IT Outsourcing: Pros & Cons, Risks and Everything You Should Know
IT infrastructure and a highly skilled team of professionals are necessary to create next-gen products. Many companies worldwide lack both things. Thanks to IT outsourcing, companies are now delivering some of the best solutions by accessing the skills of talented professionals globally.
IT outsourcing has become one of the growing trends among businesses globally to achieve their goals quickly and effectively. Moreover, the demand for IT outsourcing has increased due to the pandemic. Hence, we say that IT outsourcing will reach new heights in the near future.
If you are an entrepreneur and have doubts about whether to consider IT outsourcing or not, you have reached the right place.
Here, we will touch upon the pros and cons of IT outsourcing. It will help you whether to consider IT outsourcing or not. Before that, let us have a brief about IT outsourcing.
What is IT Outsourcing?
IT Outsourcing is the process of using some or full IT functions outside of an organization to get specific business outcomes. An organization utilizes IT outsourcing for different functions such as software development, managing infrastructure, directing strategy, maintenance, and support.
An IT Outsourcing service provider that takes complete responsibility for IT maintenance and support is referred to as a fully managed service. However, if they only provide extra support for an internal team, it is called co-sourced support, and big enterprises generally prefer it.
Whether you are an entrepreneur or running a small/medium/big scale enterprise, you can take help from a single provider for IT requirements or multiple service providers to obtain various services.
Now, we will look at some of the statistics that indicate the growing IT outsourcing market.
Latest Statistics on IT Outsourcing
According to GlobeNewswire, the global IT outsourcing market size is expected to reach $425.19 billion in 2026.
As per a survey by Deloitte, the primary reason the companies outsource (70%) is cost reduction. Flexibility is the other reason why companies outsource.
The global spending on IT services is expected to reach $1.2 trillion in 2022, reports Statista.
When to Consider IT Outsourcing?
The majority of businesses still struggle when it comes to outsourcing. Here are some of the signs which indicate when to consider IT outsourcing.
- You are an emerging startup with limited resources & budget. Besides this, your startup does not have a suitable plan for data recovery or loss.
- You want to launch a new service or product quickly but do not have talented professionals.
- The project you are working on requires expertise in new technology like Artificial Intelligence.
- The hiring process in your company is complex and takes the majority of your time & money.
- IT is not your core domain. You should definitely look out for an IT outsourcing company that can do the work.
You can resolve all of these challenges by hiring an IT outsourcing vendor. Here, we will look at some of the advantages and disadvantages of IT outsourcing. So, let us get started:
Benefits of IT Outsourcing
There are numerous benefits of IT outsourcing for every kind of business. Let us look at some of the crucial advantages of IT Outsourcing.
1. Pool of Highly-Experienced People
There are times when your core team might not be familiar with a particular skill or technology. With IT outsourcing, you have the opportunity to hire dedicated developers for small to big projects.
The hiring process for an expert through IT outsourcing gets completed within a few days instead of months. Consider hiring an expert for a specific task and later hire another whenever needed.
For instance, Facebook(now Meta), a leading social technology company, outsources for the majority of operations. The company outsources customer representatives, content moderators, and IT professionals.
2. Reduce Business Costs
There is a lot of difference in the IT outsourcing cost in developed and developing countries. One of the essential advantages of outsourcing to developing countries is that you can save 30% of the cost of a project. But, when you choose to build an in-house team, you have to look after different expenses that include salaries, government taxes, and much more.
IT outsourcing is very beneficial not only for enterprises but also for small businesses, as they will be able to save their development costs. Moreover, leading companies like Alibaba & Samsung outsource their IT services to reduce costs.
3. Focus on Your Core Operations
Every decision in business is made by doing a lot of research. With the help of IT outsourcing, businesses can focus only on the core processes and delegate all the work that is not possible for them.
Due to this, businesses can further enhance internal processes and utilize resources in those tasks that directly help them improve the company’s performance.
4. Business Scalability
Many progressing companies worldwide have issues in offering new goods and services. These companies need to hire new employees to provide these goods and services. Also, they require a proper IT management team, which is quite time-consuming and costly.
With the help of IT outsourcing, you can have the complete freedom to hire a specialized team or go with staff augmentation. For those who don’t know, staff augmentation is a process of hiring required experts from a company for a specific time.
In IT outsourcing, you have complete scalability when hiring professionals. You can expand or downside the experts as per the requirements. It helps you provide various solutions to the organizations at a reduced cost.
5. Access to Different Technologies
Technology in the software development field is changing at a never-ending rate. In the case of an in-house development team, you may need to provide a lot of training & support about the latest technologies and tools.
On the other hand, an outsourced IT company might have experienced a team of developers familiar with modern technologies and tools. Thus, IT outsourcing allows you to access new technologies and implement them instantly in your future projects.
6. Divide your risk
Another essential IT Outsourcing benefit is risk assessment and analysis. By outsourcing different types of tasks to experts in various IT outsourcing firms, you will be able to gain an advantage over their ability to plan & thus divide potential risks.
7. Disaster Recovery
In case of flood, fire, or cyber-attack, crucial business data might get lost. The majority of businesses or individuals don’t possess enough resources to recover from these disasters. This will in turn force the company to stop its operations ultimately.
One of the essential benefits of outsourcing is that you will be able to resume your operations quickly. Disasters can occur at any time. Hence, if you seek help from a professional IT outsourcing vendor, you will get support from experts equipped with the latest disaster recovery and backup tools & technologies.
IT Outsourcing Cons, Risks & How to Avoid Them
Although there are a lot of IT outsourcing benefits, various companies are still skeptical. So here, we will provide not only potential risks involved in IT outsourcing but also how you can overcome them.
1. Choose a Reliable Outsourcing Vendor
It might be somewhat challenging for you to find a reliable outsourcing vendor. There are several outsourcing companies that claim to provide desired solutions to businesses within a day. How should you remain aware of these companies and not get trapped?
Solution: The straightforward answer to finding a reliable vendor is doing thorough research. You might have a question, how to do it?
Firstly, visit the website of the outsourcing vendor and observe things closely. Check out the website’s UI/UX design, navigation from start to end, and position in the search engine result pages.
Secondly, check the portfolio to understand their domain expertise. Also, consider how many employees and years of experience a company has in IT outsourcing. Generally, a company with a year of experience with a talented team of professionals can do the desired IT work for you flawlessly.
Other than this, you should also check the profile of the IT outsourcing vendor on B2B platforms like GoodFirms and Clutch. These consist of the reviews of the outsourcing vendor on the platform. It helps you get familiar with the IT outsourcing vendor.
Lastly, you can also check the vendor’s profile on social networking platforms. Upon considering all things carefully, schedule a meeting with the company to get to know each other well.
For instance, Guru TechnoLabs is an outsourcing company always ready to discuss new ideas with clients, employees, and tech partners to deliver exceptional products.
2. Less control over operations
Whenever you outsource your work to a third party, you explain things you want to achieve from the project. However, you may find that you have less control over the operations. The main reason behind this is that the vendor you hire is working from a different part of the world.
If you have collaborated with the wrong vendor, you might face several situations as follows:
- The vendor requests additional payment for any software or hardware purchase.
- Outsourcing vendor has expertise in specific technology and suggests you go with the same instead of using more reliable technology.
Solution: You should check out the client testimonials and work they have done earlier. Besides this, you should ask the vendor to provide you with constant updates on the project.
3. Data Security Issues
Anytime you work with an IT outsourcing vendor, you give access to your most private or commercial data. There is a possibility that your information might suffer if the company doesn’t have proper security protocols in place.
Solution: There are some things you can do to avoid security risks. Firstly, sign an NDA with the IT outsourcing vendor you hire. At Guru TechnoLabs, we sign NDA with every client.
Secondly, you should discuss with the vendor and ask them whether they are building solutions as per the latest industry standards. Lastly, ensure that the vendor uses different tools and security protocols to protect your project data.
4. Uncertainty about Product’s Quality
Due to so much distance between you and the outsource team, you have less control over the quality. The quality of the product depends on the IT outsourcing vendor you hire and what you outsource.
Solution: To avoid the above issues, you should monitor the entire development process the vendor follows and constantly verify their work.
You will receive the best quality product according to your business needs when you get involved with the outsourcing development company.
Here we conclude the pros and cons of IT outsourcing for a business. From the analysis, we can say that outsourcing software project requirements to a company are cost-effective and beneficial for small to big businesses in the long run.
If you still have any queries about IT Outsourcing, you can contact us.
Guru TechnoLabs is a web and mobile app development company. We provide staff augmentation services according to the client’s requirements. We connect businesses with top-notch developers who have experience in web and mobile app development services. We have a fully-equipped infrastructure and utilize the next-gen tools & technologies to deliver exceptional solutions according to industry standards.