10 Reasons Companies Choose to Do IT Outsourcing
Outsourcing IT services is not something new today. It has been here for the longest time but has gained popularity in the last two decades.
Most companies outsource IT work to third-party companies to increase efficiency, save on the cost of production, boost network management and beat stiff competition in the marketplace.
In simple terms, outsourcing is all about contracting a portion of work or projects to a third party to work outside the business to cut costs. IT outsourcing may involve delegating services such as cloud computing and managing sub-segments like Software as a Service (SaaS).
The statistics prove the popularity of IT outsourcing. According to Statista, the global market size of outsourced services is almost 92.5 billion USD. Additionally, the global Information Technology Outsourcing (ITO) value for 2010-2019 is 66.5 billion USD.
This article looks more into the benefits of outsourcing and the reasons why businesses should invest in it.
1. Reduced the Cost of Production and Operations
Companies, especially small businesses and startups, are always looking for a means to cut production costs and increase their profit margins. By outsourcing different IT functions, they can reduce overhead costs and save a lot of money for overall growth.
Companies want to reduce costs for many reasons. For instance, if a supplier increases the cost of acquiring materials, a company can opt for hiring an IT service provider to reduce these expenses and gain a competitive advantage over its rivals.
Also, in case of a merger or recent acquisition, a company can outsource its IT services to downsize its operations and improve productivity.
As a result of outsourcing IT operations, you’ll free up some resources for other growth objectives. For instance, while a remote IT team works on developing your mobile application, you can explore different marketing channels to promote it or work on content to fill your app.
2. Save on Worker Training
Staffing and employee training is another time-consuming business process for most companies. When a company decides to adopt a new information system or software that its IT team does not have the core competencies to work with, it has to educate and train them to navigate the system.
As a result, it will take the company time and money to coach the team and teach them skills to work on in-house projects. But if a company decides to outsource IT projects to a third-party company that already has a qualified team at its disposal, it can save a lot of resources. Skilled workers can immediately step into the project and deliver on-time results. And your company will save on employee expenses and get benefits in terms of deliverability.
3. Lower Wages
Speaking about employee expenses, most companies decide to send part of their IT operations outside the country to save on wages. If IT services abroad are cheaper than where your company is located, you can outsource a part of your IT tasks to save on wages.
By lowering payroll costs, companies increase their revenue which they can spend on growth. A company can outsource services like call center teleradiology to the Philippines or medical billing to India because the wages there are lower. By doing this, companies that outsource their operations overseas are bound to succeed and witness an increase in business than other players.
4. Optimize Network Security
Sometimes companies can misplace or lose valuable information regarding network data centers and IT infrastructure. This is very common if the company lacks a skilled IT team or necessary automation tools, for example, Saas cloud security solution, that will always ensure the IT systems are not susceptible to external threats.
By outsourcing IT operations, companies can decrease the risk of losing critical information. Outsourcing guarantees companies collaboration and resources that they can share as a team.
You can plan and mitigate potential cybersecurity risks in any IT project by outsourcing to a third party. This is because the third-party company will also take part in project risk assessment and analysis.
5. Simplify Project Management
Managing IT projects is one of the most difficult tasks your team has to deal with. If you have a complex project at hand, the best you can do is outsource it to another credible company to work on it and reduce the time you’d spend managing it.
When you outsource to a narrow-profile company, it can help you manage the project by keeping you updated on the progress. You can easily estimate the project lifetime and the expenses you’ll have to make. If you outsource IT department tasks to another company, you will have enough time to manage your business needs and focus more on growth.
6. Free Up Internal Resources
Outsourcing IT services to a third party makes it easy for your IT team to free up internal resources and optimize company workflow. This way, you’ll increase productivity in the long run.
When you outsource IT work that is not related to your product or service, you can also allocate funds for other projects related to your brand – monetize your apps, get new partnerships, etc.
In addition, if your IT team doesn’t have the expertise to do web development, app development, and telecommunication infrastructure, you should outsource this task.
7. IT Planning for the Business
If information technology is not a basic component of your product or service, keeping up with the latest technology can be an overwhelming task.
When you outsource your IT projects to a company specializing in IT services, you’ll be working with the best professionals in this field. Your IT outsourcing partner will keep you updated on the latest technology trends and recommend solutions based on your business’s needs. This way, you can make the right and informed decisions on the matter of technology.
8. Work with IT Specialists
When you have an in-house IT team in your company, they are likely to encounter complex IT issues beyond their expertise. In this case, you can outsource part of the project to another IT company.
Information Technology is dynamic and everyday experts in this field face new issues. If you don’t have an IT department, you can outsource to a third party that has all the resources and required experience to handle your projects. Your staff can work together with the contractor to solve any issues in your project, ensuring you the best results in the shortest time possible.
9. Reduced Downtime
Downtime is another issue that most developing businesses find difficult to tame. At least 25% of business worldwide report that servers’ downtime cost their businesses 0.3 and 0.4 million USD per hour.
When your business experiences frequent downtime because of IT issues, you are more likely to lose customers. As a result, your profits can drop significantly.
By outsourcing your IT services to an expert company, all your IT issues are attended to on time, thereby minimizing or eliminating bottlenecks. You will always be in business and retain your existing customers. When you get work done with minimal interruptions, you build a happy customer base, which is good if you want to gain a competitive advantage in a crowded market.
10. Improve Employee Morale
Today, most businesses find it difficult to retain top talent employees because of the increased demand for such workers. Recent research has shown that 63.3 % of small to medium businesses with an average of 50-500 employees admit that retaining employees is harder than recruiting them.
Any business that wants to keep its employees should focus on creating a better work environment. When the system goes down, or the computers in your company crashes, the productivity and morale of your staff can drop.
However, when you outsource your IT services to an expert company, your employees will always be at ease, knowing that a professional in this field will take care of any technical IT issues.
Disadvantages of IT Outsourcing Services
Hiring managed services to run IT processes may prove useful in the long run. However, outsourcing also comes with some issues that every business should be aware of before making that move. Here are some cons of outsourcing in a business.
It Puts You Out of Control
When you outsource IT services to a third party, it means you are losing control of how your project is handled. It is not easy to track and monitor how an external agency works on a project once you outsource it. It is even riskier to outsource a project that costs a lot of money and takes time to complete.
If your company has been working with IT professionals before, you can have peace of mind that the project is in safe hands. However, if you are outsourcing to the company for the first time, it is always important to trade with caution because it can cost your business a lot if the contractor does not meet the targets.
Most companies get IT support to reduce expenses and conserve capital. While outsourcing helps you cut the cost of production and operations, your IT outsourcing company can still charge you extra. Sometimes a contractor might not provide the full picture regarding pricing, and you might end up paying for services you didn’t expect.
If you’re operating in a highly competitive business environment, outsourcing to the wrong companies can cost your business a lot. Most IT outsourcing vendors issue lengthy and detailed contracts to their clients. If you are not attentive when signing the contracts, you will likely fall into traps that will eventually cost your business a lot of money.
Lost Track of Quality Control
If your company has strict quality control and adherence policy, it is not easy to stick to it as long as you outsource IT to freelancers and other companies. Truth is, most outsourcing companies are only interested in profits, and they may not deliver to your expectations.
Sometimes if you need a job well done, you have to do it yourself. When you have set a quality standard that customers expect from your company, outsourcing may not be the best option.
Shifting Time Frames
When you outsource IT to a company or a freelancer in a different time zone, you have to shift your timeline to ensure your customers get what you’ve promised at the right time. Most companies that outsource overseas have issues with shifting time frames which can end up costing your business extra money.
Outsourcing can also expose your business to the risk of public backlash. Some customers don’t like the idea of outsourcing work to third parties. If most of your customers have a negative attitude towards outsourcing, it is better to avoid this strategy.
IT outsourcing is a top-notch idea for any business that wants to grow and expand. If you outsource most back-office tasks and IT, you create more time to focus on running the business and generating more income for business growth. Outsourcing helps your business reduce operation costs, conserve capital, and foster innovation.
If you plan to outsource IT services, it is vital that you only partner with a reliable company. So, research out and find a company with an excellent reputation and positive feedback from its previous clients.
Also, don’t forget to discuss your quality policy with the contractor to ensure they deliver the best result for every project you’re paying them for. And, just to play it safe, go through the terms and conditions to avoid being ripped off.