A Comparison of The Risks & Benefits of IT Outsourcing

45% of businesses that outsource their IT do so to save money. Although cost savings are one of the key benefits of outsourcing IT services, it’s not the only one. Plus, focusing too much on cost can steer you toward an IT outsourcing company that may not be the best fit for your needs.

“IT outsourcing isn’t simply a matter of cutting costs. It’s also an easy way to give your team more time to focus on your core business.”  – David Gracey, Founder & President of Network 1 Consulting.

You can find a cost-effective option without compromising quality. The key to accomplishing that is to weigh IT outsourcing’s pros and cons as you assess each potential partner. Quickly selecting the company with the lowest price tag won’t provide you with the in-depth analysis you need.

If you’re not sure how to perform this type of analysis, this article shows you some of IT outsourcing’s advantages and disadvantages. In this overview, we’ll discuss how you can spot partners who exhibit each pro and con so you can favor the pros and avoid the cons.

The Advantages of IT Outsourcing & How to Find Them

1. Access to Specialized Skills

Outsourcing gives you access to top talent and specialized skills without the time and money needed for hiring and training. With 78% of businesses worldwide facing a tech talent shortage, this benefit cannot be overstated.

Ask potential partners to explain their team’s credentials and expertise, and look for a history of successful projects involving the specific skills your business needs. Doing so can help you verify that the company employs professionals who can provide specialized skills.

2. Access to Cutting-Edge Technology

Outsourcing IT services gives you access to the latest technologies and innovations without the need for constant internal upgrades. Having easy access to these tools can give your business a competitive advantage without a high investment.

Look for partners that demonstrate expertise in the latest technologies and can provide examples of how they’ve helped clients integrate these tools. Check if they have certifications or accreditations that validate their skills in the most current technology platforms.

3. Improved Risk Management

Outsourcing IT services can spread risk across different providers,therefore, lowering the risk of business disruptions due to system failures. Firms that manage multi-vendor relationships report a 10%-12% improvement in financial performance due to this lowered risk.

However, you still need to specifically choose partners with a low risk profile to gain this advantage. So, look for partners that emphasize their risk management frameworks. Ask them to explain how they handle incidents and review any case studies showing how they’ve managed risk for other clients.

4. Flexibility & Scalability

Outsourcing allows businesses to scale IT services up or down based on project needs without the long-term commitment of maintaining an in-house team. A reliable outsourcing partner will be able to adjust their level of involvement depending on your requirements.

Choose partners that demonstrate flexibility by providing examples of how they’ve scaled their services for other businesses. Make sure they can show you how they handle both large and small projects effectively.

The Disadvantages of IT Outsourcing & How to Avoid Them

1. Loss of Control

Outsourcing IT functions may reduce your ability to control specific processes, timelines, and service quality. If the outsourcing partner doesn’t align with your expectations, this could result in mismanagement.

Select partners that emphasize collaboration and transparency in their operations. Ensure that you establish clear expectations from the start with well-defined contracts to maintain control over key processes.

2. Communication Issues

Some outsourcing partners are located in different time zones or countries. That doesn’t necessarily mean they’re a bad choice, but it does increase your risk of communication issues. Poor communication could result in misaligned expectations or delayed timelines.

Prioritize partners with strong communication skills. Ask how they handle communication with clients and assess whether they can ensure consistent availability despite time zone differences (if relevant).

In most cases, whether your partner is onshore or offshore, the following steps should be helpful.

3. Cybersecurity Risks

Outsourcing IT services involves sharing sensitive data. Therefore, you need to trust the company you’re working with. Some providers may lack the necessary security measures to protect your data from unwanted exposure.

Look for partners with strong security protocols and a track record of data protection. Verify that they comply with industry standards or other relevant data protection regulations.

4. Hidden Costs

A low upfront cost for outsourced IT services can be deceptive. Sometimes, there are additional costs that aren’t included in the provider’s initial price tag. So, if the cost seems too good to be true, question it. Be sure to ask about any additional costs during discovery calls.

There isn’t anything inherently wrong with charging various services separately. This is a common practice that many good IT companies will do. The problem is if they aren’t transparent about these costs.

You don’t need to avoid everyone who charges additional costs alongside the initial price tag. You do need to avoid anyone who dodges the question if you ask them about it. That response is a sign that unexpected charges may arise later.

Tips for a Successful IT Outsourcing Partnership

Even if you source an excellent partner, you still need to put in the work to foster a great relationship. Doing so will help you reduce risks and ensure that your partner continually supports your long-term goals.

Here are our tips.

1. Establish Clear Expectations

Setting clear expectations at the beginning of the outsourcing relationship is essential to avoid misunderstandings and misalignment. Start by defining the scope of work, timelines, and specific deliverables. Both parties should agree on what success looks like and how progress will be measured.

2. Communicate Regularly

Frequent and transparent communication is critical when managing outsourcing relationships. Regular check-ins help ensure that both parties stay aligned as projects progress and address any concerns early.

3. Monitor Performance

Ongoing performance monitoring is essential to ensure your outsourcing partner meets expectations. Establish key performance indicators (KPIs) that align with your shared goals. These metrics could include response times, resolution rates, or the quality of deliverables. Regularly review these KPIs and provide constructive feedback to your partner.

Here are some example KPIs you may find helpful.

4. Proactively Address Challenges

Establish a clear process for identifying, escalating, and resolving issues before they affect the overall project. Encourage your outsourcing partner to bring any concerns to your attention early, and be prepared to work collaboratively toward solutions.

5. Plan Ahead for Future Growth

Regularly revisit your strategic goals to ensure that your outsourcing partner can adapt to  changes as your business grows. This proactive planning ensures that your partnership remains beneficial and continues to support your long-term objectives.

Choose Managed Services Without The Cons of Outsourced Work

Instead of outsourcing single contractors, choosing a managed IT service provider will give you all the advantages of IT outsourcing with fewer risks. Each professional works for the MSP and will be evaluated based on that company’s standards.

If you’re looking for such a partner, consider Network 1 Consulting. Our team has more than 25 years of experience providing high-end IT services for small to mid-sized businesses in the greater Atlanta area.  We’re dedicated to your success as much as our own and will always recommend solutions that fit your goals.

Contact us today to learn more about how we can help you.