3 months, 3 weeks ago
In the 21st century, companies tend to use IT services for most critical operations, including finding new customers, accessing broad market research data, and using the internet as a storefront. That is why, the costs of the services got off the charts in recent years. Although the prices are getting higher, it is quite convincing why agencies are trying to find IT outsourcing companies and transfer their assets. It enables those agencies to save money without diminishing quality or losing ground to intense competition. Some of the essential deals in recent years were between DuPont and CSC (Computer Science Corp). Companies agreed on a 4 billion dollars worth of contract over ten years. DuPont outsourced all its IT tasks to CSC. Other examples may include the 3 billion worth Xeroxs/EDS contract or McDonnell Douglas/ISSC contract.
Outsourcing IT services is becoming like a trend between this type of huge companies and market leaders. However, it is also a trending topic around small businesses. There are many benefits of IT outsourcing companies and services, which will be discussed later. Therefore, both small and big companies are interested in these types of deals. Large companies mainly make long-term contracts, while small brands usually deal with short-term contracts that include IT maintenance, training departments, and help desk. What are the other issues that IT outsourcing companies can solve? Is it worth outsourcing those services? Are there any risks involved? All these questions will find answers throughout the post, but let's first define IT outsourcing and then discuss other essential aspects and pros/cons of the matter.
IT outsourcing is a term that refers to the practice of transferring some or all the IT functions to external service providers to deliver the task. Required features may vary and can include the company's directing strategy, managing infrastructure, and running the service or help desk. IT services can be both fully managed and co-sourced. What are they? A fully managed IT service means that the IT outsourcing companies are taking full responsibility regarding support and IT maintenance.
On the other hand, those companies may also provide you with additional services such as support for your company's IT team or complete more straightforward tasks. In this case, they are called co-sourced IT support. These approaches can help both large and small businesses regarding the completion of IT tasks. Generally, the second approach can be seen in large brands because they tend to outsource various functions to different IT outsourcing companies.
Offshore IT outsourcing means transferring all the IT-related tasks to foreign companies. Generally, businesses prefer to use Indian, Chinese, and Philippines companies for offshore outsourcing. The advantages of this type are about tax savings and low costs.
As you can guess from the title, this is a different type of outsourcing that involves relatively near countries with a border with you. The essential advantage of this type is that the company leaders may quickly get into contact or meet up whenever necessary.
This type involves the IT service provider, which locates in your own country. Those suppliers of the IT services agree upon doing the required tasks and completing IT-related work.
It is a relatively similar type to onshore outsourcing, but they vary on platforms. The cloud computing services are held on the internet, and the staff from both companies do not necessarily have to physically see each other. The services that cloud computing type IT outsourcing companies may offer include building a platform as a service, software development, etc.
This type of outsourcing companies is mainly focusing on providing network management functions to their clients. Those functions may include networking monitoring, emails, call center, messaging, firewalls, and VPNs (Virtual Private Networks).
Various reasons lead companies to use outsourcing for IT services. In the next few paragraphs, we will discuss those reasons and find out the main advantages that IT outsourcing companies are providing you with and explore any risks involved during the process.
What are the benefits that you can get by outsourcing IT services of your company? Why do companies choose outside vendors for completing these services?
The IT sector has high volatility, which means the skills are essential for professionals. The technology, including software, is rapidly updating, and the specialist needs to have enough skill set to cope with those changes. It is hard to find these types of professionals for those living in countries where there are not enough resources for improvement. That is why, those companies outsource services to get the best available result.
The competition is very fierce, and to survive; most businesses try to eliminate any additional cost. In an effort to save some money, those companies cut personnel as an available solution. Outsourcing the services that fired employees were doing is a good idea, which can save you money while keeping the quality the same.
By employing IT Outsourcing companies, businesses can use low labor cost pools freely. Besides that, they can move data centers to low-cost areas too. Contractual pressures are high, and that is why the tight deadlines will work best with outsourced companies. Those companies are more informed about software licenses and all that stuff, which will help you to manage your business effectively.
Local staff has more limited sources and capabilities when it comes to IT services; that is why outsourcing can help you. Generally, vendors have those skills and abilities which enable them to respond quickly to the changes in the industry and technology.
Outsourced employees are working on the same project for a limited time, and they know that it is temporary work. While the company is working with vendors, it enables them to build a stronger relationship with its regular employees. This process helps them to identify the ones that are demanded and the replaceable ones.
Users nowadays are more aware of the possibilities and limitations of information technology. Managers, in general, are the ones that are not satisfied with the internal IT department as they tend to think that internal stuff is outdated, unmanageable, and expensive for their company. Rather than a strategic resource, those managers argue that the internal IT staff are cost burdens. That is one of the primary reasons that pushed IT outsourcing companies into the scene. On the other hand, we need to consider that outsourcing does not always work, leading to higher flexibility and lower cost. Actually, it is better to mention that the system of IT outsourcing is not built for every company. Though, international media hypes this process up. So, let's find out if IT outsourcing is that effective and see the risks and disadvantages that you may face by transferring IT services to those vendors.
Mainly, the reason is that companies who fail the deals and could not succeed are hiding that to keep their reputation high. Projected savings with IT outsourcing companies is high, but actually, not every deal will meet those expectations. It is also worth mentioning that IT outsourcing is not that easy task to complete. It does not work like outsourcing other services such as legal services, advertising, digital marketing campaigns, or logistics. They are not comparable to outsourcing components and raw materials and have a more complex structure. That is the leading risk that most companies may experience. Therefore, you need to understand the system, and only after that, decide to search for outsourcing companies.
One of the most compelling advantages that managers think outsourcing has, in the short run, is the lower operational costs. Outsourcing Institute conducted research regarding the matter. The results showed that, on average, there is a nine percent cost reduction through the first several months of outsourcing IT.
As we mentioned earlier, outsourcing IT services will save you money. So, that means, you will have more capital for core areas as you diminish the cost.
Client companies have the needed assets for producing the results. By selling those assets, vehicles, infrastructure, equipment, facilities, and software, they can get additional money.
Required resources may be scarce, or the company would not want to get them because they are expensive. By employing the IT outsourcing companies, they will ultimately eliminate that cost and have access to a variety of new resources. Besides that, outsourcing will enable you to access better overall IT management.
Outsourcing IT services enable you to think more deeply about target business issues rather than focusing on operational tasks. The main reason why so many companies are targeting outsourcers is that they want to minimize the time and resources they use to complete small but complex tasks.
In order to meet their client's expectations and complete their requirements, outsourcing companies use high-quality resources and have extensive capabilities.
Both parties have shared risks when it comes to outsourcing IT services. According to their conduct, if the vendor cannot complete or do anything wrong, they would be penalized. That makes outsourcers more responsible and the outsourcing company more flexible on the issue.
Outsourcing the services helps companies to realize the core needs and focus on those elements rather than finding resources for IT tasks.
One of the main disadvantages of outsourcing deals can be about their duration. Keep in mind that, the technology is evolving rapidly, and anything can change over the next few years regarding the operation. So, signing a deal for longer than three years can somehow become disadvantageous for you in the long run.
Just like we mentioned before, the cost can change over time as technology improves. For intense, let's take the simple mainframe. In the 1960s, the cost of getting a mainframe was around one million dollars while you can get it for 30.000 dollars today. This case can ultimately create issues for decision-makers as they do not know how much these elements will cost in the next few years.
The IT sector is getting bigger, and the competition is following this trend. So, we do not know which vendors will survive this fierce competition. That is why it is risky to sign a long term deal with those IT outsourcing companies.
Management and control over outsourcers are some of the issues that many businesses are concerned about. The people who are against these vendors often argue that you can never have the ultimate control and accountability with vendors just like you do with your regular personnel. There are other issues, such as confidentiality and security of these services. That is why, many companies are still refusing to work with IT outsourcers.
Outsourcing these services can also result in demotivation for regular staff. In onshore outsourcing, the existing IT staff of the company is sent to the vendor for completing tasks. Most importantly, those people who are experts in their field may feel that their employment security is under question. That can lead to demotivation of the current staff.
There are various questions that you need to find answers to before closing a deal with any of the vendors.
First of all, you need to define their reputation. See if they had any conflicts, or will that company's culture fit with yours?
These questions will help you to evaluate them better.
After finding answers to all these questions, you need to ask them to provide you with the respective references regarding the previous clients and their particular contacts, names, etc.
Outsourcing all the primary IT functions of your company may be riskier than you thought. So, it is always better to be prepared before signing any contract with unknown brands. By completing a deal with wrong vendors can diminish your reputation and create new problems while you are still trying to resolve existing ones. To choose IT outsourcing companies wisely, Gygzy is here to help you. We have an extensive database that contains hundreds of freelancers, IT service outsourcers, and more. We evaluate each of those companies and individuals specifically before adding them to the system. By filtering the results and expressing your needs on our website, you will be able to find the best possible IT outsourcing companion in your area and in a shorter time.