IT outsourcing: opportunities and threats for companies

Outsourcing certain parts of the business is a clear fact in the IT industry. Many companies gain from bringing in service providers who are skilled in specific fields, which allows business owners more free time and a group of experts to focus on strategic business matters.

This topic was also looked at in a worldwide survey by IBM, which revealed that 1,351 IT leaders and managers shared new observations about the actions of these leaders. The first finding is that only 7% view outsourcing solely as a way to cut costs in infrastructure, applications and business process outsourcing activities. 39% note that outsourcing has delivered real results for firms. In fact, innovative companies have seen a 9% increase in financial earnings and a gross profit that is up to five times greater than that of competitors who invest in IT.

However, outsourcing also presents some issues to examine, like data privacy, oversight of employees, as well as the connection of external people with the whole team.

In this article, we will explore the advantages and risks of IT outsourcing, pointing out some elements that should be considered when selecting a service provider.

Opportunity:

Reduce and control operating costs.

When the company outsources, it eliminates the costs associated with hiring an employee, such as management control, training, health insurance, employment taxes, pension plans, etc.

Improve the company’s focus

Outsourcing allows the entrepreneurship to focus on its essential points in turn, while the other company allows it to focus on its own.

Access to differentiated resources
The return on investment is much greater when IT is outsourced to a company that specializes in the areas in which it will operate. Instead of having the knowledge of just one person, the hiring company benefits from the collective experience of a team of IT professionals. Outsourced IT companies typically require a properly trained team.

Employees available to work in other sectors
In some cases, an employee interested in IT is employed to help solve some problems with company machines, in addition to carrying out other tasks such as sales and accounting. By hiring a specialized team, that employee will be able to focus on their tasks, instead of wasting time on something they don’t have specific knowledge about.

Human resources are not available internally
Now it’s the opposite. A company that does not have employees interested in the technology area and who do not have the knowledge to help with IT issues will have to hire a new employee, as long as this does not affect the company’s budget. In this case, outsourcing can be a valid alternative.

Maximize the benefits of the renovation
When a company is going through a restructuring and seeks to reduce costs, increase service or product quality, and quickly deliver service to customers at the same speed, essential functions and strategies cannot be left aside. This is where outsourcing comes in, helping managers think about planning.

Function difficult to manage or out of control
This is one context where outsourcing to specialists can make a big difference.

Reduce risk
Staying up to date with the technology needed to run your business is expensive and time-consuming. As outsourced IT service providers work with multiple clients, they must stay up-to-date on industry-leading technologies. This type of knowledge and experience reduces the risk of making a wrong and costly decision.

Threats:

Some IT functions are not easily outsourced
Being sure of the type of supplier you are going to hire and whether they have the specific qualifications to take care of most of the company’s needs is a fundamental consideration to take.

Control may be lost
Critics argue that an external vendor will never be as effective as a full-time employee, being under the same management as other employees. Other concerns include data privacy and crisis recovery. In this case, an experienced IT team member management supervisor is usually needed.

Employee morale can suffer
This is especially true if others who performed similar or related functions to the work to be performed by the service provider are fired.

The contractor may become dependent on the outsourced company
If the vendor does not document its work in the network of the company for which it provides the service, it could get stuck in its own system. Many outsourcing companies require a one-year contract, which limits flexibility.

Most of these risks can be avoided if the executive knows what to look for in a vendor and asks the right questions when hiring.

In addition to business opportunities, outsourcing offers numerous advantages, such as the acquisition of specific knowledge, cutting internal costs – such as, for example, hardware and software localization options and software licenses, as well as possible compliance with government regulations – the possibility of better using time and focusing on strategic issues, in addition to the high specialization of the hired staff.

The trade-off is balancing user satisfaction with tasks that don’t add IT value to the business. Despite the benefit of eliminating the need to train and retain professionals distant from the company’s specialization, it is not easy to align the service provider with the same objectives as the contractor. With the mix of internal and external employees, it is up to the manager and his team to generate trust among all those involved in the outsourcing process, with transparency, planning and explicit definition of the IT governance model and to demand the same level of service, quality, speed and flexibility.