IT outsourcing started in the 1980s and continues to dominate the industry. However, today we are beginning to see things change as more and more companies want to develop their own products and view IT as a strategic function worthy of internal resources and commitment.
The decision whether IT services should be internal with its own product or performed by external providers is crucial and there is no correct answer.
For larger IT companies, it often makes sense to develop their own product. For companies with fewer resources, outsourcing appears to be the more suitable option. But what about mid-sized companies? What is the best option for them?
IT Function in Mid-Sized Companies
In most mid-sized companies, IT plays an important role. The main IT functions include:
- Data center operations
- Application development
- IT staff support
- End-user support
In these companies, data center operations are often seen as a commodity. However, with software as a service (SAAS) and cloud models continuing to dominate, data centers are not as important as they once were. As for user support, automation is quickly replacing human support and changing the way this function is outsourced.
Set of IT Professional Skills
Many companies are starting to view IT as a strategic function. An IT specialist must possess a unique set of skills:
- Quality assurance, which is crucial for software and system development.
- Documentation to mark processes and products for fellow IT professionals.
- Databases, as they are at the core of most software programs.
- Networks, as everything is connected, and understanding them is crucial for problem-solving.
- HTML for web coding as a last resort.
- Microsoft Office, as it is essential and widely used in the workplace.
Additional skills often desired by IT specialists include:
- Programming/application development
- Project management
- Technical support
- Security management
- Website development
- Business intelligence/analytics
Pros and Cons of IT Outsourcing
Now that we have looked at IT functions in most organizations and the desired skill set, let’s dive into some advantages and disadvantages of IT outsourcing:
Advantages:
- Operational costs: Outsourcing any function in the organization reduces the costs associated with hiring employees to perform that function. The company may have fewer expenses and gain advantages such as group purchases for necessary software through their IT provider.
- Freeing up internal resources: If IT is not central to a specific product or service, it may make sense to outsource it to an external provider and free up resources for key internal functions. Then, more resources will remain for other elements directly related to the company’s products or services.
- Hiring experts: Outsourcing makes sense when the company needs a team of IT experts to handle specific needs. IT outsourcing firms often work hard to hire and retain the best and brightest IT specialists, passing that expertise on to the company looking for external providers.
- Risk reduction: Business management technology can be expensive. IT outsourcing providers work with many clients and are up-to-date with best practices and software, which can reduce risks for the company.
Disadvantages:
- Finding the right vendor: Finding the right IT outsourcing provider is easier said than done. Since IT affects everything in most organizations, a provider that is suitable for all needs and corporate culture must be found.
- Loss of control: Even when IT is outsourced to external providers, the company cannot (and should never) distance itself from the IT function. It will need an employee who is familiar with IT to supervise the provider and make sure they are doing what they are hired to do.
- Delay: A good IT provider will have a plan for rapid response in emergency situations. However, the needs of a larger client may take precedence, pushing the “emergency” in question to the back burner.
- Network familiarity: Internal IT will be better informed about the company’s network. If outsourcing is used, the external specialist will need time to develop and learn it.
- Security and accountability: Bringing in an external company may make issues around information and security a larger concern. This is potentially a bigger issue with foreign companies where laws regarding privacy and security may differ. It is important to ask many questions about how the vendor will protect sensitive data, including employee and product-related information.