For the past 15 years, outsourcing has trended and reshaped how human resources operates. Correspondingly, next-generation technologies, informed consumers and an explosion of data have all helped redefine the business landscape.
The changing dynamics highlight the need to deliver more value to customers while empowering the ability of SMBs to deliver service solutions. Being the beneficiary of a sourcing relationship can lead to rich industry insight that will enable SMBs to chart a path to modernization and innovation. A collaborative outsourcing relationship will not only drive bottom line savings and top line growth, it will help turn weaknesses into strengths by bolstering internal function and operational deficiencies with diverse and divergent skillsets and strains of thought. Need help with your IT Outsourcing? Contact Toronto-based Fidelity IT Solutions at 647.693.9124.
What is Outsourcing?
Outsourcing is the process of problem-solving by branching out and allocating certain job responsibilities to an external agency instead of relying on in-house departments or personnel.
In such an evolving marketplace, outsourcing becomes attractive for those who want to stay competitive. The pros and cons of outsourcing your IT services, and the move to look beyond company walls for answers is an important talking point for shareholders in boardrooms. They like the flexibility and cost-efficiencies that outsourced IT offers but have major concerns about privacy and control.
Many companies have completely revolutionized the way they operate by outsourcing various departments, either partially or entirely. What are the reasons that companies decide to outsource IT, and what are the risks that are involved? We will breakdown and simplify the arguments for the pros and cons of outsourcing your IT services to give you the real reasons why switching-over may make sense for your small-to-medium sized business.
The Pros of Outsourcing:
Lower Costs: The most powerful reason, arguably, for outsourcing your IT services is the cost-savings incentive. When you outsource your IT, you are removing all of the costs that are associated with hiring an employee, which includes but is not limited to: health insurance, micromanaging costs, retirement plans, training labour and so on.
In the end, outsourcing lowers labour costs and helps SMBs increase economies of scale. When it properly executed, outsourcing has a significant impact on an SMBs revenue recognition and can deliver significant savings.
Focus on Core Competencies: Today’s business world is marked by specialization. To operate at consistently high-levels in all critical areas of business may be a sign that you’re biting more than you can chew. By freeing-up internal resources, you can focus on your core competencies and you allow an outsourced vendor to help you by focusing on theirs.
By not concentrating on nonessential areas of business, you can dedicate resources to strengthening your primary business focus and bring swift resolutions to emerging problems. By delegating business functions to outsourced companies, companies are free to manage core competencies and kick-start the re-engineering process.
Greater Access to Specialized Talent: When competing against big businesses, small businesses often struggle in attracting and recruiting premier talent. Usually, specialists tend to gravitate towards industry-leading companies in order to maximize their talent potential. Not being able to access expert labour in certain areas of business process weakens their ability to bring solutions.
When you outsource to external vendors –who are industry-leaders and are securing top tier-talents – you are tapping-into their specific R&D initiatives, technical expertise, and their ability to deliver higher quality output. Third-party vendors who are specialists in their field have multiple resources available to them.
Risk-Sharing: An important business consideration when deciding to follow through with a project or focused-improvement initiative is to analyze the risks associated with it. When you outsource certain business functions, you negotiate those risks to an external vendor, who can shoulder the burden and responsibilities that come with it. Mitigating the risk works better in this paradigm because the outsourced party is a specialist in their field.
The Cons of Outsourcing:
Privacy Concerns: Whenever you get a third-party involved in the day-to-day of your business, you risk exposing confidential information. By giving high clearance and authorized access to external vendors – where they will have access to some or maybe all of your company information – presents a dangerous conundrum and lay at the forefront of the concerns of small business owners. Serious background and integrity checks into the external vendor that you will partner with, will help mitigate the risk of your precious data being leaked. Your points of sabotage expand when you look outside your company walls.
Control Issues: By infusing an external company – who has a different workflow, business processes, management styles and operational workflow – means that you may potentially feel that you are losing control in your own company. An outsourced vendor may insist that a particularized and specific way to do things is the right way, and this may result in a clash of philosophies. There also may be concerns with turnaround time and what you may perceive as sluggish response times may feel that you are at the mercy of a third-party entity. This may result in alienation and control concerns.
Performance: In the event that you do not choose the right partner for outsourcing, there may be some performance problems. An outsourced vendor may stretch delivery time frames, provide second-rate quality output and perform poorly vis-à-vis your expectations. Critics of outsourcing IT say that the inability to synchronize deliverables can be averted if the solutions, despite being of an inferior quality, are organically produced in-house.
The risks associated with outsourcing can be mitigated if your small to mid-size enterprise must practice due diligence. Before delving into the pros and cons of outsourcing, consider these points:
- Define and communicate your goals and expectations at the start of a business relationship or project. Map-out the vision and plan so that no stone is unturned.
- Ensure that the external vendor you are choosing has the right credentials and can scale to your needs.
- Ensure that there is a channel of dialogue so that you can continuously communicate your expectations and concerns.