Reasons, Risks, and Rewards Behind IT Outsourcing

IT outsourcing has been the trend in the last couple of years. A lot of businesses – big and small – have joined the IT outsourcing bandwagon. But what is it in IT outsourcing that attracted business owners?

Reasons Behind IT Outsourcing

Perhaps the most obvious reason companies choose to outsource their IT departments is to cut costs. However, there is much more to it than this reason alone. Here are the reasons cited by the Outsourcing Institute as to why businesses choose to outsource their IT departments:

1. Reduce and control operating costs. 
2. Make capital funds available to improve products and services. 
3. Use internal resources for other purposes. 
4. Improve company focus. 
5. Tap professional IT staff. 
6. Maximize restructuring benefits. 
7. Reduce Risk. 

Risks That Go With IT Outsourcing

Any business venture comes with risks. Outsourcing your IT department is not an exception. Yvonne Lederer Anotucci lists the risks associated with IT Outsourcing in her article “The Pros and Cons of IT Outsourcing.”

1. Some IT functions are not easily outsourced. It is not like other resources a company successfully outsourced in the past. IT outsourcing cannot be compared with outsourcing of security, logistics, legal services, advertising or the procurement of raw materials and components.
2. Control may be lost. Critics of IT outsourcing argue that no outside vendor can match the responsiveness and service levels offered by an in-house function, largely because the outsider is not subject to the same management direction and control as employees. In addition, concerns exist with outside vendors about confidentiality of data, strategic applications, and provisions for disaster recovery.
3. Employee morale may be affected. Outsourcing often results in layoffs or the transfer of existing employees to the IT vendor. Such displacement can set morale into a tailspin and cause even talented staff to fear for their employment security.
4. You may get "locked in." Because IT evolves so fast, predicting beyond three years is highly speculative. Hence, signing long-term IT outsourcing contracts is risky. 

Rewards You Can Get From IT Outsourcing

Risks come with rewards. Anotucci lists the rewards that your business may get if you outsource your IT department. Some of them are as follows:

Short-term Benefits

1. Lower operating costs. 
2. More capital funds. 
3. A cash infusion. 
4. Access to new resources. 
5. Better overall IT management.

Long-term Benefits

1. Improved business focus.  Access to world-class capabilities. By the very nature of their specialization, outsourcing providers bring extensive worldwide, world-class resources to meeting the needs of their customers.
2. Accelerated re-engineering benefits. 
3. Shared risks. 
4. Free resources for other purposes. 

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