ICT outsourcing definition and type

2019-05-16 Business No comment

ICT outsourcing can be said to be one of the current trends in business processes for companies around the world. It is estimated that ICT outsourcing began in the early 1990s, and Kodak used external partners to process its ICT resources. Since Kodak does not have ICT expertise, they hire another company to help them deal with ICT resources. This phenomenon occurs because the company wants to focus its core business functions on other aspects. Just 20 years later, many companies now need outsourcing, mainly customer support and back-end processes, which also affects Malaysia. Currently, Malaysia is known as the world's leading outsourcing center and currently ranks third in the outsourcing industry, behind China and India. This shows the importance of outsourcing to developing countries in Asia.

Outsourcing definition

Outsourcing is defined as the concept of outsourcing part of an organization's business processes to third parties with specific skills and services. The third party must have the skills needed for the organization so that the output of the outsourced work is as expected. Outsourcing can also be interpreted as the transfer of one or more business functions of the company [including its assets] to an external service provider that provides defined services for a agreed duration and pays in a written agreement.

From these two definitions, we can see that outsourcing can be defined as having the following characteristics:

1. Transfer one or more business processes to a third-party company.

2. Third parties have the skills and services required for business processes.

3. Whether the parties have reached an agreement or contract on the price and expected results.

Outsourcing type

Outsourcing can be divided into two types, with little total outsourcing and selective outsourcing.

The first is full outsourcing, which is used to pay external suppliers with an IT budget of about 80% or more of the total. For outsourcing activities that account for less than 80% of the total IT budget, it will be called selective outsourcing. It is named 'selective' because the company only chooses one or several IT functions to outsource to third parties.

In addition to these two major types of outsourcing, there are other types of outsourcing that are typically the two main types of segments, such as insourcing and transition outsourcing.

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