Any agreement to obtain services from an outside vendor rather than to provide them internally meets the definition of outsourcing. The following is a list of IT outsourcing areas that are addressed:

1. Time sharing and applications processing
2. Contract programming
3. E-Business and Commerce Hosting
4. Software and hardware maintenance
5. Contingency planning and disaster recovery planning and services
6. Systems development and project management
7. EDI services
8. Network management
9. Re-engineering services
10. Transitional services
11. Facilities management
12. Remote LAN/WAN management

It is important to understand motivating factors when evaluating whether an outsourcing solution meets an organization’s objectives. The following is a list of the motivating factors often cited by management:

Cost Savings
Achievable through outsourcing by increasing efficiency (i.e., staff reductions, shared resources, etc.)

Fixed Cost vs. Variable Costs
Management has been driven to a fixed-cost contract for its predictability.

Flexible IT Costs
Management may have indicated that outsourcing is preferred because it allows management to adjust its IT costs as business circumstances change.

Dissatisfaction with Internal Performance
Management has not seen the increases in revenue and market share nor the increased productivity and cost reductions used to justify projects.

Competitive Climate
Speed, flexibility, and efficiency are often considered the keys to competitive advantage. By outsourcing the IT function, personnel resources can be quickly adjusted to respond to business peaks and valleys.

Focus on Core Business
Outsourcing support functions like IT allows management to focus on its primary business.

Capital Availability and Emerging Technologies
Management does not want to increase debt or use available capital to improve or maintain the IT function.

Staff Management and Training
Outsourcing eliminates the need to recruit, retain, and train IT personnel. This becomes the responsibility of the vendor.

Transition Management
As mergers and acquisitions take place, senior management views outsourcing as a means to facilitate the integration of several different hardware platforms and application programs. In addition, some managers are using outsourcing as a means to facilitate the organization’s move to a new processing environment.

Reduction of Risk
Outsourcing can shift some of the business risks associated with capital investment, technological change, and staffing to the vendor.

Accounting Treatment
Outsourcing allows the organization to remove IT assets from the balance sheet and begin to report these resources as a non-depreciable line item (i.e., Rent).

About The Author - Dennis Sommer

Dennis is a highly sought after author, keynote and seminar speaker on sales, leadership and business best practices.

Contact Dennis at www.executivebusinessadvisers.com or www.dennissommer.com .