What is IT Outsourcing? Top Pros and Cons

In this competitive business world, every company seeks cost-effective means to streamline workflow to remain in the race. It allows many businesses to outsource their key and non-essential company tasks, which provides an excellent opportunity to minimize daily operational costs while focusing on the most important component of the organization’s core aim. Many firms rely on IT outsourcing services to address a shortage of IT personnel as well as a lack of expertise and experience.

According to Deloitte, businesses were anticipated to spend over $700 billion per year on IT outsourcing services in 2022. And it was projected to increase by $731 billion in 2023. If we take a world overview then the outsourced IT services market is worth about $400 billion globally according to Capital Counselor study news. In 70% of surveys, the first reason companies follow IT outsourcing trends is due to cost reduction. However, there are many other benefits.

Whatever the reason, information technology outsourcing has shown to be an unavoidable yet wise decision for any firm seeking additional resources, productivity, and the highest quality results. Outsourcing IT projects is giving several benefits to a business in both the short and long terms, however, it is not without drawbacks and challenges. In this post, we will list the top IT sourcing pros and cons. Let’s first start with its definition:

 

What is IT outsourcing?

Outsourcing is all about hiring another company, business, or individual to carry out activities on behalf of your business. Shifting operations to a third party to reduce workload and save operational costs. The most common outsourced cuts across diverse fields are human resources, customer support, content writing, security services, legal services, IT services such as data entry, web and software development, virtual assistance graphic design, etc.

IT outsourcing trends are different from offshoring and Business Process Outsourcing(BPO). Find out different reasons for your outsourcing:

• Reduce operational and labour cost
• Improve productivity and operational efficiency
• Improve service delivery
• Take advantage of reduced tax rates abroad.  
• Focus on core business objectives 
• Free up internal resources and put them to better use.
• Tap into the global reservoir of experts 
• Maintain some level of operational flexibility
• Expand and gain access to a new market 
• Enjoy cost-saving and sometimes lower-wage requirements 
• Mitigate against business risk

 

IT Outsourcing Advantages:

Reduce Labor Cost:

One can save recruiting cost and training costs for more employees by outsourcing your business operations. Additionally, the employee benefits are also removed from you. Money saved can be reinvested in other elements of the firm to ensure its long-term viability and profitability.

Get Professional Access:

IT outsourcing will let you access experts in specific fields. Your in-house personnel may be capable of doing a variety of tasks. However, you cannot expect them to be perfect in everything especially if your employees are new. Therefore you need to hire experts in such situations. For instance, technical expertise is required to perform specific tasks efficiently, and you may not have that in your group. Outsourcing the job to properly skilled people will guarantee quality and on-time delivery along with enhancing productivity.

Get a Competitive Advantage:

When you give your service to a third party you are leveraging the skills and vast expertise of experts in specific fields. It will provide a competitive advantage to your business.

Faster Task Completion:

Outsourcing supports doing extra work within a short period. When specific roles are assigned to experts they know exactly how to get it done, so the output time is drastically reduced and helps in increasing productivity. The increasing productivity supports the business’s overall profit margin.

Free to focus on vital issues:

IT outsourcing trends give many companies the freedom and flexibility to look into their vital issues. Outsourcing jobs allows these business owners to focus on enhancing other essential business processes. Flexibility gives efficient decision-making and proper management to boost business performance. Indeed, it gives time to focus on skills to sharpen your business orientation.

Easy project management:

Information Technology Outsourcing helps to manage different projects. With an automated feature, you can manage the overall operation flow and key issues such as how the project will work, the due date of submission, how the payment will be made, etc. This way you don’t need to think much about managing the project. Everything will be managed in place and payment will be released on time. You just need to monitor the progress from time to time. It will give you enough time to manage other business matters.

 

IT Outsourcing Disadvantages:

Less Confidentiality:

The outsourcing trends increase the risk of exposing confidential data when you outsource tasks such as payroll, recruitment, and HR services to a third party. It becomes a serious issue, especially when you fall into the hands of an outsourcing company that is not credible. It can increase the danger for your business. The risk can be increased on intellectual property theft or some of your confidential personal data could be used for malicious purposes.

Loss of Control:

In your organization, you can make specific guidelines on how you want tasks to be done. But in IT outsourcing, though you share the guidelines but will lose monitoring control unlike when a full-time employee completes the same task. When your outsourcing partner lacks the competency or skills to execute a particular task then it will create problems for your organization. Therefore as a solution, you can outsource your work to someone whose skills have been tested as per your requirements.

Delay in Service Delivery:

There are higher chances of delayed delivery in outsourcing trends. Because most gig economy individuals and outsourcing organizations serve many clients simultaneously. Another reason for getting a delayed timeline is the different time zones. If you outsource a job to a person from a different timezone location then there are fewer chances of meeting deadlines. In the end, it will affect your business performance and productivity.

Quality Issues:

Freelancers work with multiple clients simultaneously, and as a result, it may affect the work quality to some extent. Although they are specialists in their industry, serving a large number of clients under tight deadlines can be daunting and may compromise the required quality. Discuss quality delivery upfront and ensure that the contract worker has enough time to finish the task.

Look for the hidden charges:

As IT outsourcing tasks are comparatively cheaper, but there are chances you get hit by hidden costs. Therefore before signing any contract, be clear about all terms and conditions. For instance, there are some contract agreements that you and the outsourcing partner need to sign before you begin. If you did not read the agreement paperwork, you might end up agreeing to pay additional charges.

 

Stay on top of your business with Kodehash

IT outsourcing is an excellent strategy to boost corporate productivity, performance, and efficiency. However, while trying to improve performance, you need to prioritize the technology development of your business. With Kodehash’s software development team, you can focus specifically on managing other aspects of your business without bothering about software solutions. Our team of different software technologies enables you to stay on top of your business.

 

Final Thoughts

IT Outsourcing can give you great competitive advantages. The only thing you need to keep in mind is to choose reasonably. You should keep a few things to reach satisfactory effects. The most important step here is to build a long-term partnership.

Nevertheless, when the day concludes, IT outsourcing emerges with a myriad of advantages, making it an exceedingly viable option for nearly any company. In certain scenarios, outsourcing stands out as the optimal choice. Yet, for smaller companies, establishing an in-house IT department becomes progressively challenging. This is particularly evident in a business environment that is growing more cutthroat with each fiscal year that unfolds.