ICT outsourcing can be said as one of the current trends for companies around the world to carry out their business processes. ICT outsourcing is estimated to begin in the early 1990s, when Kodak used an external partner to manage its ICT resources. Since Kodak does not have the ICT expertise, they hire another company to help them manage the ICT resources. This phenomenon occurs because companies would like to concentrate their core business functions, among other benefits. After only 20 years, many companies now need outsourcing, mainly in customer support and also in administrative processes, and this also affects Malaysia. Malaysia is currently known as the world’s leading outsourcing hub, where it currently ranks third globally behind China and India in the outsourcing industry. This shows the importance of outsourcing for developing countries in Asia.
Definition of outsourcing
Outsourcing is defined as a concept of outsourcing part of the organization’s business process to a third party who has the specific skills and services. The third party must have the skills that the organization needs so that the result of the outsourced work is as expected. Outsourcing can also be explained as the transfer of one or more business functions of a company, including its assets, to an external service provider that provides a defined service for an agreed period of time and payment through a written agreement.
From these two definitions, we can see that outsourcing can be defined with the following characteristics:
1. A company that transfers one or more business processes to a third party.
2. A third party has the skills and services necessary for the business process.
3. You have an agreement or contract between the two parties about the price and the expected result.
Types of outsourcing
Outsourcing can be divided into two types, namely full outsourcing and selective outsourcing.
The first is full outsourcing, where the IT budget used to pay external vendors is roughly 80% or more of the total. For outsourcing activities that only took up less than 80% of the total IT budget, it will be called selective outsourcing. It is called “selective” because the company will select only one or more IT functions to outsource to a third party.
Apart from these two main types of outsourcing, there are also other types of outsourcing that are usually the subdivision of these two main types, such as internal outsourcing and transitional outsourcing.