With all the media attention focused on the projected benefits of major IT outsourcing deals, several questions emerge: What are the risks, disadvantages, and hidden costs? Is IT outsourcing really as effective as it outweighs its awards? This article will answer these questions.
Major Risks Of IT Outsourcing
Inexperienced Staff
First off, one of IT outsourcing’s risks is having inexperienced staff. When business owners hire an in-house IT team, they have the benefit of interviewing and getting references for every individual on the team. However, this is only effective insofar as they have the knowledge to be able to verify new hires’ experience.
Choosing outsourced IT services means they don’t get much—if any—insight into the team members managing their account. Instead, it’s important to verify the knowledge and experience of the outsourced IT company as a whole. Let’s look for case studies, call references, and read online reviews.
Hidden Costs
Second, another risk of IT outsourcing is hidden costs. Some IT companies will charge a monthly fee for basic IT services but will rack up surcharges for support, additional software charges, and consulting on any opportunity not included in the contract. This is why it’s important to read the contract carefully before signing. Make sure to ask any references whether they’ve experienced hidden fees.
Unresponsive Support Team
The third is the time IT outsourcing takes to receive support and troubleshoot problems. Since an in-house IT team is typically on-site, it makes it easier to seek assistance or to produce fixes in case of system problems.
Many outsourced IT companies offer remote desktop assistance which can help troubleshoot almost any problem—although this is only helpful when the support team answers. Make sure any outsourced IT company is committed to fixing problems quickly, answers phones with live people, and has IT engineers available for more complicated problems—in a timely manner.
Biased Software Decisions
While on the outside it may seem like software partnerships between IT outsourcing companies and business owners are a good thing. Because they often result in a discount for the end-user (while providing a kickback to the outsourced IT services company). Software partnerships often diminish the company’s ability to stay objective in picking the right software solution.
Any company that has tried to pigeonhole themselves into a CRM or task manager that wasn’t the right fit for their company understands the risk here. Well-aligned software is exponentially more productive than software that doesn’t actually fit the business owner’s existing needs.
Decreased Security
Another risk of hiring an IT outsourcing company is decreased security. This may come in the form of outdated technologies, antiquated security strategies, unfamiliarity with the most recent security threats and best practices, and more.
However, this risk is pertinent to in-house IT teams as well. The best option to maintain the best network security, backup and recovery systems, and disaster preparedness is to partner with a reputable IT expert. Better-known outsourced IT companies are more in the spotlight making it even more necessary to maintain high standards of safety and security.
Loss Of Control
When using an in-house team, companies are firmly in control. But when outsourcing will they really have the same level of control over what is in effect a completely separate company? Once again, it depends on whom they choose. A quality outsourcing firm will move the earth to make them happy and operate under the principle that the customer is king.
Further reading: IT OUTSOURCING MODELS: GUIDE TO CHOOSE A RIGHT MODEL FOR BUSINESS?
Balance Rewards With Risks Of IT Outsourcing
It is not surprising then that IT outsourcing has experienced such growth. Nevertheless, there is no conclusive proof that outsourcing will always lead to more focused organizations and higher flexibility. In addition, there are also lower costs, staffing levels, and economies of scale or to the solution of all problems with internal IT departments.
Outsourcing can deliver significant rewards to organizations, beyond the common cost reduction benefits that are most obvious. These cost benefits are derived from labor arbitrage, process optimization, IT enablement, and scale. Other benefits include focus, access to expertise, flexibility, and faster time to market.
However, there are a number of risks in outsourcing above that need to be recognized and managed. As users become more aware of the possibilities and limitations of information technology, they tend to become more critical of IT outsourcing. Managing these risks needs a combination of a strong legal contract and a good relationship, one that is built on mutual trust.
See more about IT Outsourcing benefits: From cost-cutting to growth
How To Mitigate These IT Outsourcing Risks
Planning is the key to militating against any risk. When outsourcing to a new IT service provider, companies should start the process early to ensure they do not overlook any detail. Because that could expose their organization to unnecessary risk. The following steps can help:
Conduct A Risk Assessment
Assess the IT service required against each risk and the business impact if something goes wrong. From this assessment business owners will be able to identify the most critical factors and carry out appropriate due diligence.
Understand The Processes Of IT Outsourcing Provider
Due diligence should include a thorough understanding of all the processes employed and how these impact the business’s organization. A site visit is highly recommended, although not always feasible if they are exploring outsourcing to an offshore IT service provider.
Explore How Resilient The IT Outsourcing Provider’s Business Is
Get a clear idea of how the vendor’s business continuity and disaster recovery processes protect their customers and what processes are in place to minimize disruption to other businesses. Also, explore the company’s financial resilience and business plans to know if they go under or sell to another company?
Test Different Risk Scenarios With The Provider
Just as companies would test their business continuity plans internally with key members of staff, test different risk scenarios with the IT service provider. This will help companies identify any factors that leave their business vulnerable.
Get Guarantees About The Standards
Most IT outsourcing providers will have quality standards certifications like ISO 27001 for information security. They may also have developed their own standards and processes, aligning them with their customers’ requirements.
In reverse, if not, business owners need to ask them to sign up for their standards. Such as the way they vet staff and handle staff leaving their employment, etc. Companies can also ask for guarantees that the vendor has the right physical and virtual security protection and processes in place.
The Bottom Line
Don’t let the risks associated with IT outsourcing put you off this model! With the right preparation and the right provider, you can get all the benefits while mitigating the risks. The right way to balance risks with rewards can bring a successful IT outsourcing project to the business.
Innotech is one of the leading firms in IT outsourcing in Vietnam. With 14+ years of experience, we’ve been assisting startups and organizations of all kinds with software solutions. We improve workflow efficiency, address business issues, and aid in acquiring competitive strategy with cutting-edge tech stacks.
We are ready for long-lasting and practical cooperation with you. So let’s contact our team of experts if you have any queries or concerns about outsourcing. We’ll be more than pleased to assist you!
