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Strategies to Adopt for Technology Outsourcing

Strategies to Adopt for Technology Outsourcing
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by Sanjeev Kapoor 06 Dec 2014

Outsourcing is a practise that is widely adopted by businesses nowadays. It is essentially the process of contracting with another company or individual to do a specific function. A lot of companies outsource area(s) of their IT requirements. This could be anything from IT management, to programming, to software development. It saves businesses the time and resources that are need to acquire a team that can take care of specific IT tasks in-house. Nonetheless, you obviously cannot walk into this blind. You need a solid strategy in place to guarantee technology outsourcing is successful for your business. So, let’s take a look at four different options…

Supplier revenue based on your own performance

This strategy involves the firm and the provider sharing the risks as well as the benefits. The payment of the provider is linked to the realisation of benefits. A straightforward and evident performance measurement system needs to be in place so the provider knows exactly what they are aiming to achieve and what they will be paid if they do so. Negotiating is the main challenge with this strategy, as both parties want to be protected.

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Selective outsourcing in a flexible or module manner

This strategy entails keeping some of your IT tasks in-house whilst outsourcing whatever can be better supplied by service providers. Typically firms will outsource anything from 20 per cent to as much as 60 per cent of their IT budget. This is a flexible solution and one that is highly adopted as it’s often very efficient – you manage the tasks you can do well and outsource those that are not within your team’s main capabilities.

Using numerous suppliers for an activity

This strategy involves using two or more suppliers for IT tasks. The main motive for this is so that the firm avoids reliance on one company and thus risk is diminished. Moreover, they can derive quality and cost benefits from increased competition amongst the suppliers. Short-term contracts may be offered with a potential of a renewal if the company impresses. The management of relationships becomes pivotal in this strategy.

Outsourcing to overseas providers

Last but not least, a lot of companies are outsourcing their businesses IT tasks to companies that are based overseas. Their main reason for doing so is often to take advantage of lower costs; nonetheless it could also be to tap into better skills and labour. The main barrier with this strategy is communication. You need to establish effective channels of contacting each other from the start. Conveying your wants successfully is imperative so time and money is not wasted and deadlines are not missed.

So there you have it, an insight into the various strategies you can use when you adopt technology outsourcing. It is all about finding what works for your business, as well as a strategy that works for the provider. Is it worth missing out on a provider because they do not want to work in the manner you do, i.e. the performance revenue based model? This is something only you can determine.

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