Outsourcing and offshoring are business trends that started to become popular in the 1980s and is the use of a third party company that insources to handle some of the work of an existing company, usually (but not always) away from the client company’s host country to a location where there is a better supply of suitably skilled workforce and lower costs involved in hiring the labor. In a competitive environment, many small and large companies have come to realise that they need to take advantage of the availability of an increasingly highly skilled global workforce in order to remain productive.
For example, many large businesses outsource to India, where there is a competitive supply of highly educated workers who are skilled in IT and fluent in English. The advantage of this approach is that the client company can save costs by freeing up resources such as office space for other activities and leave the personnel department of the third party company to handle recruitment costs.
In many cases, the supply of suitably skilled workers is unavailable in the client’s host location and therefore the option to outsource to India where there is a more readily available supply of skilled workers would save costs by removing the need to provide training from scratch. In this context, software outsourcing such as web design outsourcing, SEO outsourcing and IT outsourcing is an increasingly popular trend within the software industry in the UK where there is a skills shortage in those areas.
IT outsourcing can involve the turning over of responsibility to an outside firm the company’s entire IT department such as hosting, maintenance, software development and technical support. However, many companies choose to partially outsource IT functions. For example, SEO outsourcing would involve the external company, such as Business First, to perform “internet marketing” tasks on the client’s website without hosting or maintaining the website. The client company may at a later stage choose to have “web design outsourcing” to redesign their existing website while still hosting the website on their own self maintained servers.
IT outsourcing can significantly lower the costs to the client’s company while matching and often increasing the end product quality, leaving the company better able to anticipate future costs and focus on other key functions. Although tabloids have argued that offshore outsourcing takes jobs away from the host country, it is increasingly recognised that since offshore outsourcing increases cost/benefits ratio, the company’s productivity increases – and this benefits the host economy on aggregate, demonstrated by the conitnued low unemployment rate of the UK at ~5% compared to Europe’s at ~4% > ~20% since the start of the millenium when outsourcing of IT functions became increasingly popular amonsgt the larger companies in the UK.