The Pros and Cons of IT Outsourcing

Introduction

In the age of silicon, IT Outsourcing is one of the most lucrative and in-demand services in the global outsourcing market. 
In fact, Deloitte reported 54% of IT services were outsourced by businesses in 2021 alone. 

Cost reduction is one of the most significant advantages of IT outsourcing. However, process efficiency and standardisation have now become the primary focus for businesses, making IT outsourcing services the perfect solution to infrastructure challenges. 

But with 72% of outsourcing contract values attributed to outsourced IT services and 90% of businesses showing interest in implementing IT outsourcing solutions, one would have to ask, what are the risks of outsourcing IT services? More so, why outsource IT if there are, in fact, IT outsourcing risks?

But before we delve deeper into IT outsourcing pros and cons, let’s take a closer look at what it entails.

What is IT Outsourcing?

IT outsourcing or information technology outsourcing is the process of using external service providers to complete IT-related operations. The entire project process — ideation, design, development, testing, deployment, upgrade, and maintenance can all be done by an outsourced IT services provider. 

Below are some of the most common information technology outsourcing services available:

• Software development
• Web development and hosting
• Database management
• Datacenter operations
• Help desk outsourcing
• Infrastructure development
• IT security
• Disaster recovery
• Desktop support
• Network operations

But before you start outsourcing information technology services, let's take a look at some IT outsourcing pros and cons to help determine if outsourcing fits your business strategy.

Benefits of IT Outsourcing

Why outsource IT? There are numerous advantages of IT outsourcing, so let's start off by looking at how IT outsourcing could potentially save your company thousands of euros.

1. Reduce Operational Costs

 27% of businesses reported a 10 - 20% cost reduction in 2021. Outsourcing information technology processes can reduce costs in more ways than one:

• Salary or hourly rates - businesses can leverage outsourcing IT services offshore to reduce labour costs.
• Equipment and infrastructure - by outsourcing IT tasks, companies won't have to buy expensive tech equipment and software and require less workspace.
• Recruitment and hiring costs - instead of recruiting full-time tech employees, businesses can hire on a project basis, reducing hiring, onboarding and retention costs.
• Training - companies can reallocate budgets reserved for upskilling and training or software licensing fees to other areas.

2. Increase Innovation and Efficiency

Information Technology (IT) is at the forefront of innovative business solutions, with Robotic Process Automation (RPA), Enterprise Resource Planning (ERP) and cloud computing services driving the demand for IT outsourcing services. These innovations offer incredible benefits, including: 

• Increased productivity - cut data processing times by up to 50%.
• Improve accuracy - achieve 100% error-free results through automation.
• Better customer service - automating repetitive tasks allows employees to focus on customer satisfaction.
• Opportunities to scale - automation allows businesses to scale up or down depending on business needs, e.g., processing more orders.

Utilising knowledgeable outsourced IT professionals saves you time and resources, allowing your business to operate more efficiently. By outsourcing IT services, you’ll also have access to global talent, a wider range of services, and the latest technological innovations that may not be accessible locally, giving you a competitive edge.

3. Enhance Security

Human error is inevitable, but implementing digital or cybersecurity measures reduces contact with personal or sensitive information, reducing the risk of data leaks.

Cybersecurity reduces operational risks like data and service breaches or theft. High-profile companies like Microsoft, Uber, Crypto.com, Cash App, MediBank and Red Cross have all experienced security breaches in 2022, costing millions in lost revenue and brand damage. 

4. Simplify Project Management

Every team is as effective as its leader, and in IT, it’s imperative that projects are managed by experienced, knowledgeable professionals in their respective fields. 

One of the main ways that using an outsourcing company like blackbear differs from simply hiring a freelancer is that project management is one of the many perks of its outsourcing services. You’ll have a single point of contact who will provide you with regular comprehensive feedback and involve you in every decision — every step of the way.

So now that we’ve taken a look at some of the great benefits of IT outsourcing, let’s take a look at the risks of outsourcing IT services.

IT Outsourcing Risks

As with any form of outsourcing, there will be some risks, and IT outsourcing is no different.

1. Less control

When outsourcing your day-to-day IT tasks or projects, you’ll have to trust your IT service provider to deliver quality results. This, however, means less control over how and when tasks are completed. As a result, you may find yourself dissatisfied with the project execution or level of results and, worse yet, incomplete projects or missed deadlines. 

Solution: This can, however, be mitigated with a detailed agreement outlining all expectations and services provided or by using an outsourcing company. IT outsourcing companies like blackbear manage projects from start to finish using thoroughly evaluated IT professionals so, at the end of the day, you can rest assured knowing that you're getting what you’re paying for.

2. Hidden costs, legal and security issues

Unexpected issues, additional software or services and expenses, which weren’t mentioned from the offset, can lead to unnecessary conflict. Unfortunately, entrusting your sensitive data with unfamiliar companies or freelancers is an unavoidable risk of outsourcing IT services.

Solution: The best way to avoid legal disputes and minimise security risks or unexpected costs is to use a reputable IT outsourcing company. The last thing you want is to risk your reputation by entrusting valuable information to an inexperienced IT freelancer and, on top of that, be hit with an outrageous bill. 

Your best recourse is to ensure that your intellectual data and your client’s financial and personal information are in trusted hands — choose your service provider carefully. Also, ensure that you have solid policies and regulations in place and that all services and fees are clearly stated in your agreement. Alternatively, ask your contractor to sign a non-disclosure agreement (NDA) - this can be managed seamlessly on the blackbear outsource platform.

3. Time zone restriction

Outsourcing IT services to offshore companies means that your IT team will likely operate at different times than your regular work hours. As a result, you may struggle to get timely feedback or even be faced with an unresponsive support team. Not being able to communicate in real-time causes some challenges, but none that can’t be avoided or resolved. 

Solution: It’s essential to plan overlapping times and dedicate that time to ironing out the most critical issues of the project or task. Another option is to use a reliable outsourcing agency so you won’t have to resort to back-and-forth emails to follow up on project management. Instead, your project will be managed for you, leaving you free to focus on more pertinent tasks or manage your in-house team.

4. Language barrier

Outsourcing information technology projects can be tricky when using offshore outsourcing solutions, especially when it comes to communicating your project or task requirements. Ineffective communication or a lack of clear instructions and information can lead to critical gaps in the project or bad task execution. 

Solution: This can easily be resolved by ensuring that your outsourced IT service provider has all the information it needs from the beginning of the project, including strategies and guides detailing the work process and requirements. Another great benefit of outsourcing that could help alleviate this frustration is using an outsourcing company.