For IT service industries, the value chain consists of more inputs and outputs than retail or manufacturing. IT services are intangible, so value addition must happen with every activity throughout the process. Outsourcing is the latest trend at the ...read more
For IT service industries, the value chain consists of more inputs and outputs than retail or manufacturing. IT services are intangible, so value addition must happen with every activity throughout the process. Outsourcing is the latest trend at the moment, and it has also provided opportunities to save money and time on projects that will boost business profits.
Outsourcing is the process in which a business subcontracts out a portion of the company’s activities to a third-party. Outsourcing incorporates subcontracting parts of an organization’s value-chain, to other companies or contractors that specialize in those specific activities. These activities involve various aspects such as steps in the design, supply, production, marketing, sales, and services. The client company hires multiple companies to perform specific tasks in the value-chain on its behalf. Most of the time, the work is performed under the name of the client.
The type of outsourcing tasks includes value chain activities such as human resource management, facilities management, supply chain management, accounting, customer support & service, marketing, computer-aided designing, research, design, content writing, engineering, diagnostic services, and legal documentation. With the evolution in the technology sector, more and more tasks are getting outsourced. The companies should prefer and focus on saving time and money as these are the most vital aspects of any business.
However, the company must always weigh the pros and cons of outsourcing before implementing this practice to their business. In short, outsourcing should be considered as a tool and should only be utilized when required the most.
Let’s consider some of the examples of value chain activities performed by IT companies:
Many organizations worldwide have started outsourcing their IT requirements right from developing a new app to maintaining the latest IT infrastructure. This is because some companies believe outsourcing is the less expensive way to ensure that servers keep running. Emails are delivered without managing it manually and paying for an entire department. Similarly, when a company wants to develop a product and hand it over to the team of experts but does not prefer to perform the task in-house; thereby saving their loads of time and capital. However, businesses still have to monitor that the contractor is fulfilling all the business requirements and expectations.
Many businesses already outsource some of these tasks without having a complete understanding of it. For instance, many organizations use Gmail for their email systems, by enabling the technical knowledge on Google instead of their in-house IT department. It might take a bit of experience to set up and use the Gmail platform, but it’s not as technologically driven as setting up in-house mail servers.
Hence, IT companies have chosen various value chain activities, as mentioned above, to outsource their business processes.