Outsourcing is a term that refers to the allocation of services, processes, activities or resources (particularly ICT and infrastructure) outside the organization as the form of long term contractual relationship. Sometimes this term refers to the process of exclusion, sometimes it is used to refer to the forms of service, process and activity assurance. Outsourced services, processes and activities are provided by an external supplier (provider). Although outsourcing may involve sub-processes or resources, it is usually used for a more comprehensive, broader area. Outsourced service, process or activity is managed based on the SLA (Service Level Agreement - an agreement on service level). Therefore, in practice the outsourcing is mostly associated with the service.
Outsourcing has many forms and attributes:
- Business Process Outsourcing (BPO) was a term used for the exclusion of the entire processes or procedural blocks, especially supportive. Contract with an external supplier was usually in the form of service and therefore it is in practice used only shorthand outsourcing.
- Outsourcing in ICT has different forms, from the ASP, SaaS to Cloud Computing. More details are in the article dedicated to the service management in ICT.
Use of the outsourcing in practice: Outsourcing can lead to many reasons, which can be combined, for example:
- Lower costs, which can achieve and guarantee only the service provider
- Transferring risk to providers
- Higher quality of services offered by the provider
- Lack of human resources
- Lack of investment funds at the moment
- Better spatial coverage of the provider
- Little experience in the new region
- Greater experience of the vendor with a particular field or technology
- Short term use of a particular technology or knowledge and it is therefore better to choose a provider for a limited time
- Need for specialized technology for which the organization has not experienced human resources or which it does not have the capacity to fully utilize later
- And more
Through outsourcing anything can be provided that is convenient for the organization that can be contractually detected and where it can be specified the KPI on which is based the provider’s job evaluation. Outsourcing leads to the specialization of service providers . Examples of industries where outsourcing is used in practice are: