Types of Outsourcing

Outsourcing is the delegation of tasks or jobs from internal production to an external entity (such as a subcontractor). In long-term relationships, the key component for success of the relationship is best laid during negotiations, which lead up to the signing of the Service Level Agreement. Some of the common practices employed for a successful management of outsourcing relationship have been listed below.

1. 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.
   
2. 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.
   
3. 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.
   
4. 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.