The IT Outsourcing Pros and Cons

With many organizations considering this approach, it is time for everyone to understand this topic. It remains imperative to compare the effects outsourcing IT can have on the company’s financial position of organizational culture.

This article will cover everything you should know about IT outsourcing. We will discuss everything from the pros and cons to everything you need to leverage this model successfully or make long-term IT decisions.

Pros and Cons of Information Technology Outsourcing

Advantages of Information Technology Outsourcing

IT outsourcing is unique and beneficial in the following ways:

Enjoy Cost Reductions

Although hiring in-house IT experts may seem cost-effective at first sight, this option may become costly if you need access to experienced experts. The onboarding process for new employees is often expensive, especially when you must train your new staff. Besides, sometimes companies do not intend to keep long-term IT staff. Find this great comparison of outsourcing vs insoucing here.

Fortunately, outsourcing can help you reduce expenses. You will require less capital to outsource than employ IT employees when you want to avoid additional charges or have a limited budget. Besides, you can leverage the outsourcing company’s IT infrastructure instead of establishing your company infrastructure. Most IT third-service providers allow companies to access their IT infrastructure through virtualized services. Generally, a company can remain competitive with IT by leveraging indirect benefits such as better efficiency despite having limited resources.

Leverage IT Outsourcing Knowledge and Resources

Outsourcing IT services is best suited for a company looking for access to a team of experienced experts. A company should continually expand itself beyond a few in-house IT professionals. This approach restricts the company to a few individuals with limited expertise. Instead, the company should outsource a third-party provider with a team of experienced IT professionals. A more strategic approach should include working with firms that have access to vendors of the latest development in the IT industry. The technology industry is among the rapidly changing industries. Therefore, working with a provider with employees that receive continuous training improves your competitive advantage. Your due diligence checklist for a company to partner with should include the provider’s access to lower-cost hardware and software latest developments.

Enjoy Security Benefits

Outsourcing gives you access to the best security recommendations and services, such as data backup, monitoring, and protection. Third-party providers include experienced experts with the expertise to implement advanced tools and the latest security technologies (1).

“Outsourced IT providers train employees to make the best security recommendations depending on the needs of the individual business at hand. They understand which technologies are available, their benefits, and how to implement these advanced tools to best protect the organization.”

– Analytic Insight

It is beneficial to work with a company with cyber security infrastructure to provide you with the best remote monitoring services. Most providers provide continuous monitoring to prevent potential intrusions that can lead to downtimes. Companies can improve employee productivity and customer satisfaction by outsourcing IT services from a provider that invests in a reliable cybersecurity infrastructure.

Leverage Emergency Response

Third-party providers specialize in addressing cyber security gaps that can lead to potential intrusion, data breaches, and unpredictable downtime. Besides, an outsourced IT provider gives you access to a team with resources to respond to any IT emergency. A company that relies on its in-house IT specialist remains limited to a smaller workforce and lesser resources in case of a data breach. Your in-house time may need to gain the necessary knowledge and experience to resolve critical issues compared to an outsourced IT provider. You can prevent losses associated with legal penalties arising from data breaches by outsourcing an IT provider to handle IT emergencies correctly. Besides, your emergency response can boost your relations with clients. If you’re interested in hiring your own outsourced IT support staff, click the link, and we’d be happy to help: https://sonatafy.com/outsourced-it-support/ 

Enjoy Predictable Cost and Billing

IT outsourcing can help you minimize additional expenses associated with in-house IT employees. Outsourcing software development gives you access to cost-effective services without incurring charges such as office rent, turn-over, and sick leaves. Outsourcing a third-party IT provider will significantly minimize additional costs and give you a predictable option if the company charges per task or user.

Reduce Software Development Costs

One of the most outsourced IT services includes software development. As a result, outsourcing this service is an appealing alternative for cost-effective services. A Deloitte report shows that approximately 70% of companies outsource essential IT services, such as software development, for cost reduction. Besides, there is a general increase in global, cost-effective third-party IT service providers. For instance, Central Europe abounds with high-quality software service providers who benefit from low taxation, social legislation, and a large pool of talented IT professionals.

Access a High-Quality Software Development Team

Outsourcing IT services give you access to pre-approved specialists with vast software development skills. Remember, software development is among the IT areas that experience rapid technological changes. Therefore, partnering with a software developer who receives continuous training can help you maintain a competitive advantage with your IT infrastructure.

Access A Vast Pool of Worldwide Talent

One of the outsourcing advantages is access to world-class talent. As a result, you can bring most of the world’s talented IT professionals to your company by expanding your search. You will find the IT talent you need for your project regardless of its complexity.

Save Time on Hiring Specialists

The hiring process for in-house IT specialists can take months before the company gets a qualified person. However, outsourcing allows you to compare thousands of specialties with different technical talents and complete the hiring process within a few days. The largest American Companies, such as Google, use outsourcing services to hire thousands of pre-approved skills from different regions globally.

Flexible Team Capacity and Scalability

Outsourcing allows you to scale your staff without compromising your company’s reputation. A company can employ cooperation models such as staff augmentation as the company grows. Such flexibility gives the company an efficient, cost-effective alternative to scaling up or down, depending on current needs. Remember, the time and cost accompanying the hiring process can become a challenge, especially when the company needs to scale up or down on different business cycles (2).

“Companies must be flexible enough to adapt to a business environment in constant flux, so their IT functions have to respond quickly to changing demands. Vendors often can tap a wide range of resources, skills and capacities while internal IT staff may have limited capabilities. “

– Journal Of Accountancy

Outsourcing helps you to integrate a pre-approved employee into a project immediately. Management has control of the staff scalability. Depending on the project’s need, they can partner with as many or few IT experts.

Improved Focus on The Core Business

IT outsourcing allows you to recruit skilled IT specialists from different technologies. However, the company’s team can still deliver the outsourced services. Most companies use outsourcing to complement the IT team’s weaker areas. This approach is also common in large projects. The latter allows on-site IT staff to concentrate on their specialties and prioritize the company’s core business. For instance, a customer service company can outsource cybersecurity specialties to monitor the existing infrastructure gaps, allowing its team to prioritize the improving customer experience. Therefore, company employees will create value for the business when allowed to concentrate on the core competencies.

Cons of Outsourcing

Although outsourcing can give you a competitive advantage, be aware of the possible risks and constraints preventing you from realizing IT outsourcing’s benefits to your business (3).

“Outsourcing IT reduces or completely eradicates direct communication between organizations and clients. Limited communication impedes the relationship building process, which may lead to the overall dissatisfaction of the organization and client.”

– Chron

Consider the following outsourcing disadvantages:

Minimal Control Over Processes

The company’s management has minimal control over outsourced IT services. The company’s in-house team mostly excels in providing the best service levels because they are under management. As a result, management remains reserved about handing over its infrastructure management, data, and processes to a third party. Therefore, establishing transparency with the outsourcing firm will help you determine control levels of different outsourced services. Ensure that your service provider understands your organization’s internal structure and goals.

Communication Breakdown and Culture Issues

Outsourcing allows access to a vast pool of IT specialties from different backgrounds. However, communication barriers between the internal and external teams remain the biggest success hindrance. The distributed nature of employees from different time zones, cultures, and languages can prevent the company from realizing outsourcing benefits.

At Sonatafy, we specialize in a nearshore software development approach that can curb communication breakdown challenges. Our pool of qualified software developers includes proficient English speakers working in the same time zone.

High Onboarding and Service Provider Costs

Onboarding a third-party IT service provider is costly if companies use outdated hardware or differing software. A service provider may require you to upgrade your equipment to align with the required standards. Such accrued expenses are against the expected outsourcing benefit: reduced operating costs. Organizations wish to cut costs by leveraging the third party’s economies of scale. The unexpected makes it costly for some organizations to adopt this operating model.

Lack of Experience with Remote Support

Although remote service is becoming the new operating style, employees have yet to adapt fully to this change. Most people are accustomed to having their IT personnel within the organization. However, an established IT service provider will deliver the same services as the company’s in-house personnel. The company should help its employees to familiarize themselves with the outsourced IT company’s ticketing process.

Quality Drawbacks

Outsourcing IT services only sometimes results in excellent service delivery. Some IT service providers in the marketplace can compromise quality by swapping experienced team members with less experienced technicians. Ask your IT provider to outline essential details such as response time on their service level agreement. This approach will allow you to measure their performance metrics and improve your outsourced services delivery by paying close attention to the team’s work standards. Building an in-house IT support staff is generally more traditional and appeals to more business owners

Frequently Asked Questions About The IT Outsourcing Pros and Cons Services for Your Business

What is IT Outsourcing?

Information technology outsourcing (ITO) is among the options available for companies that wish to shift from in-house services. Factors such as minimum capital and the unavailability of IT experts may necessitate the need for external IT experts. Access to experts and IT resources remains a challenge for most companies. As a result, companies use conventional methods, such as outsourcing, to incorporate IT experts into their infrastructure.

Fortunately, outsourcing allows them to choose from a pool of qualified IT experts. Most service providers specialize in infrastructure solutions and other IT-reliant business processes.

In general, outsourcing IT, services refers to contracting a service provider or external supplier to perform a portion of IT functions that may be possible internally. However, the company opts for third-party vendors to leverage benefits such as lesser expenditure and quicker services.

When Do Companies Outsource IT?

Naturally, a company needs to stay up-to-date with the current innovative technology. IT outsourcing helps companies with limited resources to access valuable IT services while keeping their data safe. However, businesses should watch out for the following signs to know when to sort the third-party managed IT services:

• More downtime that leads to decreased company efficiency means that the Internal IT team takes too long to resolve customers’ inquiries.
• High frequency of cybersecurity issues that take too long to resolve
• Internal IT team with limited expertise to cover all the IT-related problems in the company
• Absence of an efficient recovery plan in case the company loses its data
• Limited resources to onboard new IT staff
• Minimal resources to invest in new cybersecurity infrastructure.

If the above challenges seem familiar, your IT infrastructure requires an external boost from third-party services. However, you must understand the type of services your company needs before you can outsource.

What Are the Common IT Outsourcing Services?

You can choose from relation-based or location-based IT services. The two come with unique advantages that benefit your organization in different ways.

Location-based outsourcing is defined depending on the distance between your company and the service provider. This type of outsourcing is divided into the following classifications:

• Onshore services: The company partners with a third-party IT service provider from within the same country
• Nearshoring services: The company contracts a third-party service provider from a region similar customer’s location
• Offshore services: The company works with a vendor away from their location. Most organizations use offshore IT outsourcing services due to their significant profitability.

Another type of IT outsourcing is known as relationship-based outsourcing. This type is often common for IT projects such as software development. Companies can outsource relationship-based providers according to project realization peculiarities or resource availability. The most common relationship-based outsourcing services include the following:

• Project-based providers: These third-party providers work on your IT project from the beginning to the end. You can use this approach if you are a start-up without an experienced IT team.
• Team-based providers: Outsource team-based providers so you can engage in simultaneous projects. This type of provider remains available and flexible for any IT solution in the company.

Companies can choose from the above IT outsourcing options to remain competitive or resolve their IT problems, especially in the ever-evolving environment. However, this approach comes with pros and cons you must consider before choosing IT outsourcing.

What is the Reason for Growing IT Outsourcing Popularity?

Transitioning from in-house IT services to outsourced IT has recently gained popularity. Research statistics show that outsourcing relevance and market share are expected to grow. The Grand View Research predicts an 8.5% compound annual market growth for business process outsourcing by 2028 (4). Another research by Technavio shows that by 2024, the global outsourcing market is expected to reach approximately $97.50 billion (5). As a result, most companies are increasingly leveraging the advantages of utilizing these external IT services.

How Can You Avoid Risks of Outsourcing?

Although we have explained the most common outsourcing pros and cons, you must understand to avoid the associated risks. This strategy will help reap the full benefits of outsourcing IT services to a third party. The following due diligence checklist will help you choose the right third company to outsource your It services:

• Check the Outsourcing company’s website for details.
• Pay close attention to statistics such as their Search Engine Result (SEPR) position. A company in a high position is reliable.
• Explore the companies’ websites for features such as user-friendly UI/UX
• Ask for the company’s portfolio and learn more about their expertise.
• Check customer reviews on popular platforms such as Good Firm.

Sonatafy — Your Reliable IT Outsourcing Partner

We are your most reliable IT outsourcing company. Sonatafy is specialized in assisting all kinds of organizations in acquiring technologies and software solutions. We will provide you with a cross-functional team that will handle your projects to your satisfaction. Our Nearshore Software Development model allows us to prioritize cost-efficiency, time sensitivity, and highest quality services.

References:

1. Outsourced IT providers train employees to make the best security recommendations depending on the needs of the individual business at hand. They understand which technologies are available, their benefits, and how to implement these advanced tools to best protect the organization. – Analytic Insight Quote
https://www.analyticsinsight.net/the-advantages-and-disadvantages-of-outsourcing-it/
2. Companies must be flexible enough to adapt to a business environment in constant flux, so their IT functions have to respond quickly to changing demands. Vendors often can tap a wide range of resources, skills and capacities while internal IT staff may have limited capabilities. – Journal Of Accountancy Quote
https://www.journalofaccountancy.com/issues/1998/jun/antonuci.html
3. Outsourcing IT reduces or completely eradicates direct communication between organizations and clients. Limited communication impedes the relationship building process, which may lead to the overall dissatisfaction of the organization and client.”– ChronQuote
https://smallbusiness.chron.com/advantages-disadvantages-outsourcing-it-764.html
4. Business Process Outsourcing Market Size, Share & Trends Analysis Report By Service Type (Customer Services, Finance & Accounting), By End-Use (IT & Telecommunication, BFSI), By Region, And Segment Forecasts, 2022 – 2030 – Grand View Research
https://www.grandviewresearch.com/industry-analysis/business-process-outsourcing-bpo-market
5. IT Outsourcing Market by Service and Geography – Forecast and Analysis 2022-2026 – Technavio https://www.technavio.com/report/it-outsourcing-market-industry-analysis