IT outsourcing can help small businesses reduce IT costs and access new technologies. It begins understanding which IT operations could benefit from being managed by a third party service provider, which could be an offshore outsourcer or someone based on-shore.
Why outsource your IT?
There are many reasons why a business might choose to outsource part or all of its IT operations. These include cost savings, particularly from owning and managing an IT estate and employing the staff to do so.
But cost is not the only reason. IT may not be the core activity of a small business, so outsourcing can relieve the pressure.
Also, outsourcing can provide access to the latest industry processes and techniques, and bring operational efficiencies. It can also improve the firm’s speed to market for new products and services.
Service quality can be improved through outsourcing specific operations such as customer care and billing.
What are the drawbacks of outsourcing your IT?
There are some potential downsides to outsourcing any operations. These include losing control over a critical business service or activity.
There could also be a lack of flexibility in the services you receive. Lastly, you may have to invest time managing your relationship with the service provider.
Which IT operations are usually outsourced?
Many IT activities can now be run as outsourced services (NOA), including the development and implementation of applications and IT systems themselves.
One of the fastest growing sectors is business process outsourcing, which is where back or front office functions are run by a third party.
However, many non-core IT activities, which businesses have traditionally provided internally, are now available as outsourced services.
How do I outsource my IT?
Once you have decided which department or operations you would like to be run by a third party, and made the business case for it, the next step is to find an outsourcing partner which you are comfortable working with.
From a financial point of view, it is advisable to understand your existing IT estate and its cost base in enough detail to enable you to evaluate whether the pricing model proposed by the service provider provides value for money.
Should I look for an offshore provider or stay home-based?
Offshore service providers may be able to offer good rates but there are many considerations involved in choosing to outsource to a service firm located abroad.
For example, will the off-shore services be subject to the same legal and regulatory regime as any on-shore services, for example in relation to data protection?
Who will audit the off-shore services, and correct any problems? Also, will the off-shore provider have a sufficient degree of familiarity with the language and customs of your customers?
Ensuring that you get the most out of your outsourcing relationship means you will need to have regular meetings with your service provider, and measure their performance and targets. With an off-shore provider, this could be an issue.
Is Software as a Service the same as IT outsourcing?
Web-based hosted software, also known as Software as a Service (SaaS), is not strictly the same as IT outsourcing, but it does share some of the same principles.
For example, a service provider will manage and maintain a business application for you, offering you access to it over a network and backing up any information that is generated from your usage.
You will be billed regularly for the services you use, and there will be an agreement between you and the service provider that governs your usage and their responsibilities to you.
This was first published in July 2009