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 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. The reasons for IT
outsourcing include lack of resources and cost reduction. IT outsourcing is
sometimes called IT enabled services outsourcing.
Overseas ITO = Asia =
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; 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. 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, Vietnam is exceptionally attractive due to competitively low
salary of the technically skilled workforce.”While not the cheapest
outsourcing destination, 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 Africa,.
Other 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.
= Latin America = Countries like United States and Canada
usually seek nearshore outsourcing in Latin American countries like Mexico,
Guatemala, Costa Rica, Panama, and others because of a closer cultural
match and timezone. = Eastern Europe =
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, Russia and Ukraine are common
destinations for ITO within Eastern Europe.
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,
reached 95,000; this number represents a 9% growth for countries like Ukraine. A
representative snapshot of Ukraine's IT outsourcing market can be found in the
uSupport Project catalog, founded in 2014 and containing the most recent info
about the outsourcing companies and their services.
= United States of America = Although many associate outsourcing of
the IT industry to be leaving America, the United States does receive a wide
variety of outsourcing work from other countries. A 2009 study on oDesk
employment had the 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.
Illegal outsourcing by Japanese IT companies
Japanese companies often exploits the foreign labors, particularly Chinese and
Vietnamese, by violating the Employment Security Act, and Labor Standard Act set
by ministry of health and labors in Japan using the name of offshoring.
Article 44 of Employment Security Act in Japan implicitly bans the
domestic/foreign workers supplied by unauthorized companies regardless of
their operating locations. Law will apply if at least one party of
suppliers, clients, labors reside in Japan, and if the labors are the
integral part of the chain of command by the client company, or the supplier.
Those deemed to violate will be punished with
as well as the punishment defined by the article 6 of Labor Standards Act in
Japan, Victims can lodge a criminal complaint
against the CEO of the suppliers and clients in the Labor Standards
Inspection Office or Public Prosecutor's Office of the respective company
location. Due to the risk of the CEO's arrest, Japanese company accustoms to
the private settlement with financial package in the range between 20 and 100
million JPY. See also
Offshore programming Software testing outsourcing
Website Management Outsourcing Offshoring
Offshoring Research Network Globalization
References External links
Central-East European Outsourcing Association
The Pros to Outsourcing your IT