Outsourcing is not a new term used in business but often has a stigma attached to it in terms of value for money and professionalism. However, more and more companies are turning to outsourcing various IT aspects of their business – but what is the driving force behind this and what factors are used to decide whether to make the leap into the world of 3rd party assistance?
The word outsourcing can often ring bells of worry, frustration or poor quality in the eyes of customers and also fellow employees. Whilst there can often be truth and reason behind these concerns, it must be understood that outsourcing can often be the perfect solution for a company – depending on the nature of the problem in hand.
When dealing with outsourcing, the idea usually comes to the table for one or more contributing factors – either the company has a temporary need for extra workforce, there is a cause for increasing the workforce in a risk-free manner or the company need some form of technical expertise at small but regular intervals. Employment in today’s economic climate is a risky business – resourcing has never been so difficult for companies. Balancing work loads against company profit and quality of work is difficult when businesses are booming is hard enough. In times of uncertainty, business leaders need to assess their requirements and make a judgement call on whether to employ or outsource some of the workload.
IT departments are a perfect example of this and even large businesses will outsource some of their IT work – call centres, server houses and user training are examples of this. SMEs are more likely to outsource the nuts and bolts of the IT functionality.
Outsourcing comes in many shapes and sizes – often support and hosting for software products is offered by the software vendor. Saas (software as a service) allows companies of all sizes to purchase software, whilst the vendor takes care of the hosting, implementation and maintenance of it, on their own servers. This reduces the amount of infrastructure internally, which correlates to a smaller demand on workforce.
The aforementioned call centres is another example – outsourced IT support for technology companies. A company like HP or Dell wouldn’t want to commit to paying high wages and host employees in expensive areas such as the USA, Russia or China – instead, they outsource to areas where businesses are cheaper to run and people are cheaper to employ in countries such as India and South Africa. This not only tackles a question of cost but also reduces the risk of over-employing staff and needing to make multiple redundancies in times of hardship.
Small and medium enterprises (SMEs) are prime candidates to outsource IT requirements. Some companies will have no internal IT department at all and depending on the size and structural complexity of the SME. It’s a common practice for SMEs to have a core internal team of people, to meet the demands of day-to-day support, management and strategy, whilst outsourcing the technical aspects where a full time person would not be required.
Take the example of a small consultancy – they may have several small sites that require linking together and managing – they will probably have periods of growth or expansion which requires technical staff at irregular bursts. A SME is not going to want a CCNA sitting in an office, to have about 5% utilization – they would outsource the networking tasks to a professional IT support company. This example is scalable in so many instances. It comes highly recommended however to retain internal control of IT, particularly in the era of outsourcing and IT functions “as a service” – someone needs to oversee the responsibility of high level IT workflow of the firm, the strategy, user behaviour, support and expenditure.
As with all decisions to be made, there are downsides to outsourcing – there is the inevitable loss of quality for instance. Once an outsourcing contract is signed, the company has your money and you’ll be ‘just another customer’ to support – there is often an initial bedding in period where the outsourcing team will work hard to impress and capture your confidence, but this can tail off if not kept on a close rein.
There is also the worry with data security – its a well known fact that a company must be able to wholly trust their IT staff – after all, as a department they have access to absolutely every piece of information, statistic and document that the company produces. Outsourcing teams could become negligent or curious about your business so access control needs to be monitored.
Hidden costs are another example of outsourcing disadvantages. A contract will define a set of terms, but its more than likely the customer will require assistance outside of these – at a fee. For example, if the contract is for local working hours, but some work needs to be done outside of these (as is very likely with IT), it will come at an extra cost.
The key to a successful relationship with an outsourcing team is to firstly define measurable goals to work towards – ensure the outsourcing team are on the same page as you. Define response times in terms of severity, and business impact. Avoid loose contractual terms such as “responses will be made in an acceptable time frame” – the word ‘acceptable’ can be interpreted to suit different people.
When invoices arrive from your outsourcing team, read through them carefully, and raise the occasional query, irrespective of whether you feel the need. This reaffirms in their minds that you do have a watchful eye for detail. Ask them questions about work being done – more often than not, outsourcing teams are excellent at the primary job but often leave out details of secondary implications when work is carried out.
A recent experience was on an implementation of Microsoft Lync and the assumption was made by the outsourcing team to allow all remote offices to talk to head office via Lync, but not to each other. Our assumption was that each office would be interconnected but on realizing this was not the case, it ended up costing more money.
The bottom line with outsourcing is that is CAN save your company a lot of money and a lot of time. Outsourcing teams are professionals within their own field and are available when their clients need them. With a good relationship involving a mutual understanding, solid contractual terms and rigorous internal review on outsourcing expenditure, there is everything to gain.
- How to Outsource Smart (joelcomm.com)
- What is the Need for Outsourcing Jobs and the Presence of Software Outsourcing Companies in Today’s Market? (techwench.com)
- IBRC shelves 10-month search to outsource day-to-day operations (independent.ie)
- Cost Considerations Decline In Importance As IT Outsourcing Driver – KPMG (misco.co.uk)