FSN: Outsourcing, off-shoring, near-shoring, confused?

Outsourcing, off-shoring, near-shoring, confused?

5th June 2006
From ASCII and ERPs to WANs and XBRL: the IT industry has always loved acronyms and abbreviations. But outsourcing has created its very own bowl of alphabet soup and Lesley Meall is getting indigestion just writing about it.

Organisations have been benefiting from outsourcing since before we had a word to describe the process. Professionals such as accountants and solicitors have always offered client services on this basis and organisations have always relied on external individuals and businesses for some of their business needs – and nobody needed a Harvard degree in advanced semantics to understand what was going on. Now, the term outsourcing has become so all-encompassing that it is almost meaningless.

Nonetheless, Gartner felt compelled to have a go. The analyst describes Business Process Outsourcing as the ‘delegation of one or more IT-intensive business processes to an external provider, who, in turn, owns, administrates and manages the selected process(es), based upon defined and measurable performance metrics.' It certainly seems to cover all the bases. But it's of limited help if you are trying to figure out the difference between a business service provider, commerce service provider, exsourcer, and managed service provider, choose between co-sourcing, in-sourcing and netsourcing, or navigate the associated alphabet soup. ASP, BSP, MSP, PEP, SaaS, VSP and WASP are just a few of the abbreviations on a list that gets longer by the day.

In one way or another they all refer to slightly different types of third party suppliers of software and systems, concerned with providing information and communications technologies, such as software applications or IT infrastructure and processes over a network, and managing them externally. In some instances the differences are marked, in others you could go blind trying to find them.

Take outsourcing and off-shoring. If you have your invoice processing handled by a third party organisation in Basingstoke or Bolton , it's being outsourced; send it to the Balkans or Bangalore and you are off-shoring it, as well as outsourcing it. Get fed up with any of those options and decide to bring it back in-house and you are in-sourcing. There's a little overlap, but not enough to cause any real confusion.

When you get down to the nuts and bolts of software and hardware things are less clear cut. Software-as-a-Service, for example, is a delivery model that uses a network (most often the internet) to provide customers with access to commercially available software (not bespoke or custom software) while relieving them of the associated maintenance, relentless upgrade cycle, daily technical operation and support.

The concept of buying business applications as a service from an independent software supplier started with the Application Service Provider, an earlier incarnation of the same beast. Providers of SaaS are keen to differentiate themselves, but can be confusing.

In both cases, the software is hosted on the service provider's systems and accessed remotely. Some SaaS suppliers use specially designed software to offer ‘software on demand', where one copy of an application is installed and used by many companies.

From the users' point of view, there is no division between hosting and licensing fees. With the ASP model, the service company charges users a monthly fee for hosting applications that can just as easily be sourced by them as their client.

As in all things, the devil is in the detail. ASP and SaaS providers can also be categorised as Business Service Providers and Managed Service Providers. Because a BSP is an ASP that focuses on providing and hosting applications related exclusively to business functions, while an MSP manages both infrastructure and services, which can, of course, include software. Unfortunately, all three of them could also be a PEP or a WASP.

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