Outsourcing

Outsourcing is the practice of entrusting the development, maintenance or management of IT systems to suppliers external to the company. It can involve complete projects (custom software development) or ongoing services (infrastructure management, application support).

How it works #

The client company defines requirements and signs a contract with an external supplier who commits to delivering the project. The most common contract models are: fixed-price (set price for defined result), time and materials (billed man-days), or hybrid. The supplier provides a team of consultants who work on the project, often with periodic staff rotation.

What it’s for #

Understanding outsourcing risks is fundamental for deciding what to externalise and what to keep in-house. The main risks are: vendor lock-in, know-how loss, scope creep, consultant turnover and incentive misalignment (the supplier earns by time, not by result).

When to use it #

Outsourcing can work for commoditised or well-defined activities. It becomes risky for strategic, custom and long-term projects where domain-specific know-how is critical. The often more effective alternative is a small, competent internal team, possibly supported by consultants for specific specialist skills.