel to perform some functions of the client for a definite period of time. The management of the personnel is performed by the client himself, he is also responsible for the result of the personnel activities. The responsibilities of the service provider include provision of the client with the personnel having a required level of qualification and its timely replacement if necessary.
Functional outsourcing should be specially mentioned. It consists in working out the methodological procedures for managing IT processes, formalizing them and performing certain functions on support of the client’s IT structure, for example software support on the working places of users at the client's request. In this case the criteria of the provider’s work are clearly specified: speed of response to the off-nominal situation, degree of participation in non-standard problems of the client. That is all activities transferred to the outsourcing fall into functions with certain criteria of their execution, and these functions are transferred to the company provider. And at this time the emergence of moments connected with holding consultations is inevitable since the development of any new projects by the client is usually associated with the consultations of the operation services, i.e. analysis of the system conditions and the variants of its development.
Internal outsourcing allows to solve the problems connected with the geography of the client. Sometimes the client needs to expand its business in the regions, and management of the remote offices – it is rather a labor-intensive task from the IT point of view: it is recruitment, and control of the personnel. The company-service provider having a wide branch network or a network of subcontractors has the opportunity to solve the client’s issues by means of internal outsourcing. It is the service of practically any computer equipment and provision of the IT personnel. Depending on the availability of a dedicated communication channel this problem can be solved with the help of external outsourcing through the organization of a centralized server center on the provider's territory which resources are used by the branches in a shared mode via remote access. As a technological platform for provision of external IT services there often used a powerful data-center connected to high-speed Internet channels, equipped with the most advanced means of physical and information security, climate control and fire fighting systems, uninterrupted power supply, high-performance equipment and software.
Outsourcing also gives an opportunity to engage the client’s employees previously servicing the execution of the function delegated to the outsourcer that know the specifics of their company. In addition, strengthening the concentration of intracorporate attention on core objectives of the company by means of delegating secondary functions to outsourcers is extremely important which gives the company an opportunity to focus on meeting the clients’ needs and the development of technologies. The concentration on core functions also allows to perform the optimum reengineering by means of improving efficiency of the company with the continuous improvement of such indicators as cost, quality, service and temporary expenses. Outsourcing can allow the company to use the resources the access to which otherwise would be impossible, for example, the geographical expansion of the company’s activities or creation of a new company. Outsourcing reduces the risks due to the fact that the outsourcers invest funds into a large number of the client companies at the same time. At the developed outsourcing market the client company in its turn has an opportunity to choose those outsourcers that have the greatest experience in this area. And finally the client company can improve the reputation and increase the brand value as a result of a better service of its clients by the specialized third party company.
Initially outsourcing was considered only in terms of economy, that is an opportunity to solve the organizational problem with the help of lower financial costs. But with the development of information technologies when the companies are extremely short of its own specialists, a significant shift in the understanding of this business model has taken place.
Outsourcing contributes to the rational organization of business due to the strategic use of financial and temporary expenses, increase of the staff. At the same time the necessity for searching new employees and training of the available ones is excluded due to using the services of highly qualified professionals-executors of outsourcing projects. Modern development of telecommunications, including Internet, allows to find the executors almost anywhere in the world easily, since the organization of a prompt and close interaction between the client and the executor has become simple and easy.
