By Daniel Chokoe
Information Technology is an integral part of any business organisation, it is nearly impossible for an organisation to function without an IT department hence most companies had an IT department that dealt with all their technology support services. However that soon changed as from 2008 when the whole world was introduced to our good friend “Mr Recession”, which affected the entire economy resulting in companies looking for ways to cut costs, some did it by downsizing their back-office whilst some took it to an extreme level and scrapped their whole IT department opting to outsource the services instead.
What does it mean to Outsource your IT?
Outsourcing refers to an arrangement in which one company provides services for another company that could usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business. On paper outsourcing IT services seems to be a very good and cost-effective way of running a company, certain costs such as Employee salaries, provident funds and all other employee-related costs are eliminated. You only get to pay for services only when you need them, more like on a call-basis. It seems like it is all gravy right? well not quite. Let us quickly go through the Pros and Cons of IT Outsourcing.
What are the pros and cons of outsourcing?
The pros of outsourcing
The pros of outsourcing often positively reflected by organisations across industries include:
– Better revenue realization and enhanced returns on investment.
– Lower labor cost and increased realization of economics of scale.
– Tapping in to a knowledge base for better innovation.
– Enables companies to focus on core competencies while not being concerned about outsourced routine activities.
– Increases speed and the quality of delivery of outsourced activities.
– Reduces cash outflow and optimizes resource utilization.
The cons of outsourcing
Often weighed with the advantages before any decision on outsourcing is undertaken, the following represents some of the possible disadvantages often mentioned:
– Possible loss of control over a company’s business processes.
– Problems related to quality and turnaround time.
– Sluggish response times coupled with slow issue resolutions (happens all the time).
– Shortcomings in performance expectations.
– Lower than expected realization of benefits and results.
– Issues pertaining to lingual accent variation.
– Possible strike by employees of the outsourced IT company (I mean hey, this is South Africa, employees unions are forever active).
Outsourcing also has its disadvantages. The main one is trusting a third-party provider for all of your company’s IT needs can create serious security issues. IT outsourcing is not a panacea and should never be confused as one. If your business is having trouble managing technology on its own, it’s likely that an IT outsourcing provider will be bound by the same constraints that make in-house management difficult, research further on the difficulties you are facing to understand whether you there is a real need to outsource. Things like poor system construction, inefficient communication, and lack of scalability are not problems that an outsourcing company will be able to fix overnight, irrespective of how great they are at doing their work.
It’s a good idea to ask yourself why you’re considering outsourcing. If it’s to take advantage of the specific benefits mentioned above, you’re probably a good candidate. If it’s because you’re unable to manage problem systems or processes on your own, you may need to address these issues first before involving a third party.
The most important fact is that Mr/Ms. CIO you are responsible for making that decision, please make sure that you are making the right choice.