South Korea: Information Technology Outsourcing

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Nowadays, information technology plays a major role in business sphere. The world is seeing its fourth modern upset, initiated by digitization, computerized reasoning, apply autonomy, expanded availability, and self-governing vehicles. Korea could have a tremendous part to play. South Korea can possibly give Silicon Valley and China a keep running for its cash. The nation has positioned as the most inventive economy by Bloomberg, ruling worldwide outlines in R&D power, esteem included assembling, and patent action.

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It’s a mixture of development. Consider it: which other nation is contending head-on with Apple in the top of the line cell phone race? The East Asian country is additionally home to the quickest web on earth and broadband administrations per capita is the most elevated in the globe. The purpose of this paper is fully explain all features of the IT systems and its challenges, specifically in South Korea.

In this competitive business world, companies and firms of all size are trying to get a competitive edge over their competitors. In the quest of ever-lasting development, companies have been using the help of ESP (external service provider) to control and run certain aspects of their business, which is usually done to reduce the cost of operations and procedures. Indeed, outsourcing is not a new trend as it has been around since the 1960s when external help was needed in performing simple tasks like fixing problems within the hardware or controlling only a few operations in the software. IT outsourcing has come a long way ever since turning into an undividable part of modern businesses, which deploy their services for their own benefit on a day-to-day basis. The exact definition of IT outsourcing as puts it “[I]t is the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes” (1st). Accordingly, getting help out of the company without using its in-house workforce is useful in areas such as utility services, software as a service (SaaS)and cloud-enabled outsourcing, governing deals for sustainable win-win relationships with external providers and so on. It is no surprise, then, to see that IT outsourcing had $62 billion dollars in total contract value worldwide out of $85.6 billion dollars of all outsourced services provided in 2017 (2nd). Therefore, it is reasonable to say that IT outsourcing is an essential component of companies that put efficiency and cost management at the forefront of their businesses.

Case of South Korea

South Korea has been enjoying the steady growth of its national economy which is largely due to strong domestic economy. It has been cited as one of Asia’s most mature IT service markets, according to IT analyst Ovum in its last Emerging outsourcing opportunities report(3rd). “IT market in South Korea is expected to grow by 7 per cent in the next three years reaching $16.4 billion dollars by 2016” the report concludes. One particularly interesting characteristics of Korean IT industry is the presence of Chaebol companies, large conglomerate groups that are usually owned by a certain family, which dominate in the sphere with companies like Samsung SDS, LG CNS and SKC&C totalling 50 per cent of market control. Therefore, IT outsourcing market is captive as the majority of Chaebol group companies are serviced by their own corresponding IT service groups. This, in turn, hinders the penetration of global names like IBM and Capgemini’s external source providers into the economy with the exception of Hewlett-Packard.

Kakao Bank, driven by the administrator of Korea’s overwhelming informing application KakaoTalk, has pulled in some 4.35 million records in four months by offering extended premium advantages and easy to understand versatile administrations. Then again, ordinary banks opened uniquely around 155,000 computerized records a year ago. Jung anticipates that the financial business should experience the greatest ever changes in the following 10 years, however the greater part of Korean banks depend on redistributing for their innovation improvement, giving themselves a chance to fall behind. ‘While block and-engine branches, where a teller meets clients, have been assuming a significant job for conventional banks, an easy to understand portable application and the individuals who build up the program have turned into the center for Kakao Bank,’ he said.

In his eyes, versatile applications created by Korean banks look like random stores where they simply moved substance from their PC form locales. ‘There are no obvious versatile applications by regular banks,’ Jung said. ‘It was inconceivably hard to develop the financial inheritance. We chose to dump PC banking to go portable just in spite of concerns and questions why we need to surrender a major channel still utilized by numerous individuals.’ To upgrade client accommodation and overhaul the financial framework for cell phones, Kakao Bank dropped the same number of superfluous strides as it could, including passwords for bankbook, confirmation frameworks requiring an open key testament or Active-X devices. It likewise abrogated prime rates for favored clients. Regardless of Kakao Bank’s ubiquity that difficulties others, a few concerns have been raised about how much longer it can offer premium advantages which drove the organization to report an aggregate total deficit of 66.8 billion won (US$61.40 million) as of end-September. Its security provisos as of late found by occurrences identified with its check card and oversea exchanges have additionally stressed clients. ‘It’s a quickly developing bank, so the job of top chiefs is to realize how to go for broke at each developing stage,’ Jung said.


In South Korea, we can see a lot of problems associated with IT outsourcing. The first issue which can be this is captive domestic market. The domestic market in the field of IT outsourcing is not developed as other states such as America or other republics in Europe. among other things, Korean IT outsourcing cannot compete with other domestic markets because it is not big enough. In Korea there is no internal dominant company in the field of IT outsourcing that could provide services, here in Korea we can see only Chaebol which dominates the business environment. One of the most attractive markets in Korea is IT outsourcing, in Korea there are no large companies other than Chaebol, which mainly deals with serving its customers with the relevant IT services they need. It can be noted that the domestic market is not so big to compare or compete with each other with the exception of Chaebol.

The second problem may be related to the image or rather the image of Korean companies as well as the image of Korea. Korea should prove itself as a more developed country in the field of IT outsourcing and not only that, but also recognized as an economy in the economy, it is world class. as well as Korea should build a company that should be at a high level and that would be efficient and friendly and be an example for backward companies. Korea has to prove that it is strong in software or business services because it leads and is exemplified by the example of Korea being one of the leaders in advanced technical environments with high-speed Internet, commercial technologies and others.

The third problem is that the Korea Company should not only deal with IT outsourcing, but also provide additional services and should be optimistic. Employees should not only understand their work, they should also understand the related issues with IT outsourcing or business processes. Suppliers must be able to solve the difficult problems associated with IT outsourcing in various system projects. As well as suppliers should strengthen communication with customers by providing them with various services in order to develop their business as well as a business model.


In Korea, there is very little competition in the domestic market for IT outsourcing or services. Korea should expand the domestic market so that there is competition inside the country so that in the future one or two companies are not enough enter the foreign market and compete with foreign companies.Korean companies need to start a plan to expand the company and enter foreign markets.

If Korea and Korean companies have their image, then it will show itself as a developed country in IT outsourcing and it will be an example for backward companies or for other countries and show its efficiency and friendliness. To be recognized as a Korea-friendly business, they can take an example from more developed countries and apply their IT management system in Korea and follow the rules so that they can compete with foreign markets in the future. This is all to show not only Korea in the field of IT outsourcing or the company but Korea itself in the field of IT services.

IT outsourcing providers can develop themselves and their business models if they have good relationships with their partners or customers, and an example of this can be found in business process outsourcing. if suppliers have good relations with their customers and show interest in customers as well as attract the interest of IT partners in this case, they can request other services related to IT outsourcing such as BPO and various types of programs or systems. Following this, they will mean that suppliers will find other questions and learn how to solve complex problems related to IT problems.

Future prospects

Upcoming years are expected to bring about massive scale developments in the IT outsourcing sphere. These changes stem from various factors like digital data revolution, automation and personalization, to name but a few and it is anticipated to have an influence on not only the types of provided IT services but also on their quality. The main trend change will be in demand for the qualified IT specialists as the spending on IT industry will climb over $3.8 trillion dollars by the end of 2019(4th). This is largely owing to the fact that cybersecurity and AI to blockchain and cryptocurrencies are all emerging as new generation technologies. companies are struggling to provide in-house manpower to get their operations run in those fields and this calls for the urgent need of an educated workforce. In addition, one of the noticeable trends will be the automatization of certain routine tasks through the help of AI. This automatization will streamline routine processes and give rise to gadgets that go beyond smart speakers and AI assistants that are currently available in the markets. ESP specialists will be required to design those tasks and help companies get the maximum output from the routine manual processes. The shift in the very paradigm of Outsourcing will happen with ESP experts being seen as service integrators who share risk and responsibility for the project’s success. As the GSA report writes more focus will be put on outcomes than outputs (5th). Contracting rules will clearly state that service integrators will be given procurement which will increase competition between experts and reveal the best talents in the field for companies. Last but not least, the hype over security will skyrocket the need for outsourced security services that can protect companies data from cyber attacks and help increase workers awareness of cyber threats.


Data frameworks are assuming real jobs for organizations to bring and support upper hands. Subsequently, it tends to be a concerned issue to redistributing organization’s data frameworks to an outsider. Since Information innovation is an indispensable piece of pretty much every association and assumes a significant supporting job in many capacities yet it isn’t the essential business of numerous associations. Their center skills – the things they do best and that speak to their focused qualities – are in assembling, retailing, administrations, or some other capacity. IT is intricate, costly, and continually evolving. It is troublesome to oversee IT, notwithstanding for associations with better than expected administration abilities. Since of these contemplations, a few associations have chosen to use outside merchants as opposed to inner IS units as their essential wellspring of IT administrations. Getting administrations from merchants, instead of from inside the association, is known as IT re-appropriating. IT re-appropriating is the authoritative vehicle through which ventures utilize outside sources to give life cycle administration and bolster tasks for their IT framework. IT framework redistributing centers around organizations who give re-appropriate administrations in the regions of data innovation framework. The run of the mill instances of exercises that these suppliers perform incorporate server farm activities; organize tasks; reinforcement/ recuperation administrations, information stockpiling the executives administrations; framework organization administrations; end client backing of work area PCs, workstations, and handheld gadgets; site, or application facilitating, and so forth. Re-appropriating supporters portray IT as a ware, a nonexclusive thing like power or janitorial administrations. Specifically, the promoters guarantee that outside sellers can give IT administrations at 10 to 40 percent lower cost, with higher quality, for the accompanying reasons: equipment economies of scale, staffing economies of scale, specialization, charge benefits. Then again, there are additionally potential redistributing costs, for example, constrained economies or scale, absence of business ability and loosing inward cost decrease openings. Be that as it may, one of IBM research demonstrates that the bigger the redistributing contract, the almost certain the improvement in main concern results.

The Korea IT administrations market has developed quickly in the previous decade, getting a charge out of solid twofold digit development rates supported by a sound household economy. Be that as it may, the market experienced genuine changes since the Asian monetary emergency which was exacerbated by the shaky worldwide economy. Korea IT administrations market is unequivocally in view of frameworks joining administrations, which smaller person different portions, for example, item support, counseling and IT the executives. In any case, client organizations have begun tolerating all the more truly the IT re-appropriating idea and are thinking about the advantage and esteem that IT outsourcers can bring. In any case, Korea IT administration market is additionally a Chaebol-ruled business condition. In this way, IT re-appropriating in Korea is particularly a hostage advertise, with most Chaebol gathering organizations adjusted by their separate IT administrations arms.


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