Why Do Companies Outsource IT Services: 8 Advantages

To outsource, or not to outsource, that is the question.

(With apologies to William Shakespeare.)

Basically, those professionals maintain what is arguably the most important part of the company - the computer network. They also deal with pesky issues like a broken mouse or a laptop that mysteriously won’t turn on. These experts also frequently tell people (sometimes in emails with all caps).

Large companies may have a dedicated IT team in some divisions, for example, Finance and Accounting.

In that division, software and procedures must be current as the division responds to changes in tax legislation and evolving standards in financial reporting and procedures. It is much more than just a computer system. 

Software development outsourcing can involve an employee self-service (ESS) mobile application or all the IT services in a company, that is the genius of outsourcing.

Why companies outsource IT- projects:
8 advantages of outsourcing

What Is Outsourcing?

Through IT outsourcing, business contracts with an independent company for all or certain technology services, including software development, rather than having them on site. Sometimes the provider is used to augment the in-house IT team.

A minimum number of IT staff may be retained in-house to provide help desk functions, liaison and/or monitoring.

Since the contracted IT outsourcing company or personnel could be anywhere geographically, the provider may sometimes be categorized as a “virtual” company. 

Companies Outsource because….

Most surveys place reduced IT costs as the main reason. Essentially, this is all about reducing the expenses associated with IT personnel and information technology. 

IT personnel includes tech support specialists, system analysts, data administrators, and network administrators; there are HR administrative costs as well. These positions often have high salaries.

Technology includes software (purchased/leased, upgrades, and perhaps customization). Hardware includes purchased and/or leased computers, monitors, networking essentials, etc. 

Taken together, companies understand that these costs represent a significant percentage of operating costs. Obvious territory for outsourcing.

Types of IT Outsourcing

If a company outsources all IT to an independent company, then that could come to represent a significant part of that company: purchasing management, web development, customer relations, personnel medical benefits, accounting, and much more.

There would be such a significant relationship that it could be considered as a long-term partnership.

The independent company could have almost all employees working from home (an advantage during the pandemic). There would perhaps be a minimal physical presence nearby to facilitate monitoring of these “virtual” employees, who could be dispersed across a wide geographical area.

Or, perhaps, the independent company is located overseas. There could be significant benefits from the much-reduced labor costs.

Advantages of IT Outsourcing

Core Business

Concentrating on the core business leads to more efficient utilization of all hose resources that generate income.

Readily available outside expertise, experience, and assets

The IT partner will have access to specialized talent and equipment, either on a permanent or on-demand basis. Does a company need more coders? More Python developers? More data specialists? The provider will have an established inventory to tailor a team and hardware on an ‘on-demand’ basis. For the outsource specialists it is their only reason for existence, so it is within their self-interest to maintain high service levels. 

Increased productivity

The outsourcing company can invest money and time in other parts of the business, such as strategic planning, product development, or customer acquisition.

Reduced Costs

From increased productivity to readily available lower labor cost, there can be reduced expenses on a predictable basis.

Cost Containment

Companies know that prices/ fees/ charges increase from year to year, often for reasons beyond their control. The emphasis transforms from cost reduction to slowing the rate of increase. 

The IT provider adjusts staffing levels and hardware requirements on a continuing basis. A company no longer asks, “How many full- time employees do we have?” Rather, they ask, “Do we have all the employees that we need?”

Staffing Flexibility

Some companies must respond to seasonal fluctuations in their markets.

For example, the agricultural industry regularly requires a surge in staffing on a seasonal basis. For holiday staffing, think Christmas. (A day many permanent employees don’t want to work.)

Multi-billion-dollar industries demand high IT service levels every single day of the year. The IT service supplier will have an all-in commitment ready on a seasonal basis.

Security

Data is valuable and critical. The IT provider will be committed to that belief. Continuous monitoring services are integral to IT security. Every part of the project must be secured 24/7. 

Staff will be available to secure any breach as soon as possible, and then issue all the required information to the client company so that it responds to inquiries from any person whose individual data has been compromised.

Emergencies

Things happen like floods, power outages, power surges, fire, earthquakes, and political instability. Things burnout, rust out, and tragically blow up. Just watch the news regularly.

The IT provider will know all of this and have the appropriate scenario response in place around the clock. ‘If….then….’ is important, not only in coding but also in preparing for what does happen in life and business.     IT outsourcing companies are situated all over the world, ready to help businesses on various projects, and on different budgets.