Information technology outsourcing or IT
Outsourcing is a company's
outsourcing of computer or Internet related work, such as programming,
to other companies. It is used in reference to business process
outsourcing or BPO, which is the outsourcing of the work that does not
require much of technical skills.
1 IT outsourcing drivers
2 Overseas ITO
2.2 Latin America
2.3 Eastern Europe
United States of America
3 See also
IT outsourcing drivers
IT outsourcing refers to outsourcing all or parts of IT functions to
an external party.
Information technology outsourcing is a subset of
business process outsourcing (BPO). The reasons for IT outsourcing
include lack of resources and cost reduction. IT outsourcing is
sometimes called IT enabled services (ITES) outsourcing.
The typical destinations of overseas IT outsourcing are India and
Philippines for the American and European companies and China and
Vietnam for the Japanese companies.
A combination of high overhead in the
United States and strong
cultural ties between the domestic and Asian information technology
industries have led many companies to outsource labor-intensive
software programming to Asia and Eastern Europe.
Although Eastern Europe has created a lot of competition for India in
recent years, India has always been a major player in information
technology (IT); they even make their own supercomputers for
predicting monsoons. It wasn't until the
Y2K bug emerged that the need
for legions of cheap programmers really arose, however, and American
companies began to see the potential for outsourcing overseas. After
Y2K the IT service industry exploded, with American companies
outsourcing everything from data entry to customer service to India
and other Asian countries.
Despite its distinct advantages for companies looking to outsource
their IT services, India's volatile political climate and rampant
corruption present problems. Some of the 185 Fortune 500 companies
that outsource software to Asia are choosing places like
China with more predictable politics and less corruption. The
Vietnamese government has succeeded in retaining a low cost, lower
risk market, while significantly improving income, per capita. A
series of educational measures and incentives have also been applied
to promote the technology sector. In addition,
exceptionally attractive due to competitively low salary of the
technically skilled workforce.”While not the cheapest outsourcing
Vietnam is still very competitive when compared to other
global locations, especially, as wage rises in India and China. This
is what contributed to it surging up the rankings, to take first place
in 2015,” commented Richard Middleton, Cushman & Wakefield’s
head of occupier services for Asia Pacific, Middle East and
Thailand was ranked as the 6th best IT outsourcing country in 2016.
It benefits from a combination of low costs and good infrastructure.
Thailand could be ranked higher with improved English language ability
among skilled workers.
Other (mainly American) companies that outsource their customer
service are finding that their customers prefer the Americanized
English of the Philippines to the British English that predominates in
India, though all of these countries have their drawbacks, from
censored Internet lines in China and
Vietnam to Muslim militancy in
Despite the hiccups the IT service industry continues to grow as the
software industry becomes more competitive and U.S. companies try to
reduce overhead. The Asian IT service market is still in its infancy,
but in 2008 industry think tank Nasscom-McKinsey predicted a $17
billion IT service industry in India alone.
United States and Canada usually seek nearshore
outsourcing in Latin American countries like Mexico, Guatemala, El
Salvador, Panama, and others because of a closer cultural match and
In recent years Eastern Europe has also become a common ITO
destination. ITO to Eastern Europe allows Western European and
North American companies to nearshore, remote insource, and in general
benefit from timezone and cultural proximity. Countries like Belarus,
Ukraine are common destinations for ITO within Eastern
Outsourcing IT to Eastern Europe has been on the rise because of the
low-cost but highly skilled labor available in this region, as well as
its geographical and cultural proximity. At first, many companies
chose to outsource to more traditional Asian destinations. However, as
software development and security needs grew, along with a preference
for geographically closer partners, Eastern Europe became a more
common destination for ITO. In 2009, the number of IT professionals
working for an ITO company in the Central-East European Region (not
including Russia), reached 95,000; this number represents a 9% growth
for countries like Ukraine.
United States of America
Although many associate outsourcing of the IT industry to be leaving
United States does receive a wide variety of outsourcing
work from other countries. A 2009 study on oDesk employment had
United States ranked #3 in countries that received outsourced
work. This is credited to the enhancements in cloud computing, and the
high evaluation marks that
United States located workers have and
continue to receive. The adverse effect that the American economy has
brought to the American worker, has also increased the demand for
seeking employment in other countries. Prior to 2008, the need was not
that high, as the average American worker was able to find work within
the 50 domestic states.
Software testing outsourcing
Website Management Outsourcing
Offshoring Research Network
^ "IS/IT outsourcing practices of small- and medium-sized
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^ ITES: Business Models,
^ VIETNAM TOPS C&W GLOBAL OUTSOURCING LOCATION INDEX FOR FIRST
^ IT Offshore
Outsourcing Opportunities in Thailand,
^ Global Sourcing of Business and IT Services,
^ Tagliabue, John. "Eastern Europe Becomes a Center for Outsourcing"
New York Times , April 19, 2007.
^ Ukrainian Hi-Tech Initiative. Dec. 3rd, 2010.
^ Hoch, Detlev et al. McKinsey Quarterly, Dec 2006. "The overlooked
potential for outsourcing in Eastern Europe"
^ Hall, Kathleen. "Why more businesses are nearshoring in Eastern
Europe" Computer Weekly, July 2011.
^ By Wadhwa, Vivek. "
Outsourcing Benefits U.S. Workers, Too" Bloomberg
Business Week , August 2, 2009.