IT outsourcing in 2021: pros and cons of IT outsourcing

What a year we've had! Businesses around the world urgently had to go online, set up remote work and think about how to optimize their costs. Last year, outsourcing IT services proved to be the right choice to optimize corporate budgets while maintaining the usual pace of business growth. No wonder that the demand for IT outsourcing services is projected to grow in 2021. We've discovered the benefits of outsourcing for business and will share with you the key findings.

What is IT outsourcing?

IT outsourcing is the practice of using IT services (subcontracting) from an external provider to solve internal IT-related business problems. Outsourcing involves achieving business goals by delegating to an outsourcing service provider for software development and support, web hosting, database development, security, networking, telecommunications and other tasks.

Most often the contractor is a foreign company that provides the services of an entire software development team or individual developers (depending on the required expertise and tech stack).

IT outsourcing is essential to industry growth as it allows businesses of all sizes to scale or enter the market faster, gain access to relevant expertise while getting the product delivered as scheduled.

When IT problems are holding you back, let an IT outsourcing provider solve them.

Why is IT outsourcing on the rise?

These days, anything that can be done in-house can be outsourced. And the question is not whether an in-house IT department is needed at all. The fact is that the game is changing and businesses must be able to adapt to the new reality, which means allocating resources wisely and focusing on more business-critical tasks while delegating technology-related issues to a third-party IT department. This is especially true given the skill gaps worldwide. Businesses are currently having difficulty recruiting. Nearly 50% of those surveyed report a lack of tech talent. What’s more, the demand for skilled technicians is expected to grow by 55% by 2030. Statistics on the most in-demand experts around the world include the following:

In other words, technicians are on the rise.

Last year's events have only increased the business need for additional IT expertise. For example, nearly 80% of businesses say they plan to make long-term IT changes, while a third of businesses plan to improve security risk management and government. At the same time, spending on managed IT services is expected to rise in 2021.

80% of businesses surveyed plan to keep their IT budget the same or increase it over the next 12 months.

There is a difference between the needs for software solutions for European and North American businesses. For example, U.S. representatives are expected to invest more heavily in industry-specific apps, productivity software and business support apps, while their European counterparts are budgeting more for communication and virtualization software in 2021. These shifts are driven by the need to continue to provide a remote work environment caused by new realities. One of the most in-demand software challenges is security, as endpoint security is a major concern for businesses with remote workers.

It's worth noting the increase in the budget for managed hardware support, as well as for managed storage/backup and hosting.

And here is what the budget for managed services look like, %

With those, let's look at when it's best to outsource your IT tasks.

When to start outsourcing?

Outsourcing is not new and any company can benefit from it. In theory. In practice, it turns out that outsourced IT services are used in emergencies when something goes wrong inside the company and urgent technical help from the outside is required. It's better to think about outsourcing IT services before it's too late.

The need for outside help may not be obvious. However, clear red flags are indicating that IT outsourcing is inevitable.

Here they are:

• Lots of downtime and unresolved tasks. Customers’ requests pile up, as your IT staff can't handle the workload. At the same time, the quality of the tasks performed leaves much to be desired.
• Increasingly, security issues arise. They are similar to each other and pile up, increasing the vulnerability of your system.
• You don't have enough expertise to handle both tech challenges and customer requests. And hiring new employees is too time-consuming and expensive for your business.
• You don't know how to deal with data loss.
• The business doesn't have enough budget to upgrade its IT infrastructure and other technology solutions.

Does this sound like your kind of issue? Then it's a sign that IT outsourcing is needed.

IT outsourcing services

The most common IT outsourcing services are the following:

• Remote Monitoring. You hire outside technicians to perform the basic IT roles your business needs.
• Technical Support. It is provided by a separate vendor, department or individual specialists and related to computer technology maintenance. It can cover aspects of the business such as IT security, website, hosting, networking, desktops and others. By outsourcing these tasks, you can focus on growing your business.
• Security issues. Issues such as virus protection, data security, backup and recovery are covered. With servers, firewalls, malware and virus protection, the vendor ensures a high level of data security and prevents hacking attempts or data breaches.
• Disaster Recovery Service. It's essential in the case of a break-in, breakdown or an unforeseen failure. Such situations must be handled quickly and in a coordinated manner, so every company needs a disaster recovery plan in place.
• Technology Planning. An IT outsourcing team can help you with technology planning to bring your business development in line with cutting-edge technology.
• Development of websites, applications and other software solutions using state-of-the-art technology to achieve your business goals and objectives.
• Helpdesk. This service includes maintaining your IT needs and troubleshooting if any. Helpdesk allows you to save costs, simplify management, increase business productivity and provide you with all related data such as reporting or tracking.
• Virtual Chief Information Officer (CIO) services. A CIO is an information technology specialist who works remotely and provides advice on issues such as the technology roadmap, IT infrastructure maintenance, new technology implementation and management, and any technology-related recommendations.

Additionally, we can mention such services as New User Setup & Training, Technology Rollouts, IT Project Management, Spam Filtering, Secure Employee Termination, Backup Management & Administration and many others.

Advantages of IT outsourcing

Did you know that most of your business tasks can be done faster and at a lower cost by delegating them to an outside company? There are very specific benefits of outsourcing IT services and you're about to learn them.

Saving time

It usually takes a lot of time to handle IT needs. But do you have any extra time? Below you can find the most time-consuming, yet necessary IT tasks:

• Planning your technology roadmap to help ensure the continuity of your business through the use of advanced technology, which means that this task is a priority.
• IT infrastructure management, which involves server and individual computer configuration, network protection, software updates, daily backups, etc.
• Troubleshooting/preventing technical problems and the consequences of breakdowns as well as troubleshooting wireless and wired networks, the consequences of a virus or cyberattack, and data storage problems.
• Vendor relationship management. Just think about it: you have to deal with vendors like the Internet, CRM, cloud storage, applications and software on daily basis, which is time-consuming. Now imagine having all those worries fall on the shoulders of an IT outsourcing service provider.

Cost control

Let's be honest, the monthly fee for outsourcing IT services doesn't seem pretty attractive. But wait, did we say that you should take advantage of all available IT services and features? It's up to you to decide what you want to strengthen your business with. The only thing your business probably needs is a technology roadmap or data protection while network monitoring or application development can be skipped. The advantage of managed outsourcing services is precisely to give customers the choice and ability to manage their costs.

Up-to-date technology to meet your business needs

Keeping up with today's technology is not easy, even for qualified professionals as it requires training and a great deal of experience. Experts on the IT service provider side have the necessary knowledge and upgrade their skills daily as they work, but it's hard to expect the same from an internal IT department. On one hand, you need the latest technology to stay competitive and grow your business, but on the other hand, you're not ready to wait for your IT staff until they are ready to handle IT-related issues. It would be wise to turn to an IT service provider and be rest assured that your technology needs will be met to a high standard. With this improvement, you gain access to previously out-of-reach capabilities.

System monitoring and risk management

We take no pleasure in saying this, but having an in-house IT department doesn't mean your system is secure and any technical problems that arise will be resolved efficiently and quickly (even during business hours). With outsourced IT services, on the contrary, your system will be under 24/7 control and all possible risks will be foreseen and eliminated. External experts get to work as soon as a problem is noticed. Plus, their expertise is matched to the challenges that may arise during your IT needs maintenance.

On-demand staff augmentation

An obvious benefit of outsourcing IT services is the ability to hire as many employees as needed, and then, when the job is done, simply say goodbye to the remote specialists. At the same time, you don't need to hire an entire software development team as you can choose just one person with the necessary skills or experience. The duration of cooperation is also adjustable - it could be a month or six months.

Labor costs are reduced

Another obvious advantage of outsourcing is cost savings. By hiring dedicated professionals, you thereby save on the costs associated with hiring full-time employees, since you don't have to hire and train employees and pay them a monthly salary (plus bonuses and taxes) when there is no work for them. The availability of virtual cloud technology and services allows outsourced professionals to solve your problems wherever they are.

Better focus on the core aspects of your business

By outsourcing some of your IT tasks, you free up your own IT staff for more strategic business tasks. You don't need to delegate the most critical ones, you can handle them in-house. The rest, such as routine, time-consuming tasks, are outsourced to your IT partner.

Last but not least. Trying to solve IT problems by yourself while lacking appropriate experience and knowledge can do even more damage to your business. In this case, a "quick fix" turns into a disaster. Is that what you need?

Disadvantages of IT outsourcing

Let's take a look at what might be a concern for you in this collaborative model:

Loss of control

Some people are embarrassed by the fact that they have to turn over the security of their business to a third party, because it is unknown how decent and qualified the third party is. Loss of control also occurs because the IT partner works outside your corporate standards.

Lack of quality control

There's a saying: if you want it to be well-done, do it yourself. When it comes to IT services, this approach doesn't work because your company doesn't always have the necessary expertise to handle technical issues at the proper level. Moreover, it's hard to be completely confident about the quality of the services provided by an IT provider. So what do we do? Pay attention to the provider's reviews, evaluate the interim results of their work and how they respond to your requests.

To protect yourself in this situation, you can add some clauses into your agreement about the consequences of not completing the task and the amount of the fine.

Communication can go wrong

Any client request should be handled as soon as possible especially when it comes to cybersecurity. IT outsourcing companies are not equally proficient in handling customer requests. This can lead to downtime, reduce business efficiency and damage the reputation of the client company as a whole.

Additional expenses

It should be understood that in the course of cooperation with dedicated software developers, situations may arise when additional resources are required. These may be unplanned software updates, unpredictable outages, overtime, etc., resulting in additional costs.

After all, a provider may pull out, downsize, change their terms of cooperation - anything can happen. However, let's face it, there will always be risks and the possibility of a worst-case scenario. By choosing a reliable partner and carefully negotiating the terms of cooperation, you can minimize those risks.

So, what are the benefits of outsourcing IT services?

To summarize all the advantages described above, let's make a brief but comprehensive list of the benefits of IT outsourcing:

• The cost of IT outsourcing is under your control;
• Both labor and operating costs are reduced;
• Qualified technicians are at your disposal;
• You can focus on your core business objectives;
• State-of-the-art technology to strengthen your business;
• Reduced risk, increased security;
• A trusted IT partner on the other side to keep your business on the right track.

How to outsource IT services

Now that you know both the advantages and disadvantages of IT outsourcing, it's time to learn how to outsource the services you need.

Points to consider when choosing an IT services provider

What do you want to outsource? When requesting software development, define the product concept, timeline and development budget; if you need a dedicated software development team, decide what expertise and technology you need, how many engineers you need, what budget and timeline you expect.

Find the right IT outsourcing provider. First of all, decide what country you need a partner in (reviews on sites like Clutch or Goodfirms may help you), then narrow down your list of possible providers to 2-3 choices and do some research on each.

Each IT service provider operates on its own terms, which should be compared beforehand to choose the most appropriate one.

Company background check. Find out how many years they have been on the market and what their main specialization is, whether they have experience with projects similar to your request. The first step when looking for a potential contractor is to review all the information provided on the website, and, of course, contact developers to clarify the following questions.

Service Level Agreement. This document allows you to be sure that your requests will be resolved on time.

Make sure their experience and track record match your needs. Years of experience, state-of-the-art technology and an unmatched set of services with proven results are all things to check.

Vendor availability. What company representatives do you stay in touch with? Who can you contact in case the first one is unavailable? Can you contact the provider 24 hours a day, 7 days a week, or is there a communication policy? How quickly should the provider respond to your request?

How communication goes. A good IT outsourcing provider is proactive and first and foremost cares about your comfort, fixing problems before they’re discovered and adapting to your corporate environment and the specifics of your business. They will make sure you are aware of their performance and the impact of technology on the state of your business.

Quality requirements for services and products. What documents govern service quality standards? How do you check if a job is being performed as required?

Getting started with cooperation. What steps do you need to go through as a client? What documents and information are expected from you? How long does it all take and what is the sequence of steps.

How does the vendor solve the security issues? The issue of data and software security is one of the key ones. The right partner has the right security plan and knows how to train your employees on how to handle it.

Another issue worth clarifying is data backup, which should be treated as a priority by your IT partner and handled as thoroughly as possible.

The mechanics of starting a partnership. And, of course, find out how the collaboration starts, how long it takes, and what you need to do to make it happen.

Cost of outsourcing IT services

When it comes to the cost of outsourced IT services, the first thing to consider is the set of services and the right outsourcing model.

In short, the main way to classify outsourcing models is the relationship-based approach. It involves the following three collaboration models:

• Dedicated (managed) IT services;
• Staff-augmentation model;
• Project-based cooperation.

The cost of cooperation according to the first two models is calculated similarly: the number of working hours per day (8 hours) multiplied by hourly pay per technician + fixed and pre-agreed fee of the provider.

In the case of project work, the final cost of outsourcing IT services depends on the number of hours agreed upon with you, which will be needed to get your task/project done. This number of hours is multiplied by the hourly rate (Fixed Price or Time & Material) and added to the fixed and pre-agreed vendor’s fee.

The most common pricing method is the flat rate. The more experienced the provider and the broader its track record, the higher the rate. The cost of services reflects the maturity of the business. After all, by offering cheap services, a provider is unlikely to be able to provide fine-tuning of internal processes and attract expensive (read: qualified) software developers.

We can't help but mention that it's not just the cost that needs to be considered, but also the value of the supplier to your business as a whole.

Signs that you're paying a fair price for their services:

• Your supplier's actions help you cut costs.
• They also give you tips on cutting costs even more and helping you develop a tech roadmap.
• They initiate and conduct a business analysis of their services to provide you with their performance results, to demonstrate their value (or not).
• The agreed monthly rate stays fixed and correlates to the provider's performance.
• The provider provides all agreed-upon services.

If all of the above is in place, the cost of outsourcing IT services is justified.

Nevertheless, many businesses still believe that their budgets are not designed for IT outsourcing. So when comparing the cost of outsourcing services and the cost of hiring in-house, the advantages of the former are obvious.

See for yourself:

• You only hire remote experts to perform a specific task;
• You don't have to give the experts a permanent job if the actual tasks are done;
• You can avoid the cost of providing and maintaining a workplace, necessary equipment and other office supplies;
• You don't have to deal with legal issues and taxes;
• You are free of all those expenses that are normally associated with hiring in-house.

In addition, there are costs caused by technical problems that were not fixed in time. Imagine that your in-house IT specialist is on vacation or sick, or lacks the experience and knowledge needed to solve a specific technical problem. The losses incurred because of this would far exceed the cost of IT outsourcing.

Bottom line

Outsourcing is not something new to the business as many companies all over the world have already experienced its benefits. In 2021, interest in such services will only increase.

However, as a business owner, you may be concerned about the need to transfer your data to a third party. As you may have realized, securing their clients is what IT outsourcing providers do. Their job is to apply cutting-edge technology, proven expertise and a deep understanding of security to their clients’ businesses.

Outsourcing your IT needs may be the best thing you can do for your business.

If you're still concerned about whether you should take advantage of outside expertise and how that might help your business, we invite you to discuss the matter. Please email us. We'll listen to you, answer your questions, provide you with figures and together make an informed decision that is sure to benefit you in the long run.