IT Outsourcing: What is it? Advantages & Disadvantages
IT outsourcing is a fast-growing practice in the industry and a great solution to scale problems for companies of any size. It's a great way for any business to scale-up, get access to different expertise, or simply grow or contract a project along with its timeline. Let's dive into the different types of outsourcing, its advantages and disadvantages.
By definition, IT outsourcing is the practice of using an external service provider to effectively deliver some or all of the IT functions required by a business, including managing infrastructure, directing strategy, application services, cloud-enabled outsourcing, and more.
Outsourcing helps clients improve their sourcing strategies, select the right IT service providers, build the best possible contracts, and govern deals for sustainable relationships with external providers. It can also reduce costs, accelerate time to market, and take advantage of external expertise and resources.
When an IT outsourcing provider takes full responsibility for all IT maintenance and support, it's called "fully managed service". If they provide additional support for an internal IT team, it's sometimes referred to as "co-sourced IT support". A company may use one provider for all their IT requirements, or multiple service providers to deliver differentiated solutions.
IT Outsourcing Types
IT outsourcing can be done in different ways and with different models to achieve diverse goals. These are the main types of information technology outsourcing, and they mostly refer to where the outsourcing is done. Let's see:
Offshoring is outsourcing to anywhere that is further afield. It involves sending IT-related work to a company in a foreign country, which offers lower costs and even tax savings.
This is largely what people think of when you say "outsourcing", it typically gives the biggest economic savings, but you can have some problems with communications and very far time-zones.
Nearshoring is outsourcing to places that are close by, this gives plenty of benefits with closer time zones. Sending IT-related work to a company in a country that shares the region with yours should make travel and communication between the two companies much easier.
Onshore or domestic outsourcing
This means contracting an external service provider, located in the same country as you, to produce your IT-related work remotely or on-site.
Contracting an external service to provide IT-related services over the internet, such as Infrastructure-as-a-Service, Platform-as-a-Service, and Software-as-a-Service.
This involves getting an external company to provide network management functions such as IP telephony, messaging and call centers, VPNs, firewalls, networking monitoring, and reporting.
Some examples of Frequently Outsourced IT Services
- Application/software development
- Web development/hosting
- Application support or management
- Technical support/help desk
- Database development/management
IT Outsourcing Models
Now that we've established where will this happen, let's focus on a really important thing for outsourcing: the model. These are the main models for IT outsourcing and what goals they aim to accomplish:
In this model, you outsource work that's already planned and defined. It's essentially delegating the implementation stage, freeing up your own team to work on the big picture.
This way, IT outsourced tasks can be done through an agency, or it can be organized from scratch. It has fewer requirements for those that are hired, and it's a simpler form of IT outsourcing to set-up.
Outsourcing isn’t restricted to implementing an already defined scope, you can use it to create a product from scratch.
This model puts the entire project into the IT outsourcing process. It will require finding people with greater expertise, knowledge, and experience. You can delegate even more responsibility and tasks, and get a much bigger financial benefit since less in-house work is needed.
Outstaffing is another model of outsourcing, but it isn’t quite as full-on as the others. This is staffing up an entire team with outsourced workers. This allows you to take even more advantage of the financial benefits of outsourcing, but it might take a lot longer than with the other models. This version of IT outsourcing can give your company the best of both worlds, providing a nice middle ground between an in-house and outsourced team.
Reasons For IT Outsourcing
Outsourcing provides benefits in a lot of industries, but it can be especially valuable for technology. These are some of the main reasons why technology firms of any size might choose to outsource:
- It's cost-saving
- It fixes a lack of in-house expertise
- Gives team size flexibility
- Provides relief when your in-house team is overloaded
- Helps meet challenging deadlines
- Gives you access to trending technologies and international talent
- Fast upscaling
These are the main advantages and disadvantages:
- You can find outsourced workers that are skilled in areas that your team might be lacking in
- Your team is free to focus on other things without sacrificing upkeep on the day-to-day management
- IT outsourcing eliminates the long, expensive, and frustrating process of vetting and hiring staff
- You can grow or shrink the size of your team considerably faster, making you more responsive to market changes and more agile
- Timezones and distance can become a problem if IT outsourcing isn’t nearshore
- You need quality control in who you hire for IT outsourcing to get the benefits of it
- Language or organizational problems in outsourcing can cause a loss of quality or delays
IT outsourcing can have a lot of benefits to companies of different sizes with widely different purposes. While many believe this practice is simply an effort to save money without much thought to quality, it can be done in different models that have a lot of benefits without those downsides. While there are disadvantages to it, well-done outsourcing can help businesses to get things done quicker and easier.
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