Vision-oriented entrepreneurs know that they cannot do everything by themselves. Irrespective of which industry you work in, IT outsourcing is a critical.
The world is now a global village, and every business is rushing to create a stable IT ecosystem. But how long can this last?
IT is an ever-changing environment. Can your IT ecosystem keep up with business growth? Or Will your business fail because of weak IT support?
Many startup entrepreneurs get into the temptation of creating in-house IT departments. Startups are small and close-knit.
After a short time, they realize that maintaining an in-house IT team is costlier and riskier than outsourcing.
But what are the benefits of outsourcing IT? Can startups and enterprises enjoy outsourcing their IT business operations?
Do you know the outsourcing industry was worth $ 85.6 billion in 2018?
A study conducted by Deloitte noted that 78% of its survey respondents felt positive about building outsourcing relationships with other outsourcing companies.
Although as many as 59% of businesses continue to outsource their IT needs, the remaining 41% do not know what outsourcing is and why it is important.
Today, we’re going to define outsourcing, list more than 20 benefits of outsourcing IT and look into a few outsourcing strategies.
The Best Part?
All of these proven benefits will work in 2020.
So, Let’s get right into it.
What is IT outsourcing in simple words?
IT outsourcing is the practice of collaborating with outside experts or companies to handle business IT
operations. Startups routinely outsource their IT needs to save on time and focus their resources on important activities. Large companies outsource IT to cut costs and manage growth. Governments and NGOs outsource IT to derive more value from their budgets and improve service delivery. So what benefits come with outsourcing? So here are the benefits:
1. Focus on business strengths
You cannot be a jack of all trades. It is possible to start an in-house IT department, but it is challenging to maintain it. For this reason, many startup founders find themselves looking for IT outsourcing contractors so that they can focus their businesses on core competencies.
As a startup, you don’t want to waste time and resources on areas that other companies can do better. If you decide that contracting IT to other companies gives you enough space to focus on your business’s’ strengths, why not do it?
For example, if you are running a restaurant business, why not spend all your time building the best restaurant and leave the IT needs to another company?
2. Reduce risks
Running an in-house IT department comes with many risks. Why? Because this is not a strength in your business.
One of the most significant risks in IT is security and the lack of training. Companies whose focus is not IT tend to allocate tight budgets on IT training and security measures.
What happens when you don’t train your IT personnel? They become rigid and rarely make any progress.
Do you know the global cost of IT security breaches cost was at $ 9 million in 2019? No matter how prepared you are with an in-house team, you may never see other risks such as high turnover coming. Sadly, information technology is one field with the highest rates of turnover.
Outsourcing your IT needs protects you from this risk. You transfer the risks to a third party and focus on important things.
3. Save money
Saving money is one of the cliché benefits of IT contracting. In contracting IT business operations, you pay for work done only.
You do not pay pension or employee benefits. Remember, the cost of maintaining an in-house IT department includes employee salaries, training, benefits, insurance, and time spent interviewing new employees.
Although this may not sound costly for established companies, it is worth a lot for startups or medium-sized businesses.
4. Gain access to skilled resources
In outsourcing, you get a chance to try and test different professionals without risking. For example, when working with outsourced developers, you may notice highly skilled developers from the group and decide to hire them.
Outsourcing is an opportunity for businesses to connect with highly competent individuals.
5. As a pilot project for startups
As a startup, you want to last for as long as you can and spend as little as possible. You also do not want to take bigger risks of hiring in-house IT personnel. But you can work with an IT outsourcer before making the decision.
Consider IT outsourcing in a startup environment as a pilot project. Start entrepreneur does not know what will work and what will not work.
No matter how many role models you have or business consultants, the business environment is murky. One lousy startup decision can mean the difference between closing-shop and hitting the jackpot. Companies like Skype and Slack began their journey by outsourcing their development.
6. Save time for other purposes
Whether you are a large company or a small business, time is valuable. When IT is not part of your primary business, you want to outsource it and focus your resources on other important things.
Time spent dealing with IT-related frustrations could be used to improve employee productivity or close more deals. In business, time is money. If you as the CEO or manager do not understand the importance of time, your competitors are about to land on you hard.
7. Peace of mind
Managing information technology through internal teams comes with their unique complexities. As the business owner, you sleep worried that your software engineer will not report to work the following morning.
As IT becomes increasingly essential, large companies are every day looking for the best professionals. As a result, even if some IT personnel is satisfied in their current position, they may be tempted to work for your competitors.
You could go home today with your IT department intact and the next morning, it is a disaster. What do you do to stop the endless paranoia? Outsource
8. Work-life balance
If you are reading this, you may be spending a lot of time working and little time with your family. Family is as important as work. You work for that family, right? You want to spend some time with them and the remaining time at work.
If you are a C-suite executive, you relate to this experience. Create a work-life balance may be the secret to a long life and other health issues. Stress is a common reason for poor work-life balance. You don’t want the complexities of IT operations to be the main reason you can’t spend time with family.
9. Reallocate funds
Managing budgets is challenging. When IT is not your business’s core strengths, you are always in a dilemma of what to prioritize. Although IT is not your focus, it is important for your present and future operations.
Budget management in IT becomes complex when working with in-house teams. Let’s assume you have a team of 6 IT personnel.
Each personnel comes with their own needs, benefits, and salary demands. By outsourcing, you eliminate some of these needs and reallocate that money to other better uses. You may also save it for contingencies.
10. Competitive advantage
When CEOs and managers think of improving their competitive positions, their minds do not go outside the internal environment.
Although this is the traditional approach to building a competitive advantage, emerging businesses are changing these approaches through outsourcing.
When you outsource, you beat your competitors by engaging a partner with better resources and a higher capacity to boost innovation.
To derive a competitive advantage from outsourcing, the CEO or manager must choose the right partner.
11. Increase your reach/ market
What happens when you want to enter a new market, but you don’t have the technology to do so? For example, a company in the US might consider contracting its IT needs to serve customers in China or Australia remotely.
12. Better skills
Companies that outsource their IT needs have a chance to work with highly skilled partners. When a company’s primary focus is outside IT, it is unlikely that they attract the right talent.
Besides, years of experience from the outsourced partner offers the outsourcer an opportunity to work with the right people.
13. Better technology
Starts, governments, and large companies may lack the right technology to deliver value through in-house teams successfully. But by outsourcing their IT business needs, they gain access to better technology.
14. IT outsourcing to build lasting relationships
IT outsourcing is not business as usual. It is about building a lasting business relationship. Before contracting an IT company, many CEOs and managers want to know their potential partners.
Remember, when a company decides to outsource, they trust the contractor. As such, outsourcing is a long term and partner invested process.
15. Increase customer satisfaction
As IT becomes more critical for business in the 21st century, the customers are demand more in customer service.
Technology is increasingly fulling customer service. When IT is not the main business within an organization, there is a risk of poor customer satisfaction.
Employees may delay in responding to complaints and the company may experience technical issues.
16. Increase business flexibility
Ever thought about the possibility of making instant changes without worrying about anything? As a critical business process, IT prevents many companies from making timely or any adjustments.
With an outsourced IT department, you can quickly stop or reduce IT operations without incurring heavy losses.
17. Manage growth
Some businesses grow too fast, and IT may not be able to keep up with the growth. You want to make the necessary decisions about growth without worrying about complex IT issues.
18. Align with your vision with IT outsourcing
Most businesses, from startups to non-governmental organizations, have clear missions, objectives, and visions. By partnering with IT outsourcing companies, you help ensure that the external environment aligns with your business’s vision.
Does the external environment scare you? You can easily understand the threats and opportunities in the external environment by working with an IT contractor.
19. Fast go-to-market
Speed is critical in product life cycles, and businesses are struggling to keep up with changing IT demands. When small or even large companies cannot keep up with change, they engage external IT consultants.
The outsourced companies may have the right experience or have money to make the investments needed to improve go-to-market processes.
20. Legal issues
Outsourcing is an essential way of dealing with tax issues, primarily through an off-shore outsourcing arrangement.
Different jurisdictions deal with tax differently. For example, a company in the US can only pay taxes for its income but cannot pay taxes for the company they have outsourced.
Common IT outsourcing strategies
Above, we have talked about the advantages of IT outsourcing, but how do you go about outsourcing? The IT outsourcing business model is challenging and requires considerations. Some of the standard IT outsourcing strategies include:
On-Shore Outsourcing: This model involves working with companies within the same country.
Off-shore IT outsourcing: Is the model where companies outsource their IT needs to companies outside the country. Many companies are moving to offshore outsourcing because of the high-cost savings and access for highly skilled individuals. For instance, you can outsource IT and software development in Kenya and pay less.
Near-shore outsourcing: Near shore outsourcing involves working with neighboring countries or states with the same structure and language skills. The big difference between nearshore and on-shore is the proximity and the ability to have frequent site visits.
Licensing Agreement: Licensing is when a company authorizes another to deal with specific IT-related tasks.
For example, a software manufacturer may license an outsourcer to distribute its software. Licensing agreements are often used in software as a service (Saas) outsourcing.
Given the increasing benefits of outsourcing, don’t be left behind. Looking to outsource your business IT operations? You know the benefits of IT outsourcing, and you can work with Huki Group. Never outsourced to Kenya? Try and you will never regret it.