Information Technology (IT)outsourcing is the use of external service providers to successfully deliver IT-enabled business processes, application service and infrastructure solutions for business outcomes.
Outsourcing, which also includes software as a service, utility services and cloud-enabled outsourcing, helps clients to develop the right sourcing strategies and vision, select the right IT service providers, structure the best possible contracts, and govern deals for sustainable win-win relationships with external providers. Outsourcing most likely enables enterprises to reduce costs, accelerate time to market, and take advantage of external expertise, assets and/or intellectual property. However, outsourcing also sets in motion a more complex delivery model, less visibility, security and privacy concerns, reduced control of the overall IT infrastructure, and makes it more difficult to map IT deliverables to a company’s business needs.
Types of IT Outsourcing
There are multiple types of IT outsourcing, defined by where and how the outsourced work happens. These include:
● Project based outsourcing
This type of outsourcing is also known as Software Development Outsourcing, Nearshoring, Offshoring. In this particular case the company provides every project related information to the external outsourcing provider and this provider does all the software development, project management and quality assurance.
● Out Staffing It is also known as Body Leasing.
In the case of outstaffing, the model company buys the time of employees from an IT outsourcing provider. Usually companies pay hourly or monthly based rates.
● Opening of Research and Development Center
Also known as Offshore Office. Some companies open a Research and Development Office in another country (usually under the same brand name) and hire local people to work for the company in the office.
Benefits of Outsourcing IT Services
We have countless reasons why companies outsource specific business activities. And some of the most common reasons include:
- Enhancing company’s focus
- Access to world-class capabilities
- Controlling and decreasing the operational costs
- Increasing efficiency for time-consuming functions
- Increasing efficiency for time-consuming functions
- Distributing risks with the partner company
- Increasing use of external resources
The main benefits of Outsourcing IT services are:
❖ Outsourcing Cut Costs:
Costs are more predictable when you outsource. Take for instance, when you use a hosted server it offers you to fix the expenditures at some predetermined amount every month. There are no maintenance costs or equipment expenses apart from fixed amounts.
❖ Proficiency:
The most popular reason for outsourcing any project is to have access to expert knowledge and experience that present employees may not offer. The best thing is there is no need to pay for any training of your IT person. It is the outsourcing company that trains the employees for recent techniques and programs.
❖ Access to Global Resources:
There are a lot of outsourcing companies that can help businesses without employee availability, office space, or personal language in order to serve clients in different time zones throughout the day.
❖ Savings:
Savings from outsourcing can be really dramatic. According to researchers, more than 80% of the businesses with less number of employees would take in major savings from outsourcing email management all alone. IT companies have the ability to offer access to equipment and services at very lower costs than your business may incur to get it alone.
Disadvantages of Outsourcing IT Services
Despite the numerous benefits, you need to be aware of certain drawbacks
of outsourcing IT services.
Some of the potential risks to acknowledge include:
➔ Control loss:
Losing visibility and control over your business is one of the critical factors that make companies hesitate whether IT outsourcing challenges are worth the effort. Yes, outsourcing presupposes transferring management responsibility for some functional areas of the business to a chosen vendor.
➔ Vendor Lock-in:
Another factor that makes small and medium-size companies ponder over the advantages of IT outsourcing is the fear of dependence on an external service provider or technology linked to them.
➔ Cultural Differences:
It may bring about particular IT outsourcing challenges. Even though English is traditionally the language of communication in the IT industry, not all team members might speak it equally fluently, which means some things might get lost in translation.
➔ Security Risks:
Outsourcing IT services or functions means you’d have to share sensitive information with a third-party provider. Doing this might carry some risks, such as intentional or unintentional misuse of your data by the vendor’s team or security breaches of the vendor’s system.
➔ Unexpected Costs:
Cutting down on costs is one of the key benefits of outsourcing IT functions. However, opting for the wrong vendor can end up in you encountering the flip side of the coin. If you set yourself flexible project goals, most likely, they will result in flexible price estimates. Aiming to bring tangible value to your business by choosing outsourcing IT services, it is vital to acknowledge the pros and cons and potential challenges. Finding a vendor that offers high-quality code and shares the same values is not an overnight task. Strategic research, communication, and clear expectations are the cornerstone of outsourcing principles.
