Monday, June 04, 2007

What is outsourcing and what are the terms around it

Sometimes, the terms such as outsourcing become to confusing. Hopefully this post simplifies it. It can be applied to any process such as manufacturing. This example tries to explain IT Outsourcing.

IT applications and infrastructure around it is an asset for a

When a company would keep the ownership and hand over management and upkeep of IT applications to another entity, it is outsourcing.

Sometimes company would outsource the management to captive unit providers (subsidiaries, sometimes legal entities seperate from the company but part of same conglomorate) - in this scenario companies are mostly shifting jobs from one company to other company, one location to other location. Sometimes it is done to save taxes (Layers of companies, less tracabilities)

Sometimes companies will outsource to third party providers. This is what is most people understand at outsourcing. Sometimes, the providers execute the work from same location - which is called onsite. Sometimes, the providers execute
the work from different location - in same territory (country, timezone, region
- dffers per vendor) - which is called nearshore. When the proejct is executed
from a far off location - it is called offshore.

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