A few years ago, while driving on a freeway in Chicago, I chanced upon a very interesting Citibank billboard that compared making investment decisions with professional help to cutting your own hair—you save some money initially, but the long term results aren’t worth it.

Few of us cut our own hair or hide our savings under the mattress. We outsource these activities because we’ve found that others can do them better than us. It may cost us a little to outsource, but it saves time and produces better results—we get a trendier haircut and make better investment decisions.

Benefits of outsourcing

Although the IT industry woke up to outsourcing in the 1980s, high-speed Internet has fundamentally changed the rules of the game. Access to people and systems around the world is now just a mouse click away. You can get your work done by anyone from anywhere. Almost all Fortune 1000 companies outsource IT functions—be it infrastructure, application development, or system integration—and more than 50 percent of them use offshore services. Several thousand midsize enterprises and software companies (ISVs) are following the lead of these multinational corporations and are leveraging the benefits of “offshoring” to gain competitive advantage.

The benefits of outsourcing can be broadly classified as follows:

• Financial: Outsourcing helps you avoid making upfront capital investments while achieving faster time-to-market. This can result in increased revenue stream and improved cash flow.
• Technical: The major benefit is quick and easy access to a resource pool with a wide variety of skills and access to multi-platform, multi-technology infrastructure. The mature process of an experienced outsourcing partner could improve the quality and maintainability of an application.
• Operational: Outsourcing can help improve the overall efficiency and release significant management resources, which can be focused on the core business. This means a more agile company and faster response to changing market dynamics.