Information Technology Outsourcing or ITO

Information Technology Outsourcing or ITO

Information Technology Outsourcing or ITO is a company's outsourcing of computer or Internet related work, such as programming, to other companies. It is used in reference to Business Process Outsourcing or BPO, which is the outsourcing of the work that does not require much of technical skills.
Outsourcing Information Technology to Asia

A combination of high overhead in the United States and strong cultural ties between the domestic and Asian information technology industries have led many companies to outsource labor-intensive software programming to Asia and Eastern Europe.

India has always been a major player in information technology (IT); they even make their own supercomputers for predicting monsoons. It wasn't until the Y2K bug emerged that the need for legions of cheap programmers really arose, however, and American companies began to see the potential for outsourcing overseas. After Y2K the IT service industry exploded, with American companies outsourcing everything from data entry to customer service to India and other Asian countries.

India was a natural choice for outsourcing. Many American technology companies were either created by or employ non-resident Indians (NRIs) or Indian-Americans who still have strong ties to family and friends in India. This cultural bridge combined with the vast pool of cheap, technically skilled, English-speaking engineering talent produced by India's engineering colleges creates the perfect environment for information technology.

Despite its distinct advantages for companies looking to outsource their IT services, India's volatile political climate and rampant corruption present problems. Some of the 185 Fortune 500 companies that outsource software to Asia are choosing places like Vietnam or China with more predictable politics and less corruption. Other companies that outsource their customer service are finding that their customers prefer the Americanized English of the Philippines to the British English that predominates in India, though all of these countries have their drawbacks, from censored Internet lines in China and Vietnam to Muslim militancy in the Philippines.

Despite the hiccups the IT service industry continues to grow as the software industry becomes more competitive and U.S. companies try to reduce overhead. The Asian IT service market is still in its infancy, but by 2008 industry think tank Nasscom-McKinsey predicts a $17 billion IT service industry in India alone.