Information technology outsourcing
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Information technology outsourcing or ITO 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.
IT outsourcing refers to outsourcing all or parts of IT functions to an external party. Information Technology Outsourcing (ITO) term can be seen as a subset of Business Process Outsourcing (BPO).1 The reasons for IT outsourcing include lack of resources and cost reduction. IT Outsourcing is sometimes called IT Enabled Services (ITES) Outsourcing.citation needed
The typical destinations of overseas IT outsourcing are India and Philippines for the American and European companies and China for the Japanese companies.
In recent years Eastern Europe has also become a common ITO destination.2 ITO to Eastern Europe allows Western European and North American companies to Nearshore, Remote In-source, and in general benefit from timezone and cultural proximity. Countries like Belarus,3 Russia and Ukraine are common destinations for ITO within Eastern Europe.4
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 Vietnam or China with more predictable politics and less corruption. 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 the Philippines.
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 by 2008 industry think tank Nasscom-McKinsey predicts a $17 billion IT service industry in India alone.citation needed
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.5 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.6
- Offshore programming
- Software testing outsourcing
- Website Management Outsourcing
- Offshoring Research Network
- Tagliabue, John. "Eastern Europe Becomes a Center for Outsourcing" New York Times , April 19, 2007. http://www.nytimes.com/2007/04/19/business/worldbusiness/19prague.html?pagewanted=all&_r=0
- Zikhmanchuk, Mila. "Belarus: IT Labor Market". Goal Europe, Sep. 9th, 2011 http://goaleurope.com/2011/09/09/accountants-belarus-outsourcing-industryshortage-of-software-engineers/
- Ukrainian Hi-Tech Initiative. Dec. 3rd, 2010. http://hi-tech.org.ua/intetics-sponsors-research-2010/
- Hoch, Detlev et al. McKinsey Quarterly, Dec 2006. "The overlooked potential for outsourcing in Eastern Europe" http://www.mckinseyquarterly.com/The_overlooked_potential_for_outsourcing_in_Eastern_Europe_1884
- Hall, Kathleen. "Why more businesses are nearshoring in Eastern Europe" Computer Weekly, July 2011. http://www.computerweekly.com/feature/Why-more-businesses-are-nearshoring-in-Eastern-Europe
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