ITO - Information Technology Outsourcing
ITO or Information Technology Outsourcing involves any tasks or functions that relate to computers and the internet. More commonly, the outsourced services might include web hosting, both for websites and data storage, software and database creation, server setup and maintenance, or file recovery in the event of disaster such as fire or flood. Today, companies that undertake these tasks will most likely be based offshore. Consequently, there are plenty of excellent reasons why information technology outsourcing is widespread today.
One of the arguments for ITO is the fact that the internet and computer programs are changing exponentially. How a problem was solved just a year ago, may now seem archaic. For most companies, even large conglomerates, this continual growth is a problem for in-house staff. Typically, they are not specialists in the field, which means they do not have the same abilities of an outsourcer. The learning curve is high and unless the staff are focused on the same function, they quickly become outdated with their methods. By choosing to outsource the function, or even the whole department, to a company whose core competency is that function, then higher productivity is realized and better solutions are found.
Further, the capital investment of setting up various departments is huge for many companies. Expensive resources include staff, equipment, twenty-four-hour monitoring, software, licenses, office space, and any other pertinent things to accommodate that department. ITO - information technology outsourcing allows the company to spend money more effectively on the specific process and end results, rather than what is perceived as trivial, such as desks and chairs to seat employees.
Companies have also found that when they outsourced certain functions, they were able to go to market quicker with new product launches. By outsourcing, the team is ready-made and can support and assistance the main team. Precious time is not wasted trying to attract the right people, keeping them motivated, organizing a hierarchy, and setting up physical resources. Information technology outsourcing usually means that a team can be brought up to speed very quickly and can jump right into the task at hand. It also means that the main company may now have access to both experts and software that may have been too expensive otherwise. They now have the best of both worlds. Excellent staffing without the ancillary costs.
Finally, although outsourcing can be risky, in many instances, a company that makes use of information technology outsourcing can actually reduce its risk. In other words, by jointly undertaking a project or function, and since the company is sharing the resources with others, their investment is smaller, making their risk smaller. If something happens to curtail the project or even stop the project from completing, the company can exit the partnership much easier than if it had created its own in-house department.
Despite all the benefits, a couple points of caution about ITO - information technology outsourcing should be brought to the forefront. First, large companies who have been surveyed about their experiences with ITO have indicated that they lost control. Since the outsourcer was not an employee, there was no direct management of the project. The question remained, "who was in charge?", the client (the company who outsourced the project) or the owner of the company that was contracted to fulfill the function? Because the outsourcer typically has other clients, the issue became which project takes precedence?
Second, companies indicated that the costs were not necessarily as agreed upon. Once the project was in motion, unforeseen costs cropped up, and the outsourcer expected the company to pay up. This problem was two-fold. The company again lost control, and in the end, outsourcing may not have been cost-effective at all.
Third, companies realized after the fact that they did not have adequate "exit clauses" in their contracts. The termination specifics should have been clearly spelled out in the original contracts in order to avoid high costs associated with breaking the arrangement terms.