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Pros and Cons of IT Outsourcing

The role of IT has changed dramatically over the past ten years thanks to advances in technology and the prevalence of cyber threats affecting businesses.

It's a bigger and more complex job than ever. This means that virtually all companies have technology gaps that they cannot fill internally. Therefore companies increasingly outsource all or part of their IT development and operations to third-party vendors specializing in this area. The quality and services offered by outsourcing providers vary, but this arrangement results in lower technology costs, reduced risk, and happier employees. This article summarizes the main pros and cons of outsourcing IT services.


What is IT outsourcing?


IT outsourcing means a company moves part of its IT function outside its internal structure to reduce costs and control all processes. You delegate IT tasks to an external specialist and monitor what he does. These functions may include but are not limited to infrastructure management, software development, IT support and maintenance, service desk management, and others. 

IT outsourcing providers can offer fully managed services, meaning they take full responsibility for all IT maintenance and support, or they can augment your internal IT team as needed, known as co-sourced IT support.


IT outsourcing has several types: 


  • Offshore outsourcing: The IT function is transferred to a company abroad, where costs are lower, the economic climate is more stable and the industry is more developed. 

  • Nearshore outsourcing: The IT function is transferred to a company that shares a border with your country, making travel and communication easier. 

  • Onshore outsourcing: IT-related tasks are transferred to a company in the same country, either remotely or on-site.

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Advantages of Outsourcing

Cost reduction

Most companies outsource their IT projects to save money. 


  • Leveraging the provider’s hardware and software infrastructure can help save on the upfront costs of building new IT processes. 

  • Outsourcing saves you money on hiring, onboarding, training, and housing employees in your company. You can gather all the skills and experience without going through a lengthy and costly selection process.

  • You do not need the equipment to perform software development tasks. 


Overall, shifting your IT spending to a predictable monthly model gives you peace of mind, access to expert resources, and lower long-term costs.


Large talent pool 
Contracts with outsourcing agencies are great for acquiring the desired IT workforce. 

  • IT contracts offer a workforce with adequate competence in the amount and duration necessary for your project. They guarantee you an experienced team and highly qualified personnel.

  • It gives you access to a large talent pool without the risk of trying to hire talents that others are also fighting for.

  • Because you are using your providers’ talent pool, you not only have access to various subject matter experts, you gain more flexibility in your IT hiring strategy. For example, if you outsource UX development, your team has more space to employ backend developers.

 

Flexibility and scalability

Outsourcing contracts are easy to expand if the circumstances require it. With more flexibility in staffing, your outsourcing provider can scale IT resources based on seasonal demand or project workflow. IT outsourcing even allows you to divide projects across a group of experts for faster turnaround.

 

If your business is experiencing bottlenecks, your outsourced service provider should be able to allocate as many resources as necessary to solve your problems quickly. For example, it might be possible to onboard multiple architects or testers quickly to support your team of in-house developers. 

 

State-of-the-art technology

Another advantage of IT outsourcing is that you benefit from their many years of experience in the technology sector. You will receive recommendations on the best methodologies, systems, and tools to run your business. 


The core competency of an outsourcing provider is all about technology. Their main task is to know the latest methodologies, frameworks, standards, and tools. They equip your business with the newest technologies that increase efficiency and competitiveness. 


Focus on core business (as a customer)

Even if an organization outsources, that does not mean it lacks IT. Sometimes, outsourcing is required to fix the organization's weaker areas or help with larger projects. With part of IT processes outsourced, you can focus your IT strategy on what matters most to your business. This allows internal staff to focus on their expertise and prioritize goals. For example, if your company outsources the development of a ticketing system, your team can prioritize more important tasks like security monitoring, network development, or new infrastructure installation. 


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Disadvantages of Outsourcing

Lack of control

One factor that often hinders investment in outsourcing is loss of control. When using third-party services, a company outsources essential tasks to another company. Some are uncomfortable with a third-party business managing their security or core functions, and a third party may not handle assignments to the same standard as an enterprise. 


While providers can tailor many of their services to your needs, they also have internal policies and continuity requirements that they must follow. This can create some rigidity from the customer's point of view. When choosing a provider, select a company with a policy framework fitting your needs.

 

Quality issues

Depending on who and where outsources, quality can be a factor. While some IT vendors provide solid infrastructure with experienced staff, others may supply people with lower qualifications, affecting service quality. This varies depending on the provider and the outsourced tasks.


Data security concerns

Just as data security improves, it can also suffer from potential risks. Indeed, a company relies on a third party to manage some or all of its data. It affects data security if the service provider does not have the same security standards or is compromised in some way. In most cases, third parties will take steps to protect your data, but this is not self-evident for all providers. For example, if you use a data center for disaster recovery, what if the data center loses data because of downtime or network security issues? In this scenario, the risk has increased, not decreased. 


Communication problems

Communication problems may arise due to distance, language, or cultural barriers. Many tech companies are easy to reach, but nothing beats a direct line of communication. In addition, communications can be subject to severe delays depending on the provider. The long interval between requests and resolutions is an issue because the slower the response, the more services are affected. For example, quick communication is critical when dealing with a security issue in your application. Communication gaps will significantly hinder your business performance and exacerbate other problems, such as downtime.


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How to overcome disadvantages

Choosing a third party to manage all or part of your IT processes is an important decision. Whether you outsource IT or keep it in-house, you are one of the greatest contributors to your success. If you don't manage your outsourcing partners properly with the right metrics and KPIs, you won't get the expected results. The right partner will help you on this path, guiding you to get the most out of your IT investments. 


So, the good thing about IT outsourcing is that you can reduce the downsides by ensuring you hire the best provider. Make sure your selection criteria seek to address most of the above cons. We help for that with our previous blog article called: "How to choose the right software development partner" Outsourcing IT development projects allow growth through technology innovation while simultaneously reducing risks and increasing profit. Again, finding a reliable development partner is the key to your success.

BlackBelt .
Written by

BlackBelt .

Publication

2022-11-16

Pros and Cons of IT Outsourcing

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