- Insourcing(in-house development) is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.
- Outsourcing is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.
- Onshore outsourcing-engaging another company within the same country for services
- Nearshore outsourcing-contracting outsourcing arrangement with a company in a nearby country.Often this country will share a border with the native country.
- Offshore outsourcing-using organizations from developing countries to write code and develop systems.In offshore outsourcing the country is geographically far away.
- Core competencies-many companies have recently begun to consider outsourcing as a means to fuel revenue growth rather than just a cost-cutting measure
- Financial savings-it is typically cheaper to hire workers in China and India than similar workers in the United States.
- Rapid growth-a company sustainability depends on both speed to market and ability to react quickly to changes in market conditions.
- Industry changes-high levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies.
- The internet-the pervasive nature of the internet as an effective sales channel has allowed clients to became more comfortable with outsourcing.
- Globalization-as markets open worldwide,competition heats up.
- increased quality and efficiency of a process,service or function
- reduced operating expenses
- resources focused on core profit-generating competencies
- reduced exposure to risks involved with large capital investments
- access to outsourcing service provider's economies of scale
- access to outsourcing services provider's expertise and best-in-class practices
- access to advanced technologies
- increased flexibility with the ability to respond quickly to changing market demands
- no costly outlay of capital funds
- reduced head count and associated overhead expense
- reduced frustration and expense related to hiring and retaining employees in an exceptionally tight job market.
- reduced time to market for products or services.
- Contract length-most of the outsourced IT contracts are for a relatively long time period(several years).
- Competitive edge- effective and innovative use of IT can give an organization a competitive edge over its rivals.
- Confidentiality- in some organizations,the information stored in the computer systems in central to the enterprise's success or survival,such as information about pricing policies,product mixing formulas,or sales analysis.
- Scope definition-most IT projects suffer from problems associated with defining the scope of the system.