Outsourcing is the concept of taking internal company functions and paying an outside firm to handle them. Outsourcing continues to gain credibility across Western European business, as companies continue to seek cost saving opportunities. This has a high impact on workforces and local communities.

 

The need to focus on core business and (more importantly) the need to change fixed into variable costs will continue to drive demand for outsourcing, even in markets where IT spending is decreasing.

 

 

Off shoring or more accurately, offshore outsourcing, is the relocation of IT services to a lower cost location, usually overseas. The rise of offshore IT services creates a double effect for IT services firms.  On the one hand, they now face price competition from offshore providers, and on the other they are impelled to make their own investments in offshore capabilities.  IDC’s current forecast (for 2006) is that IT services offshored to low cost providers will grow at twice the rate of IT services overall.

 

According to Capgemini the UK currently outsources around 8% of its operations overseas, compared with the European average of 2%.  This figure is growing annually.

 

The UK has been slower and less aggressive in adopting and exploiting technology than other leading countries; businesses have failed to invest in IT, preferring to outsource instead.