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Information Technology (IT) is a major support function for any business. But all too often small to medium-sized businesses overlook IT as a critical business component, mainly because of the cost to develop and maintain an IT department.
However, the growing trend of IT outsourcing can bridge the gap. In fact, analysts expect global Information Technology (IT) outsourcingto have a compound annual growth rate of close to six percent through 2019. Some studies show as much as 60 percent of the IT function being outsourced, with spending on outsourcing accounting for 10.2 percent of average IT budgets.
Companies that invest in outsourced IT services achieve significant benefits that help them operate more efficiently and effectively without having to invest in a full-fledged IT department. Here are 5 reasons why IT outsourcing works for businesses:
The main driver of IT outsourcing for many companies is reduced spending. Savings are significant, with some estimates as high as 40 percent. It doesn’t take much to realize savings; a study by Gartner reported that simply outsourcing email would produce notable savings.
Both capital and operating expenses can be reduced. You do not need to purchase computer hardware and dedicate expensive square footage to develop a data center. You do not have the expenses of hiring employees to perform IT functions; all the functions of an internal IT team, from application development to hardware installations to end user support can be outsourced. Along with reduced payroll comes reduced expenses for training and benefits.
Outsourcing also makes costs predictable, with contracts specifying fixed monthly charges. Outsourcing vendors can often charge less for network access and support than a business would pay the provider directly, as they purchase in bulk and can pass on savings.
For most companies, IT is a support function, not a core competency. Building and supporting your own data center isn’t likely to give you a competitive advantage. Because your business isn’t technology, it’s hard to recruit and retain an internal IT team with top-tier skills, so your team may not have the skills to create software which could give you an edge. Outsourcing IT functions lets your management focus on your core competencies and business development, rather than struggling with technology issues. In addition, outsourced IT services offer 24/7 support and guaranteed service level agreements that go beyond what your internal operations team could provide, letting you get more work done with fewer operational issues.
Because IT is the vendor’s core competency, they make sure their employees are trained and certified in the technologies they support. The IT services vendor has a team of experts in multiple IT technologies; you can draw on the vendor’s team for advice that helps you make the right technology decisions. You get access to the latest technology and support from a team that is expert in deploying it effectively. The IT provider will make sure systems are patched and upgraded on an appropriate schedule.
Technology is expensive, and making wrong decisions is costly. An IT services provider has a solid base of experience that assists with making the right technical decisions. If you decide to change your technology strategy, your IT provider will have tools and services to help you Transition to your new platform.
Outsourced IT services reduce the risk of data loss. More than 300 million pieces of malware are created each year, and companies face significant losses if a data breach occurs. IT outsourcing providers ensure that data centers have appropriate defenses, such as firewalls and security information and event monitoring software. Outsourcing vendors often maintain certification in the security standards needed to protect payment data or healthcare information, reducing the risks for businesses in those industries.
Relying on outsourced IT services also reduces the risk of disruption from downtime. Vendors build resilient facilities with redundant devices, minimizing the risk of downtime. Robust backup and recovery procedures reduce the risk of losing data if there is a device failure.
Working with an IT services provider also provides flexibility that enables companies to scale up or down quickly when their needs change. Temporary projects can be accommodated, and the charges stop when the project ends. If a company is growing rapidly and needs additional capacity, an IT services provider can rapidly bring additional servers and storage online.
Poorly implemented outsourcing can lead to unhappy employees who worry about the security of their own jobs, but handled properly, outsourcing can actually increase your employees’ morale. Offloading IT work lets your employees focus on the jobs they were hired to do, while the more reliable systems provided by an IT outsourcing vendor can let them get more done. Because employees no longer have to perform tasks they are not an expert at and are more productive at their core tasks, they become more satisfied with their work and less likely to burn out and leave.
Of course, there are always risks along with rewards, and IT outsourcing has a few risks that businesses should be aware of and plan for. It’s important to assess vendor qualifications carefully and make sure they have the capability and expertise needed to provide all contracted services. You need to oversee the vendor to make sure services are being provided as agreed upon; you also need to make sure the vendor documents all work. You need to continue to monitor your IT needs and inform the vendor in a timely way if you require changes.