Information Technology Outsourcing
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 refers to outsourcing all or parts of IT functions to an external party. Information technology outsourcing is a subset of business process outsourcing (BPO). The reasons for IT outsourcing include lack of resources and cost reduction. IT outsourcing is sometimes called IT enabled services (ITES) outsourcing.
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 (IT); 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,.
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