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Software development outsourcing / application service providers (ASPs)

IT Outsourcing

IT Outsourcing, in broad terms, is the purchase of goods or services that were previously provided internally.

Outsourcing is a generic term used for a broad range of information technology functions that are selectively contracted to an external service provider.

Software Development Outsourcing:

• Contracting (or subcontracting) with an external organization for:
  

• ·The development of complete or partial software products /projects.
  

• The purchase of packaged or customized package software products.
  

• Activities to aid in the software development life cycle

Types of IT Outsourcing

• In-House Building (No outsourcing)
  Many organizations have their own Information Technology departments catering to their needs of software. These organizations develop the required software and information systems within their own capacity and limits.
  

• Product Component outsourcing
  In Product Component outsourcing, the developer is contracted to develop a part of an overall system. In case of large and complex systems where the organization does not have the capacity or required skill to develop a particular thing is outsourced.

• Process Component outsourcing
  In Process Component outsourcing the customer organization simply contracts for an external group to perform all or part of the functions of one or more of their process steps or components.
  

• Software Acquisition (Total outsourcing)
  In this type, the organization outsource each and every activity associated with the software which includes design, development, programming, testing and maintenance .The main reason for such type of outsourcing is to focus on the organizations core values.

The Benefits of IT Outsourcing

• Financial restructuring: Improving the business's financial position while reducing or at least containing costs

• Core competence: Redirecting the business and IT into core competences.

• Technology Catalyst: strengthening resources and flexibility in technology and service to underpin the business strategic direction.

• Business transition: Facilitating and supporting major organization change.

• Business Innovation: Improving and innovating in processes, skills and technology, while mediating financial risk through the vendor, in order to achieve competitive advantage.

• New market: direct profit generation through joint ventures and vendor partner.