The Benefits Verses The Risks of Outsourcing IT Systems & Services

Are you thinking about outsourcing an IT service or system? If yes, do evaluate the various benefits and risks that go hand in hand with IT outsourcing.

Today most large, mid-size and small organizations decide to outsource IT services or systems to stay competitive. However, the option of outsourcing comes with some proven benefits and not so obvious risks as well. If your enterprise is keen on outsourcing IT, it would be probably be a good idea to carefully analyse the risks and benefits, plan out possible measures to attenuate the risks and prepare your in-house resources for the change that outsourcing brings.

Here are some benefits and risks that your enterprise needs to be aware before you outsource IT services:

The Benefits

1.Minimize current cost

Reduced cost is the most compelling reason why most companies choose to outsource IT. With outsourcing, the capital outlay can be successfully controlled. If you opt for in-house IT services, your enterprise will be incurring fixed cost. However, by outsourcing, either onshore or offshore, the same fixed costs are converted into variable ones. This will free up your capital for use in other areas of your business. Not only will this make your business more appealing to investors, it will also give you the freedom to invest your capital into areas that will bring in direct revenues.

2. Control expenses

If your business chooses to perform every operation internally, then the expenses associated with each activity has to be passed on to the customers. On the other hand, outsourcing IT services to a service provider that specializes in business networks and support will alleviate some of your expense, while giving your enterprise a competitive edge when it comes to the pricing of your services and goods.

3. Increased focus on core operations

Through outsourcing IT services, your managers can completely focus on the core objectives and goals of your business. If IT services are performed in-house, some of your managers may have to split their time between activities that engage prospective customers and concerns around operations, leaving less time for core business objectives. Outsourcing erases this necessity and enables managers to shift all their time and energy into core business competencies.

4. Compete with large businesses

Large businesses have the required resources to maintain cutting-edge services and systems by themselves. The same cannot be said of small to mid-size businesses. Small and medium sized business very often do not have the required resources or budget to implement IT systems and services on their own. Outsourcing IT services bridges this gap and creates a more equitable playing field between large and small enterprises. Continue reading

Top 5 Outsourcing Risks & How to Avoid Them

Outsourcing is often used as an effective business strategy to reduce cost, bring in innovation and get access to better software products. However, there are risks that can sidetrack your project. What are the most common risks that a business can face in outsourcing and how can you effectively manage them? How do you ensure that your outsourced project is successful amongst these risks? Let’s examine the top five outsourcing risks and find out how to combat them.

Outsourcing Risk #1: Loss of control/ visibility over the project

Losing control over the outsourced project is one of the biggest fears that haunt CIOs. Lack of communication or slow responses may result in a costly product. The key to facing this risk is to understand that your outsourcing project should be equally managed by your company and the vendor. Start by improving the communication with your outsourcing team and also ensure that your in-house team understands how to handle the outsourced project.

Outsourcing Risk #2: Hidden costs

Though outsourcing is cost-effective, it is not an end-all to your problems. If you are to see success in your outsourcing relationship, you will still need to incur cost, like the salary of the project manager or the cost of transitioning. The ideal way to combat this risk is to keep yourself aware about the potential hidden costs in your new outsourcing venture. This will give you a clear view about the exact cost reduction that outsourcing can bring to your business.

Outsourcing Risk #3: Language problems

As you might already know, communication is a crucial factor in outsourcing. Communication can falter if your development team is unable to speak your language (For example: English). To avoid this risk, carefully choose the outsourcing country and vendor. Choose a service provider who can guarantee that their remote team will be able to communicate to you in the preferred language. Continue reading

The 3 R’s of Outsourcing: Reasons, Risks & Rewards

As the owner of a company, you would have definitely thought about outsourcing one or more aspects of your business. You are aware about the benefits of outsourcing, but want to know if there is more to outsourcing than just the bottom line. Before you outsource, you want to know why companies have taken the outsourcing route.

Well, you can get your questions answered by knowing more about the 3 R’s of outsourcing (Reasons, Risks and Rewards):

The reasons why companies outsource

  • To effectively reduce and control operating costs related to hiring new employees
  • To improve company focus and to concentrate on core business activities
  • To get access to exceptional capabilities at a cost-effective price
  • To free up internal resources for other important work
  • To make up for the lack of internal resources in a specific domain
  • To maximize restructuring benefits
  • To manage a business function that is difficult or gone out of control
  • To make capital funds available
  • To reduce risks

Continue reading