IT Outsourcing Definition & Meaning
IT Outsourcing is the strategic use of external IT resources to handle the tasks that are traditionally handled by internal resources or the staff. In different words “IT outsourcing” is the use of external service providers (external IT company or a freelancer) to effectively deliver IT-related business process, application service and infrastructure solutions for business outcomes. Simple example of IT Outsourcing: “Company A” orders development of the corporate website or mobile application from external “Company B” (an IT Outsourcing provider).
Types of IT Outsourcing
There are multiple types of IT outsourcing, defined by where and how the outsourced work happens. These include:
- Project based outsourcing (aka: software development outsourcing, Nearshoring, etc.). In this case company provides all project related information to the external outsourcing provider and this provider does all the software development, quality assurance and project management.
- Outstaffing (aka: body leasing). In case of outstaffing model company buys time of employees from IT outsourcing provider. Usually company pays hourly or monthly based rates.
- Opening of own R&D Center (aka: offshore office/company). Some companies open an office in another country (usually under the same brand name) and hire local people to work for the company in the office.
Some companies also include in this definition the following term: homeshoring or onshoring (allowing employees to work from home rather than an office, factory, or related physical workplace).
Why companies outsource IT Services
Organizations sign a bond with efficient and specialized service providers and those become the business partners eventually. Many times, outsourcing is about transferring employees from one company to the outsourcing organizations.Order a free consulting Now
It outsourcing services nowadays become one of the most popular services among smaller businesses. And with its growing popularity, most of the companies prefer outsourcing. But, before outsourcing look for your requirements properly.
Now, the biggest question is why do companies outsource IT services?
Well, there are countless reasons why companies outsource specific business activities. And some of the most common reasons include:
- Enhancing company’s focus
- Access to world-class capabilities
- Controlling and decreasing the operational costs
- Increasing efficiency for time-consuming functions
- Distributing risks with the partner company
- Increasing use of external resources
However, these reasons may not be enough to execute a successful outsourcing program. Before shaking hands with any outsourcing organization, it is important to make out if you are capable of meeting all the requirements of successful outsourcing.
Here are some important questions you need to ask before choosing an outsourcing brand:
Every small business encounters this complex question if they should outsource or not. Common questions that arise are: if you should trust the outside firm with your company’s data, if the costs are comparatively less than hiring an in-house IT personnel if it makes any sense to trust the professionals with particular experience and a lot more.
Reasons to choose IT Outsourcing
For small to medium-sized businesses, assigning a particular project task or services to the third party providers is something common. Outsourcing desk works, customer help, tech support, and on-site maintenance everything falls into this specific category. As per IT management, there are lots of IT companies that turn to IT outsourcing. It gives them an access to unavailable resources like infrastructure access, staff capabilities and other relevant capabilities.
Outsourcing Cut Costs
Costs are more predictable when you outsource. For instance; when you use a hosted server it offers you to fix the expenditures at some pre-determined amounts every month. There are no maintenance costs or equipment expenses apart from fixed amounts. Here are some of the big reasons that small business enterprises are outsourcing IT:
The most popular reasons for outsourcing any project is to have an access to expert knowledge and experience that present employees may not offer. The best thing is there is no need to pay for any training of your IT person. It is the outsourcing company that trains the employees for you about recent techniques and programs.
Access to Global Resources
There are a lot many outsourcing companies that can help businesses without employee availability, office space, or personal language in order to serve clients in different time zones throughout the day.
Savings from outsourcing can be really dramatic. According to researches, more than 80% of the businesses with less number of employees would take in major savings from outsourcing e-mail management all alone. IT companies have the ability to offer an access to equipment and services at very lower costs than your business may incur to get it alone.
Outsourcing Software and IT pros and cons:
Specific companies that are growing constantly, moving and initiating new projects, or merging up with some other organizations enjoy the flexibility factor. Rather than employing new people for temporary projects, it is better if a company outsource a resource for particular time periods.
No doubt IT outsourcing has its disadvantages too. : trusting a third-party provider may cause some serious security issues. And outsourcing is certainly not a cure-all thing. If your company is facing some problems with the technology, outsourced employees may have the same. Then it may arise some in-house management difficulties like inefficient communication, poor system construction, deficiency of scalability and more. And all these problems may not be fixed overnight.
It is suggested to question yourself why you are choosing to outsource before going with this idea. In case it is to leverage some extreme level of benefits, you are probably playing good in it. It is mainly because you are not able to manage problems or process things on your own. It is better if you address every small issue before involving any third party.
Which IT Functions can be outsourced?
Once you know you need some third party to join in your business, the first thing that strikes is what can you outsource. So, here’s an answer to that complexity.
According to studies, one of the most commonly outsourced categories is disaster recovery, center operations, and e-commerce web-design functions. There are lots of companies that start out basic outsourcing support services. In the end, these start including more advanced operations in the outsourcing agreements. IT outsourcing companies also offer services like virus protection, data recovery, data backup, e-mail marketing management and network architecture.
These are some of the common operations that are outsourced by small-to medium-sized businesses.
IT Outsourcing examples:
IT firms can execute regular maintenance and everyday fixes to computer software, hardware or network devices.
Management and Strategic Planning
Outsourced IT firms may act as a CIO or as a management consultant for particular initiatives or projects.
Application or server hosting is parallel to leasing a specific program or software from an outsourcing company. You can either use a shared server or may also pay for using your own dedicated server. This is one of the most popular options for companies that lack skills or resources for updating or maintain software on their own.
Data Center Outsourcing
Because data centers need more resources than most of the businesses may not be able to offer, data storage and data processing are some of the common uses of outsourced IT.
What to Outsource
You probably already outsource some critical business duties, such as payroll administration or background and criminal checks for hiring. And nowadays, practically any task can be outsourced, with a lot of qualified professionals which are leaving the corporate environment to work as contractors or freelancers. Nevertheless, just because you can outsource work doesn’t mean you have to.
Are you outsourcing just because you do not like doing some particular work? Well, don’t! Sometimes there are things you may not want to but they may be important to your core business.
Before making out the list of tasks that you need to farm out, take a hard look at your business and consider your values as well as strengths. Small businesses need to recognize their core capabilities and competencies. They need to focus on talent management, R&D, and resources. If not done adequately business may not be able to offer anything that their own consumers couldn’t get anywhere else. A small business that pays attention to product design must not support any outsourcing like development internal designs, or other designing activities. But they should investigate all the prospects for outsourcing divergent processes like IT, payroll services and so on.
Hence there are a lot of tangible advantages to outsourcing human resource functions, but the decision to outsource need to be taken lightly. Cost is not the only factor to drive any decision. It may not be right for all. And if you are trying to make out if you should outsource or not, determine the issues that exist in the present. Also, see if you have the expertise to solve the problem in-house. Additionally, introducing some new processes or outsourcing human resource department may also bring a big change. It is important to find a human resource team that devotes proper time to this entire process. The time spent in the beginning may go mainly on choosing the perfect outsourced human resources consultants for your organization. This will pay you off in the long term.