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5 Important Advantages and Disadvantages of IT Outsourcing

By March 8, 2022March 9th, 2022No Comments10 min read
Advantages and Disadvantages of IT Outsourcing

The topic of IT outsourcing has become hot after the coronavirus pandemic. Most SMBs are thinking to shift to the IT outsourcing model. There are various benefits of working with MSPs. SMBs are under pressure to optimize their business operations. The business environment has become challenging due to supply chain issues. Outsourcing can help your business in surviving. However, you need to properly prepare for these outsourcing services.

Outsourcing simply means that you are using the services of skilled contractors. You don’t need to keep it as a business function. It is very common in IT and payroll. Outsourcing is a very old business strategy. It has been famous since the 90s. However, IT outsourcing has completely changed the direction of SMBs. In this article, we are going to talk about the advantages and disadvantages of IT outsourcing.

What is IT outsourcing?

IT outsourcing simply means that you will hire a party outside to handle your IT services. These will contain services like software design, development, QA, network monitoring, support, and consulting. IT outsourcing has become a very common practice. Most SMBs and large corporations are doing IT outsourcing. More than 67% of companies state that they are going to continue IT outsourcing in the future.

According to a report from Statista, the revenue generated by the IT outsourcing market will be more than 135B$ by 2025. This simply means that the IT outsourcing market is going to grow in the future. The global pandemic is acting as a catalyst. Most companies are now moving towards IT outsourcing to save their costs.

Different IT Outsourcing Models

There are various different IT outsourcing models. You should know which model is perfect for you. This will help you in enjoying the benefits of IT outsourcing like cost-savings and more productivity. You can divide IT outsourcing models according to the staff categories and cost. If you want to consider the financial side of IT outsourcing, then you should consider these models:

  1. Fixed Cost Model

This is a straightforward cost model. In this, a customer will agree to pay a fixed amount of money. The contractor will also commit to some SLA. Clients can’t change their requirements in this model. Also, the contractor can’t change the price or miss the deadline.

This is perfect for companies who want to outsource IT development. You will get exactly what you want. There is no reason to worry about hidden payments. You don’t need to worry about missing your deadlines. However, you should ensure that you are giving a realistic plan and specification to your clients. If you are not sure about the features that you want to implement, then this is not a good model for you.

  1. Time model

This is the most common IT outsourcing model in the market. The main point of this strategy is that the customers will pay for the hours the development team will spend. Customers can assign different tasks if they are using this model. They need to pay hourly for the work. Customers can also change the scope of work if they want. They can ask developers to add new features. The contractor can also reduce and increase the number of IT experts.

If you want flexibility, then this is the best model for you. A flexible budget and changes in workflow won’t hurt your development project. You can easily pause or stop the development whenever you want. There is no fixed cost that you need to pay first.

  1. Dedicated resource model

In this model, you don’t need to buy a fixed amount of time. You can hire a group of IT professionals who will be working on your project. This will ensure that you will have access to a full team. The IT specialists will work on your tasks.

This is perfect for businesses that are working on complex projects. You will need dedication from IT pros in such projects. If you want to expand your business or project, then this is a good model for you. It will help you in creating complex projects.

Advantages of IT Outsourcing 

  1. Cost reduction

This is the main benefit of IT outsourcing. It will help you in saving a lot of costs. The savings will come in different forms. You don’t need to worry about investing in your software or infrastructure. If you are opting for IT outsourcing, then you will only pay for the infrastructure that you are using. This will ensure that you will have access to highly flexible IT infrastructure. You can easily scale up or down your business according to your needs.

IT Outsourcing will help you in reducing your labour costs also. You don’t need to worry about hiring new employees. Also, you don’t need to worry about training your employees. This will ensure that you can work with the best IT pros without hiring them. You need to pay a fixed fee to your MSP. This will give you access to both the best tools and IT pros. These IT pros will help you in optimizing your workflow. The costs of hiring and training can be reduced by IT outsourcing.

  1. Access to the better talent pool

Outsourcing will give you access to skilled labour. You can get access to a better talent pool whenever you want. The best thing about IT outsourcing is that you don’t need to worry about hiring these talented professionals. All you need to do is work with a good MSP.

Certain skills are needed for a short duration only. They might be only required for the development project. Also, there are skills that you need permanently. For example, you need someone to maintain and monitor your IT infrastructure. However, it is too expensive to hire a full-time employee or expert. Outsourcing will give you access to a larger talent pool. These professionals will have the specialized skills that you need. The best thing about outsourcing is that you can scale the talent pool according to your needs. You will only pay for the resources that you are using.

  1. Process optimization

Processes will become more efficient and quick with skilled professionals. This will translate into more productivity, savings, and less hassle for you. You need to focus on your core business only. This will ensure that you don’t need to worry about operational daily tasks. Your efforts should be targeted at activities that will help you in producing income. This will translate into profitability as a result of effective and efficient work.

Most companies are outsourcing their IT. It is a reliable and mature solution. Companies are following standard procedures for hiring the best talent. You will get access to highly skilled labour. This was one of the first business strategies that were used by SMBs.

  1. Access to the best technology

The latest technology can help you in doing effective and efficient work. This will help you in competing with your competitors. IT outsourced solutions will help you in saving the investment in building top-notch IT infrastructure. You don’t need to worry about buying the best software or hardware available in the market. Your business can get access to the best tools and technologies by working with a good MSP. They will ensure that you are getting access to these tools.

  1. Scalability

This is the result of all the points mentioned in this article. Scalability is the main component of cost-cutting and process optimization. IT outsourcing will ensure that you will only pay for the services that you are using. You will only pay for these services when you are using them.

IT outsourcing sounds like the best solution to every business issue of a small and medium-sized business. However, there are some disadvantages of IT outsourcing. You should either learn to shield off these disadvantages or live with them.

Disadvantages of IT outsourcing

  1. Less Control

This is probably the main disadvantage of IT outsourcing. You will lose some control over your business operation. SMBs generally have a tightly managed and centralized system. This is due to their small size. IT outsourcing simply means that you are leaving some control. You trust an external provider with your business’s important operational functions. This can be IT, accounting, or payroll services. This can be a difficult step for some small businesses. However, you need to change your perspective. You need to start working with new partners if you want your business to grow.

  1. Quality issues

Reduced control simply means that you can’t control the quality. The number of quality issues will also increase if you are losing control of your business operations. Thus, you should ensure that you are working with a good MSP. The only way to avoid this disadvantage is by working with a good MSP. You should also sign a contract with your MSP. This contract should cover all potential quality issues. Experienced MSPs like Bleuwire will provide an SLA to you. This SLA will ensure that you will get at least some level of service. It will protect you from quality issues.

  1. Security issues

You might need to provide access to your sensitive data to other vendors. This can lead to intellectual property breaches sometimes. Your partner can also mishandle sensitive customer data. Thus, IT outsourcing can sometimes be a potential threat to your data.

You can still avoid these risks. For example, you can ask for a security risk audit report or SOC 2 certification from your service provider. They should use properly defined processes for handling your important or sensitive data. Experienced MSPs like Bleuwire make data protection an important part of their SLA and services. They will ensure that your data is secure from breaches.

Sometimes using external IT systems can make your business vulnerable to attacks. However, a good security strategy can also help you in solving this problem. You should strictly enforce security policies for connections, applications, gateways, users, and devices. This will help you in mitigating the risks.

  1. Communication issues

IT outsourcing simply means that you will be working with an external service provider. There can be communication difficulties that you need to deal with. The difficulties can come from the geographical location also. There might be language barriers or time zones issue that you need to deal with. If you are working with a local vendor, then you can avoid these issues. However, you still need to align your communication needs. It is important to define the point of contact. This will ensure that you can quickly contact your IT partner whenever you want. Your IT communication plan should include the communication frequency, time, and channels.

  1. Difficult to find the right IT provider

All the above challenges boil down to this simple challenge. It is difficult to find the right IT provider for your business. You need to find someone who can handle all your business needs. They should provide the quality standards you need. Also, they should provide necessary security to your business.

You need to properly examine your external service provider before you start working with them. Try to shortlist and go through all the potential outsourcing providers. You can create a checklist for finding the correct IT partner. Make sure that you are discussing all the concerns mentioned in this article before you start working with your partner. This will ensure that both you and your outsourcing partner are on the same page.

Conclusion

IT outsourcing can be highly beneficial for SMBs. SMBs are using IT outsourcing for competing with big players. However, the key to successful IT outsourcing is careful planning. You should assess the costs and processes of all potential providers. Experienced MSPs like Bleuwire can give you instant access to the latest technologies and better skills. They can also help you in creating an IT security strategy for your business. This will ensure that you can protect your sensitive data. They will also help you in saving a lot of money. You don’t need to worry about investing in IT infrastructure and tools. If you need more information regarding IT services, then you can contact Bleuwire.

Contact us today to learn about Bleuwire™  services and solutions in how we can help your business.

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