The 21st Century has experienced a rise in the number of companies. This rise has been propelled by the advancement in the field of Information Technology. Companies have shifted from the traditional way of operation to the digital setup- thanks to technological progress. These companies depend mostly on information technology (IT) to run a big portion of their business.
IT can either be outsourced or in-house (in-sourced). IT outsourcing is defined as contracting with external IT support providers, a good example of one is MyTek, to be in charge of different IT functions in the company such as data center operations, network management operations, data entry and application maintenance and development. In-house sourcing involves the operational infrastructure of the organization. It means the company does not seek external assistance in its IT operations. Discussed below are the upsides and the downsides of IT Outsourcing and IT In-sourcing.
The upsides of IT Outsourcing
Before deciding on whether to outsource, you should weigh and know the benefits of IT outsourcing. Some of the upsides of IT outsourcing are:
1. Access to a bigger talent pool
When you hire an employee to manage your IT services, you are limited to a small local talent pool. At times, it may require you to compromise on many things. However, when you outsource IT services you are more likely to benefit from a larger talent pool from different parts of the world. If you outsource, you will be exposed to talents that may not be offered by your employees. When you outsource, you will get different talents at a pocket-friendly price whereas in-house will require you to employ different employees at a higher cost to attract the required talents that will propel your business.
2. Lower labor cost
Research has shown that there are more than three hundred thousand jobs that are outsourced by the United States annually. Companies have different reasons for outsourcing IT services. Most importantly is to cut costs. It is common sense that you wouldn’t want to trade quality for the price. However, when you outsource, you find value for your money. This is because outsourcing allows you to experience both quality and price-friendly service. If you do a thorough search it is possible to find the best talent at an affordable price.
3. No need of hiring more employees
When you outsource IT services, you are getting into a contractual agreement with the service provider. The advantage is that you avoid bringing an employee into your company. The result is that you will save money on everything from benefits to training because this will be done by the contracted service provider.
4. Reduce risk
All business investments carry a certain level of risks including changes in market dynamics, government regulations and technologies. These risks may greatly affect your business. However, when you outsource IT services, the service provider takes charge and manages these risks on your behalf. They do this as they are equipped with specific industry knowledge such as compliance matters and security. The IT outsourced company is in a better position of deciding on how to avoid the risks because it is their area of expertise. The result is that your company is more likely to save on the cost of solving these risks which you would pay for if you hadn’t outsourced.
5. Helps to stay focused on your major business
Most businesses have limited resources. Therefore, they would hire one manager to be in charge of the entire business. This manager will majorly focus on the core business. This means that he/she will have limited time and attention. Therefore, when the company outsources an IT service provider, it will help the management focus on the important part of the business rather than sitting often to make some IT decisions. When the management puts more effort into the core part of the business, it will translate to better returns.
6. Levels the playing field
Smaller companies may not be in a position to match the in-house IT services enjoyed by larger companies. When the services are outsourced, the smaller companies will be on the same playing field as the larger companies. They will act ‘big’ since they will have similar technology as the bigger companies. This is an advantage because the smaller companies would have saved on cost yet appears to be on the same level as the bigger companies.
7. Control IT costs
When you outsource IT services you only pay for what you use when you need it. This is advantageous because it helps in proper budgeting.
Despite having its upsides, IT outsourcing also has its downsides which include:
Downsides of IT outsourcing
1. There are hidden costs
Although IT outsourcing is considered cheaper, you should be aware of being ripped off. Some IT outsourcing companies give small business owners long contract agreements to read and sign. You should be keen to understand what the long contract is all about. Failure to, you may get hit with unexpected costs.
2. Problem with quality control
Some IT outsourcing companies are majorly focused on profit-making. This compromises quality. Therefore, the service you will give to your customers will be sub-standard. The customers will reject your service and you will end up experiencing losses.
3. Lack of control
When you set up a business, you ought to be in total control. However, with outsourcing the IT service you are not in total control. This is because outsourced services are provided by contractors and not employees. Since the contractor is not always on-site, it may be difficult to maintain the level of control hence you may experience losses.
Outsourcing may have benefits as shared above. Some companies may decide to seek in-house IT services. The upsides and downsides of in-house IT services include
Upside-you know where they are
The in-house IT department is located within your company premises. They are service providers for your company only. Their availability is guaranteed whenever you help them, it is easily given. This easy accessibility will help save on cost where you contract an outsourcing IT company.
Upside-they know your business
The in-house IT department works daily with your team. They know what each individual in each department provides for your company. The in-house IT department understands your business’ needs and therefore works to make it grow. This growth equally increases your business income.
Upside- they understand your people
The in-house IT team knows your users, customers and prospects. They also understand the company’s goals and metrics of success. Therefore, they work with other team players to make the company successful.
Downside-increase key person risk
Most companies have that one IT member who has a vast knowledge of the company’s operations. Unfortunately, this star IT member might decide to leave the company. The disadvantage is that he/she will go with the institution’s knowledge. Train a new member to assume their role may take a long time before they get fully acquainted with the company operations. During this period of uncertainty, your company may experience loss.
Downside-need support for IT issues outside their area of expertise
It is no doubt that IT is multi-faceted and complex. It’s almost impossible to find one IT member with all the necessary skills needed to meet your company’s needs. Therefore, you will need to employ several IT members with different skills to complement each other’s capabilities. To some extent, this will come with an extra cost.
The discussion above on IT outsourcing and in-house IT is important when considering incorporating IT services into your business. Both may be of help but IT outsourcing is better since it has a lot of upsides than in-house IT.