The Pros and Cons of IT Outsourcing

The Pros and Cons of IT Outsourcing

With the multitude of outsourcing options available today, there's plenty of scope for an IT operation to outsource complexity, and potentially save some money in the process. If your provider is offshore, it's highly likely that their wage costs are lower, and this will show in the cost of the service. There's also plenty of talent out there, so if you can come across a good operation, you can get some excellent results and save money.

But before charging into a contract for services such as technical support, software development or cloud based applications, have a think about some of the downsides:

Standardisation

Outsourcing companies need to be profitable too, and one of the main ways they do this is by providing a standardised service where one size fits all.  Therefore, if there's something about the service that you don't like or you want to customise, while you may be able to request it, until it's deemed a beneficial change for the majority of their user base it probably won't become a feature.

Security & Privacy

If you're using an externally hosted service where you store corporate information, or enter usernames and passwords, then you're probably not in control of system security and privacy.  This might not necessarily be a bad thing, because it's definitely in the interest of the service provider to implement appropriate controls to make sure access to your information is well controlled. It's well worth investigating any security and privacy concerns you may have before sign up though.

Support hours

If your provider is offshore, they may well be in a different timezone, which can impact on the support you receive for the service.
Language & cultural differences

Sometimes it's hard to understand the person on the other end of the phone, and they just don't get your jokes.

Connectivity

If you're going to be accessing more web based services, make sure your internet connection is up to the task.  There are associated costs with boosting your bandwidth that need to be factored in to your overall return on investment.
Compliance

If your organisation has compliance requirements for its IT operations, you'll need to make sure the service provider can meet these requirements.  This can be a bonus too however, because if they do meet the requirements and can easily prove this to your auditors, it makes your compliance programme easier!

Loss of the face of IT

Staff generally prefer seeing someone face to face, having a nice explanation of the problem, and having someone to have a bit of whinge to as well.  The more you outsource, the more you lose the face of IT, the more you lose the connection between IT and the business, and strategically, that's not a good thing!  IT needs to be seen as an engine room working for the organisation where everyone is on the same side, and it's all to easy to lose this connection and alienate staff.

Impact on the local IT industry

Service providers offshore seem to have the jump in competitiveness, and it's showing.  IT roles such as change and support appear to be on the decline (despite some sources stating that there is still a skills shortage) and people are having to become more creative in how they find work. Longer term, what does this mean?  Who can tell - there are always swings and roundabouts, and eventually there may be an insourcing trend, but for now it appears that wages are dropping for many people, and they'll move to find different income streams.  That will represent a loss of knowledge and international competitiveness, which I would guess is usually not a good thing.  So, can your budget afford your social conscience?

Final thoughts before you charge off and outsource your entire IT operation:

- Outsourced contracts need to be managed, just like any other IT service delivery mechanism.  They need to be evaluated for things like timeliness, performance, cost, and customer service, so make sure have expertise in your organisation for completing this function.
- All business IT services should be in tune with the goals and direction of the organisation.  Set up an IT Governance forum, and where possible integrate your providers in some way so that they can harmonise their services as much as possible with your corporate and IT strategy.
- Map out your requirements extensively before you engage anyone!  You should develop a feature list of 'must haves', 'should haves', and 'nice to haves'.  Then you can objectively work out how closely the service matches your requirements.

By Michael Ouwerkerk

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