A Practical Guide to the Benefits of IT Outsourcing for Businesses Decision-Makers
More than a buzzword, IT outsourcing’s benefits have become an indispensable strategy for many organizations, providing tangible benefits that positively impact the bottom line.
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More chaptersOutsourcing has played a critical role in the success of tech titans like Google, WhatsApp, Alibaba, and GitHub. But what does it mean to outsource? Does one outsource selected services or entire departments, or are there any other outsourcing models that should be considered? Most importantly, what are the tangible benefits of outsourcing?
Today’s article will examine a subcategory of outsourcing, IT outsourcing, and its benefits by understanding its models, costs, and best practices.
Key Takeaways:
- IT outsourcing refers to the use of external providers that handle business IT needs.
- IT outsourcing saves businesses time and money, sharpens focus on core competencies, accelerates time-to-market, and provides agility, flexibility, and access to innovative IT solutions.
- Customers can choose from numerous outsourcing models to maximize the advantages of IT outsourcing.
What Is IT Outsourcing?
Information Technology outsourcing is a subset of outsourcing. To fully grasp IT outsourcing, one needs to understand its definition and the services it entails.
Definition
IT outsourcing is the practice of partnering with external providers to handle a company’s technology needs - such as infrastructure, application services, and business processes - to leverage specialized expertise, reduce operational costs, and enhance efficiency.
Types of IT Services Commonly Outsourced
Most technical tasks can be performed remotely with the same quality and lower costs. Hence, almost every IT service can be outsourced. Below is a list of the most common IT services outsourced.
Help Desk Services
A help desk typically supports internal staff with IT tasks, such as troubleshooting a printer, resetting or upgrading a laptop’s password, or granting employees access to a new system. These tasks can be supported remotely via a ticketing system, chat, video call, or email. A remote help desk team frees up costs or resources associated with building an in-house IT team. It creates a centralized area of communication and boosts service quality.
IT Strategy Planning
IT strategic planning leverages IT resources to create a clear roadmap that aligns technology initiatives with business goals. Entrusting outsourcing services gives businesses space to focus on core business functions while cutting the costs of maintaining an in-house team. Outsourcing IT strategy planning results in innovation in the long run.
Backup and Recovery
Data holds immense power. Cybersecurity threats pose huge burdens to internal IT teams. In 2023, 2,365 cyberattacks occurred, resulting in 343,338,964 victims. In the second quarter of 2024, Check Point Research observed a global year-over-year increase of 30% in cyberattacks, averaging 1,636 weekly attacks per organization.
Delegating this responsibility to credible outsourcing companies provides peace of mind. Your partner takes care of setting up secure systems to prevent data loss and quick data recovery in case of data breaches or disasters.
Network Management
Outsourcing network management is recruiting a team to maintain and optimize an organization’s network. This involves security updates, troubleshooting network issues, and ensuring that storage, bandwidth, and hardware are readily accessible and secure.
Employee Onboarding and Offboarding
Onboarding a new employee isn’t just about assigning a workspace and training sessions; it’s a tedious process that involves setting up new accounts and granting access to essential systems. Offboarding, by the same token, is a process of termination and access revocation to systems or accounts.
Outsourcing employee offboarding and onboarding ensures a positive experience for the employee and compliance with security protocols.
Software Development
Software development involves extensive knowledge, a team of niche experts, and a robust communication and documentation system. Outsourcing parts or the entire software development team saves significant time and resources. This proves especially beneficial when there is increased competition for competent applicants in 86% of CIOs, according to a November and December 2022 Gartner survey.
Cybersecurity
Cybersecurity encompasses backup and recovery services. It safeguards data, devices, and networks from malicious attackers. Having professionals set up extensive protocols, policies, and safety measures ensures businesses peace of mind.
Cloud Services
Utilizing cloud services has more to do than saving infrastructure costs. A strong cloud service provider gives you access to the latest tech knowledge while transforming your business with more agility and resiliency, ultimately resulting in higher levels of customer satisfaction.
Models of IT Outsourcing
Naturally, when discussing different models or systems, one would wonder what the best option would be. However, it is worth noting that there is often no best model or option, only the one that works best in specific situations. Understanding what each of these Outsourcing models entails allow you to make confident, informed decisions.
Fully Outsourced IT
As its name suggests, a fully outsourced IT model means a business outsources its entire IT to a third-party provider, often referred to as a managed service provider (MSP). The MSP takes care of the ongoing, day-to-day responsibilities of monitoring and maintaining the IT system and infrastructure.
MSPs are strategic partners for businesses that lack the budget to build a full-fledged in-house team or for those with consistent technical needs. They keep your IT systems and infrastructure up and running, so often, the servers are located on their premises. Find our article on managed IT services to gain further insight into the topic!
Co-managed IT
Some businesses may not like the idea of handing total control over an outsourcing company, or they may already have an in-house team but still struggle to keep operations smooth sailing. Co-managed IT services help bridge this gap.
Similar to partnering with MSPs, co-managed IT services are diverse (strategic planning, network management, backup and recovery, etc.) depending on skills or unique IT demands. This means co-managed IT services also support day-to-day tasks. The biggest strength of this model is that your team decides how much help and control your partner has.
Offshore, Nearshore, and Onshore Outsourcing
While the aforementioned models are based on the level of control you have over the outsourced services, offshore, nearshore, and onshore outsourcing are based on geographical factors.
- Onshore outsourcing refers to recruiting team members or development teams from the same location as your business.
- Nearshore outsourcing refers to hiring team members or teams from a neighboring country with similar time zones.
- Offshore outsourcing refers to sourcing team members or teams from distant countries with different time zones.
Each outsourcing model holds its strengths and weaknesses. It ultimately comes down to the business needs, budget, and people.
Advantages of IT Outsourcing or IT Outsourcing Services
Let’s zoom in on the most noticeable benefits of IT outsourcing services and what makes them so attractive.
Cost Saving and Control
The largest driving force behind outsourcing is cost savings. To save money, 59% of companies use outsourcing services. Several factors lead to cost savings:
- The difference in labor and production costs between countries. Outsourcing to destinations like Vietnam, the Philippines, or India saves money due to lower labor costs.
- Businesses spend less on on-premise infrastructure, recruiting processes, employee wages and benefits, and training.
In addition to saving and controlling tangible resources, companies save time and effort involving the maintenance of in-house IT teams. This advantage allows businesses to budget accordingly and use the saved resources on other value-driven activities.
Stronger Focus on Core Competencies
Strong problem-solving is the top skill businesses look for in their outsourcing partners, according to Upcity. This is crucial as organizations might struggle to keep up with changing tech trends, sophisticated cyber-attacks or the time and effort needed to develop strong software.
Partnering with professionals, whether full-blown MSPs or co-managing IT operations, frees up time, resources, and mental space needed to focus on business value-driven activities, e.g., product innovation or smart marketing campaigns, without constantly worrying about IT operations. Remember, you can do anything, but not everything (David Allen).
Resource and Skills Access
IT talent shortages have posed serious problems for organizations all over the world. A recent IDC survey of North American IT leaders found that nearly two-thirds attribute missed revenue growth, quality issues, and reduced customer satisfaction to IT skill shortages, with a global impact expected to affect over 90% of organizations and lead to $5.5 trillion in losses by 2026. Outsourcing is one way to cope with this problem, especially if your organization operates in a niche sector.
Increased Efficiency
Boosting efficiency is the second most sought-after result in IT outsourcing. Clutch reported that 37% of small businesses outsource a business process to increase productivity. This can be attributed to the strengthened focus on core competencies and the reallocation of resources.
IT outsourcing not only allows the in-house team to concentrate on core competencies but also enhances product and service quality while ensuring robust security and website performance. This enhanced efficiency leads to reduced time-to-market, giving businesses a competitive advantage by letting them secure market share earlier.
Scalability and Flexibility in a Changing Market
Technology demands change with time. Outsourcing gives one the freedom to expand or shrink the IT team based on the business plans and vision at the time. Let’s say your business wants to hop on the AI train and introduce an AI assistant for the mobile app. One simple video call or email to your partner would quickly onboard AI professionals to start working on the new desired feature. This also proves another point – scaling in outsourcing goes hand in hand with flexibility, as it gives your team the time and space to adapt to the changing market demands.
Risk Management and Compliance Support
Delloite’s 2022 Outsourcing survey reported that 64% of organizations outsource their legal processes. Constant changing regulatory demands and evolving cybersecurity threats contribute to the use of external providers.
Government and defense, finance, and healthcare are some sectors with strict regulations and standards. Outsourcing partners aren’t only professionals in building, monitoring, and maintaining IT services, but also have extensive knowledge regarding risk management and compliance. They help you access and analyze risks and compliance rules, support regulatory reporting and filing, ensure the system’s security, and perform regular auditing.
Access to Innovative Tech Solutions
Last but not least, working with a trusted partner means you have access to innovative tech solutions. Working with seasoned experts often provides broader market insight, which can be leveraged to offer innovative solutions. Next, many outsourcing companies have dedicated R&D departments and infrastructure to work on advanced technologies. Cutting-edge technology requires cutting-edge infrastructure to implement the latest tech innovations.
IT Outsourced Services Disadvantages
Every service has its strengths and weaknesses, and so does outsourcing IT services. Understanding its disadvantages allows for a more informed business decision.
Less Control
One aspect many consider to be a significant disadvantage is the lack of control over IT in the company. This lack of control might lead to communication, quality, and security issues, which we’ll further discuss in the following sections.
Communication Issues
Working with offshore development partners is cheaper, but often comes with a significant difference in time zone. Time zone difference proves to be a hurdle for many, as it’s harder to sync the schedules with one another and implement real-time feedback. Cultural differences might also hinder smooth collaboration due to misunderstandings.
It’s recommended to set up a communication protocol, constantly keep team members and relevant partners in the loop and research about the other’s cultural communication style.
Security Risks
Security risks primarily stem from sharing sensitive information with the outsourcing partner. This risk is especially high when the project requires access to customer information or intellectual property and your partner doesn’t have strict and consistent security measures in place. This disparity creates chances for malicious attacks, exposing the company and client’s information to serious cybersecurity risks.
Do careful research when choosing your vendor. Check and verify their credentials and testimonials. Once you do decide to partner with them, put a strict security policy in place.
Lower Quality
Outsourcing vendors can undoubtedly produce high-quality products, but some vendors are more motivated by profit. Without careful research and verification of your vendor’s credentials, combined with the lack of direct supervision, it can be challenging to ensure the provider’s work aligns with internal standards and expectations. In the worst-case scenario, it negatively impacts the final product’s performance and stability.
Ethical Concerns
IT outsourcing faces a number of moral dilemmas. The most prominent ones include:
- IT outsourcing can hurt local employment. It can lead to job losses in the home country and a sense of economic insecurity in the local community.
- Some regions may have poor working conditions and minimum wages. By outsourcing to these regions, companies might be indirectly endorsing or contributing to exploitative labor practices.
- Carbon emissions or electronic waste might be a result of outsourcing partnerships, especially in countries where the environmental laws aren’t as strict.
Best Practices to Maximize IT Outsourcing Benefits
With the right approach, the advantages of IT outsourcing can be maximized while the challenges are minimized. The following best practices help you achieve the results you need.
- Clearly define your objectives. Start with your goals, demands, expectations, and business strategies. Write down the priorities, timeline, and expected outcome you want your provider to understand. Make sure the project goals align with your business strategies.
- Choose a skilled, trustworthy vendor. We’ve mentioned this several times, but look for credible and experienced partners with a proven track record, industry-specific expertise, and trustworthy client testimonials. If they provide you with any credentials, remember to verify them.
- Establish strong communication channels. Put detailed communication protocols in place. This involves communication channels, regular updates, and feedback loops.
- Guarantee your outsourcing partner has the resources and tools. Talk to the vendors thoroughly to understand their approach to the essential technological topics, tools, resources, and support staff.
- Plan for ongoing quality checks. Working remotely in different time zones can lead to quality problems. Schedule periodic reviews to ensure deliverables meet your standards and any expectations discussed early on.
- Maintain flexibility for potential project changes. No matter how detailed the initial plan is, changes are bound to happen. Hence, you need to create a space for changes and adjustments as the project evolves. This allows the operation to be both agile and efficient.
- Set up a collaborative framework to solve issues together. Have extensive talks with your partner to establish a problem-solving approach that keeps both teams engaged and proactive.
- Choose an engagement model that fits your project’s scope and budget. Select an outsourcing business model that works for you and your partner after careful research and consideration.
- Ensure data security and compliance. Establish a robust Service Level Agreement (SLA) outlining data protection measures, access controls, and compliance requirements. Your partner should also have industry-standard certifications and strict data protection policies.
Partnering with Orient Software for IT Outsourcing
All in all, IT outsourcing comes with advantages and disadvantages. It also comes in various shapes and sizes, so it fits almost every business’s need. However, it is crucial to carefully consider your business’ circumstances and if IT outsourcing is the best solution. If you are unsure, either talk to professionals for a more in-depth understanding or maintain your in-house team for the time being.
If you’re ready to reap the benefits of IT outsourcing, Orient Software is happy to discuss and provide you with a free quote to bring your visions to reality. Contact us today!
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