Information Technology Outsourcing – Reasons, Pitfalls and Benefits

Should one outsource IT department? The whys and the wherefores, risks and the good

For many business owners, one of the most important questions they grapple with at one point is whether to keep the in-house IT department or to outsource it to a third-party IT vendor.

On the surface, the benefits of outsourcing seem obvious, touted by pundits across numerous industries as the answer to cutting costs for business and eventually an entire company without ever hiring a single employee. However, there’s more to it than the bottom line.

Let’s focus on why organizations chose outsourcing of their Information Technology departments, the risks they face and the rewards and benefits.

The Whys

Here’s a few reasons that come to mind

Curtail operating costs. Outsourcing is thought to eliminate the costs associated with staff, such as management, training, health benefits, taxes, retirement, etc.

Enhance company’s core competencies. By outsourcing certain aspects of business and having subject matter experts focus on them, one improves organization’s competitive edge.

Watch synergy at work. When one outsources Information Technology to a company that specializes in specific area of IT and it has and has a proven track record, the ROI increases dramatically. You benefit from collective experience and industry knowledge of a team of certified experts, as opposed to relaying on limited in-house resources.

Free up already stretched resources. It’s way too common in small and mid-size organizations for an individual with IT aptitude to assume responsibilities of go-to IT support department. Problem: it’s not their primary job, which tends to overwhelm and wear that person over time. Outsourcing alleviates such problems and ultimately improves employee satisfaction and retention.

Reduce your exposure.  By engaging subject matter experts – who follow industry best practices and have the wherewithal – you get the benefits of reducing the risks of making bad, costly decisions and implementing wrong or outdated technologies.

Get to know what you don’t know. By engaging experienced IT consulting firm, making them part of your team and letting them manage your IT operations you get to learn a lot about the things you didn’t recognize that could be detrimental to your organization if not handled properly. A perfect example is ransomware awareness or proper business continuity plan.

The Risks and Concerns

So, before you decide to let an outside vendor to take over your IT functions you’re likely to have some reservations and anxieties about potential drawbacks.

Here goes the list of typically dreaded risks.

Retaining control. Handing off access to confidential data, company’s IP or other intangibles to outsourced IT provider may give some C-level executives reasons for concerns. What if the relationship with the vendor “turns sour”? Won’t we be held hostage if we’re not able to pay for their service for some reason? What if they close their door tomorrow?

There’s also an argument that an outside consultant is never as effective as a full-time employee, under the same management as other staff.

Getting locked in. There’s a concern of getting locked in by a vendor because of the long-term commitment clauses of the contract or legalese of the NDAs. Or, if the IT vendor documents their work on your IT systems poorly or if a proprietary software or system have been acquired, you may feel like your flexibility of choices have been limited.

Compromise or pay up. If a company switches from an in-house IT that handled any and every IT-related request, in all-you-can eat fashion, w/o chargeback system in place, they will likely need to adjust their expectations of the new IT vendor. Unless IT company provides full service managed IT at a flat fee, the cost may go up dramatically because of over-utilization.

What will people say? Some may fret that employee morale as they see laying off staff to replace job functions with an outsourced vendor. Other employees may wonder if it’s a new trend and their job is at risk as well.

Can they handle my IT needs? If your organization is heavily reliant on IT operations, you can’t afford major hiccups affecting your business operations. Make smart choices of what aspects of your IT to outsource and make sure the vendor of choice is qualified to tend to your most immediate needs.

Most of these risks can be avoided altogether if you know what to look for in a vendor and ask the right questions.

The Benefits

Let’s see what kind of rewards one can expect when outsourcing IT operations, and whether they outweigh the risks.

Cost savings. As listed under main reasons for outsourcing, cutting operating cost seems to be a direct benefit. Measurable financial benefits such as leaner overhead, bulk purchasing of hardware and software, economies of scale, improved regulatory compliance and more can be named here.

Availability. One of the major benefits outsourcing IT yields, for small and mid-size organizations, is availability if IT support. Outsourcing provides 24/7/365 access to engineers and skilled and diverse tech force – all at the cost of a single bill.

Quality of IT personnel. When contracting out IT services to a reputable firm, one can rely on and benefit from their core competencies and have access to trained, certified and experienced technical talent.

Staying current with technology. In the realm of IT, you face risks of falling behind the curve as technology constantly evolves and becomes rapidly obsolete. Outsourcing provides the benefits of having a team if IT pros to turn to for advice and get that return of IT investment.

Tech Force Reliability and Flexibility. Technology doesn’t sleep or take vacation. Take advantage of redundant technical human resources provided by IT support vendor, as opposed limited capabilities of internal IT staff.

List of benefits of outsourcing your IT department goes on. Read more.

Closing Thoughts

After having been given some food for thought on outsourcing the IT operations of your business, there’s likely bunch of other questions one might ask to decide between keeping IT inhouse or outsource it.

Establish a strategic plan for your project or relationship with the IT service providers.

Formulate and clearly communicate the goals and objectives of the new business relationship.

Base IT vendor selection process on thorough research, business references check and other hard facts.

Keep open communication channels with all parties involved and affected by the process.

Insist on SLA articulating all deliverables, expectations and responsibilities, especially the financial aspects of the agreement.


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