Investing in enterprise IT in the vast majority of cases involves extremely high resource requirements and usually requires significant financial outlay. Therefore, it does not matter how the IT manager decides how IT projects should be implemented.
Whether it’s a hardware investment, software development, manual or automated software testing, the IT manager needs to choose the strategy that works best for a given project from two paths, two options.
During the implementation of an IT investment, the necessary IT systems (data centers, hardware support, system software design, operation, telecommunication services) can be developed and tested by the organization itself; the other alternative is to outsource individual tasks or even the operation of the entire IT complex to an external service provider. Outsourcing is already quite popular among companies, and with the strengthening of the digital transformation, it will become an even more sought-after solution in the near future. Therefore, it is definitely worth considering its application - weighing its pros and cons.
Our goal with this article is to help company/department heads facing a decision-making situation, whether to outsource their impending IT investment or whether to resolve it within the organization. Based on this, it is hoped that IT managers in companies at different stages of maturity will be able to more easily estimate the expected risk and eventually make a decision with more information to execute IT projects with typically significant budgets.
In the following, without wishing to be exhaustive, we present and briefly argue for and against IT outsourcing. We rely primarily on our own experience. After consulting with a number of potential and actual clients over the past ten years, we recommend that you consider the following points as a company vacillates between engaging an external team of experts and implementing an IT development/investment in-house.
What are the BENEFITS of outsourcing IT services?
Not all companies have an in-house team of IT professionals or professionals who would have the knowledge to implement a given IT investment (eg software development, automated testing). At the same time, acquiring the right IT expertise and building an IT team is time consuming and significant. However, by involving external partners, a company that is poor in IT knowledge capital can also indirectly gain access to innovative IT professionals with up-to-date knowledge.
The previous point already mentioned the cost-saving nature of outsourcing, the costs of setting up or expanding the IT department, and the acquisition of expertise that are not borne by the client. In addition, outsourcing can be a cost-effective solution because a technical investment (e.g., additional hardware capacity required for testing) or license fees (e.g., special software used for automated testing) typically required for an IT investment must be provided by the outsourced IT service provider.
Because the contractor specializes in performing the IT functions, the outsourcing company is relieved of performing tasks in which they are less proficient, so employees can continue to engage in value-creating processes. So in a proverb, IT outsourcing leaves everyone behind - which can lead to greater benefits in long term.
What are the DISADVANTAGES of IT outsourcing?
If the supplier does not fully understand the goals and needs of the customer, the quality of the service can deteriorate dramatically and part or even all of the IT investment could be endangered.
If there is no proper communication between the client and the supplier, internal repair options that would increase the efficiency of the IT system may not be identified.
The main danger of IT outsourcing is irreversibility: as the replacement of professionals is slow and expensive after the downsizing of internal expertise, and the change of service provider is also high risk, it is difficult for companies that outsource their IT activities to regain them later.
Because change of the providers is relatively difficult and cumbersome, the existing supplier may gain a dominant position, increasing the risk associated with IT outsourcing.
Considering the pros and cons of balancing IT functions held and outsourced under its own authority, appropriate to the company’s level of maturity, can be a competitive advantage for the company.
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