Pros and Cons of Outsourcing IT Management
To outsource or not outsource is not a binary decision. In many instances, there is a lot to weigh based on the size of your company, your staff’s expertise, cost savings, and the risks involved. Whether you are an IT outsourcing vendor, a small business operator, or a highly technical IT staff member at a company, there are pros and cons as to whether or not IT outsourcing is the right fit for your organization.
When deciding whether or not to outsource IT, start by identifying the areas of coverage you need for your business.
The various functions IT outsourcing can assist with include data entry, data center operations, application maintenance and development, disaster recovery, and network management and operations — to name just a few. Vendors for consideration may be individual IT professionals, consulting firms, employee leasing companies, and full-service managed-service providers (MSPs).
So what are the advantages and disadvantages of deciding to seek outside assistance with your IT issues?
The Pros of Outsourcing IT
There can be several benefits to hiring the right outside IT service. Here are five of them.
Small companies due to smaller budgets have an inherent reason to seek cost-savings — but even larger brands in order to compete do whatever they can do to reduce staff and cut costs. They both seek outside vendors that can help them in the following areas:
- Employ bulk purchasing and less expensive leasing arrangement for hardware and software
- Maintain tighter control of operations and run much leaner overhead
- Tap into low-cost labor pools
- Apply expertise and industry best practices
- Access the intel of more informed negotiators
Experienced IT professionals can be better, more informed negotiators for your business.
Complacency & Costs
A recent study by The Outsourcing Institute (a professional association that provides information and products on outsourcing) uncovered an important rationale for seeking outsourced IT assistance. They found that a majority of senior managers viewed their companies as ‘cost burdens’ versus ‘strategic resources.’
This insight was based on in-house IT departments becoming complacent, outdated, inflexible, unmanageable, and lacking a customer-satisfaction focus. All of these factors led to hidden costs and rising costs. Turning to outside assistance was not only a viable alternative according to this group — but one of survival.
In-house IT teams can become complacent and lack a customer-satisfaction focus. Do you agree?
Access to State-of-Art Tech
The evolution of information technology can quickly make IT skills and practices obsolete. Software is updated and replaced very rapidly. Internally, a company cannot keep up with the changes and tend to be less competitive as a result.
By the time a firm invests and trains its full-time staff, the technology may no longer be state-of-the-art. Outsourcing specialists must be well trained and up-to-date to survive in their competitive milieu — so again, a viable alternative.
Improved Business Focus
Outsourcing allows a company to shift focus.
By relinquishing operational daily IT responsibilities to outsourced firms, companies can redirect their resources to long-term strategies.
For many companies, the single most compelling reason for outsourcing is to relieve management of the “how issues” that drain management’s resources and attention.
The Cons of Outsourcing IT
On the flip side, here are some negatives of outsourcing your business IT.
One of the major factors in maintaining the IT function in-house is control.
Critics of IT outsourcing argue that no outside IT vendor can match up with the responsiveness and service levels offered by an in-house department. This is due mainly to the fact that the outsider is not subject to the same management direction and control as employees. They don’t understand the culture and the underlying best practices nurtured by the company over the years. Additionally, one loses control when your privacy is open to outside scrutiny. This raises questions about how well confidentiality of data can be maintained — particularly when inside intel pertains to strategic applications and provisions for disaster recovery.
Being Held Hostage
Tied to losing control, some argue that outsourcing relinquishes ownership and turns the keys of the store over to the vendor. In essence, companies become hostage where they become locked into proprietary software and hardware they have little or no control over. In a long-term contract, while the customer might initially have more leverage during the negotiation stage, over the long-run, the third-party is in the driver’s seat after the outsourcing is underway.
Whether you are an SMB or multinational firm, your brand distinguishes you from your competition. When prospects or potential customers think about your company, they should immediately be able to identify your branding message.
While this marketing initiative develops over time through repetitive advertising, consistent customer contact, and experiences, it needs to be constantly reinforced.
Outsourcing tasks, especially those involving customer interactions, such as call centers or social media, can muddy your message.
For example, even a company as large as Dell had to bring their call centers back in-house after customer satisfaction declined. Call center operators overseas were unable to provide the level of technical help needed and left customers frustrated.
Weighing the Risks and Rewards
There’s no foregone conclusion that outsourcing is the answer for your business. None of the pros nor the cons outlined here outweigh the other. The focus needs to be what reasons, risks and rewards work best for you — and are you in it for the short or long term.
The benefits of outsourcing seem obvious by some of the examples listed above. Touted by IT and fiscal analyst experts across numerous vertical markets, it appears a no-brainer when it comes to cutting costs. In fact, on the surface, some might think that one can run his or her entire operation, without ever hiring a single employee.
However, there is more to outsourcing than the bottom line. What about the outcomes for your business that are not so easily quantifiable?
The risks noted above are just the tip of the iceberg. Anytime you shift responsibility for any aspect of your business, whether a full-time new hire or an outside vendor, there is risk involved.
The questions to ask of yourself are multi-faceted: Did I hire strategically? Will they perform in accordance with what is needed for my company? How will they “fit” in with my corporate culture? with my existing staff and/or departments? These are the non-quantifiable questions, which are the most troublesome for owners of small businesses when handing over the reins to a new employee — let alone an outside vendor.
If you do go forward with outsourcing, you must know or learn how to manage a successful working relationship with these IT service providers. In closing, here are some tips:
- Rally support and involvement from all decision-makers involved.
- Insist on a contract or plan that includes all the expectations of the relationship, especially the financial requirement.
- Clearly form and communicate the goals and objectives of your project or business relationship.
- Have a strategic vision and plan for your project or relationship.
- Select the right vendor or new hire through research and references.
- Work with the best you can afford.
Ron is part of the marketing team at Telzio, covering everything from tips and tech for growing businesses to customer success stories for the Telzio blog.