Outsourcing IT: The Difference from In-House IT and Benefits

As 2020 has shown us, businesses need to be prepared for the changing times. An increasing focus on IT infrastructures and remote work can provide the required flexibility to survive sudden disruptions and grow at the same time, in the coming years. When it comes to managing IT, companies either go for an in-house IT team or opt for outsourcing IT. Having an in-house team is the traditional method while outsourcing IT is considered to be the preferred way for businesses to thrive today and in the future. 

But before you decide whether you should maintain an in-house IT team, an outsourced IT team, or a hybrid model, here are the things you’ll need to know. 

What is outsourcing IT? 

Outsourcing IT is the process of handing over the entire or partial information technology services of a company to an entity outside of the company’s purview. Outsourcing is an umbrella term that can be modified and realized to the extent a company wants. The IT services often include data management, infrastructure maintenance, and security management among others. 

There are different types of outsourcing models that you need to understand before deciding to outsource your business’ information technology.  

What are the types of outsourcing IT? 

The type of outsourcing depends on the scope and to what extent the operations need to be transferred to the providers. 

1. Offshore outsourcing

Offshore outsourcing focuses on transferring services to a foreign country by taking advantage of reduced operational and labor costs of that region. Businesses often outsource IT to distant countries to enjoy tax benefits. 

2. Nearshore outsourcing

Nearshore outsourcing is the process of handing over IT work to a company that is located a lot closer to your business. Oftentimes, the regions share borders or are in the same time zone. This helps in transport and better communication.

3. Onshore outsourcing

Onshore outsourcing is the process of contracting out IT operations to a company within the same country. The premises can be dispersed, and the work can be remote and in-house, in some cases.

4. Managed IT services 

Outsourcing IT to Managed IT service providers (MSPs) can help businesses focus on their core competencies by taking care of the major part of the IT structure. MSPs can also provide comprehensive solutions to help businesses grow exponentially, technology-wise.

What are the IT services that can be outsourced? 

IT services that can be outsourced are –

1. Software development

2. Application management

3. Web hosting

4. Technical support

5. Infrastructure maintenance

6. Database management

7. Telecommunications

8. Backup and recovery

9. Networking

10. Security consultation

In-house vs Outsourcing IT: What are the differences? 

In-house IT management requires an internal team to carry out the tasks while outsourcing IT means there is a remote team of professionals to handle your IT operations on a day-to-day basis as well as help you make strategic IT decisions for your business. It is often a misconception that in-house teams respond to issues faster than their remote counterparts. Technology has advanced at such a pace that automation and cloud computing have taken service delays out of the equation. Moreover, contracts often make sure remote teams visit your ground facilities frequently. 

Having an internal IT team is necessary if your business model requires a complete on-site presence. However, developing and maintaining in-house teams is not cost-effective. Companies spend time and resources to develop a solid in-house team, but a small team can easily be overwhelmed in crunch situations. 

The risk of non-compliance is another thing that makes companies stay limited to an in-house team. While an internal team can definitely be molded in your business policies, outsourcing IT is not any less secure. Good MSPs follow service level agreements (SLAs) and NDAs to make sure you get consistently reliable service. On top of that, MSPs often have stricter on-boarding processes for their employees than regular businesses. 

What are the benefits of outsourcing IT? 

Outsourcing IT comes with a certain set of benefits that an in-house team cannot provide.

1. Efficient business model

If you outsource your IT operations to a managed service provider, you get to enjoy an efficient business model all-around. MSPs take a big chunk of operations off your plate. They work to maintain your IT infrastructure, analyze and mitigate threats, deploy timely patches, and manage your database and recovery systems. MSPs work proactively, by squashing away issues even before they can threaten workflow. You also don’t have to spend time thinking about industry risks since the providers are well equipped with their industry knowledge and experience to handle that for you. As a result, you’re left with more room to grow your business by focusing on core areas. 

2. Cost savings

The biggest impact of outsourcing IT is reflected in your finances. Traditionally, you need to spend time and resources to hire, train, and maintain in-house IT professionals. Each IT professional can cost you well over $50,000 a year. Since you’re outsourcing a lot of tasks, you have better control over your budget. MSPs bring down the fixed IT cost by letting you focus on the operations you want to pay for, and they often bundle in additional services to stay above the competition. On top of that, the absence of a full-fledged IT department can help you save real estate costs in some cases.

3. Access to better talent

Managing an in-house IT team means you need to hire them from a local pool of talent. Employees need to travel to the site every day, making it best to hire people who reside near the offices. Once you outsource and go remote, you can enjoy only the best talents from a wide pool of candidates. This leads to better efficiency, faster responses, and overall better quality of service. 

4. Better deployment of resources

You get a lot more freedom and flexibility when you don’t have to constantly focus on day-to-day IT maintenance and other technical operations. You can focus on your core competencies and find ways to refine your business strategies. Basically, you can focus on things that matter the most to your business. Outsourcing IT helps you streamline your workforce, leading to better productivity. In-house employees are less likely to get overwhelmed with work or sudden disruptions when a managed IT service provider is handling your IT work. Small and midsize businesses (SMBs) often operate on limited resources, so it’s important to focus on the absolutely necessary operations. 

5. Better quality of service

Managed IT service providers face stiff competition in the market, compelling them to constantly improve and provide better services than others. When you outsource IT to a quality MSP, you get an entire team of remote professionals, working on your infrastructure. Professionals employed by MSPs often are more experienced and ready to work with cutting edge technologies. On the other hand, in-house teams need to be briefed and trained frequently to keep up with new changes and innovations. Outsourcing IT can also be tweaked to make sure you can enjoy broader features like onboarding management, security consultation, and more. If you can flawlessly integrate an MSP offered suite of services to your business, you can upscale faster and further. 

Things to remember before Outsourcing IT 

Outsourcing IT is almost always a wise decision for a business. But it does come with some challenges that you need to address before you take the plunge. Things to remember before you outsource IT include:

1. Reputation

Whether you’re offshoring, nearshoring, or hiring a managed service provider, you need to be aware of the company’s history, performances, feedback, business models, offered services, and conflicts, if any. A reputable MSP offers quality services and experienced professionals skilled in deploying new applications and smoothing out the entire process for you. If your MSP isn’t the right fit, you need to clearly establish the scope of work in the contract beforehand. 

2. Alignment

This may seem like an extension of the previous point, but alignment is a standalone factor that needs to be considered honestly. No two businesses function the same way even if they provide identical services. Good MSPs adapt to the demands of their clients but you need to make sure when you’re outsourcing IT to an MSP, they are aligning with your business model. Alignment includes shared beliefs, clear communication, and sketched out business goals. If a reputable company is not aligning with your business needs, you need to look elsewhere. 

3. Time zone

When you outsource your IT to a remote entity, time zones become an issue. Since a remote workforce can be anywhere in the world, it leads to time differences, for better or worse. If your business model can’t afford time differences, you need to find an MSP that works well within your region.

4. Language and Cultural Barrier

Remote professionals can bring a lot of diversity to the table, which is always a good thing. But you need to make sure you and your MSP are on the same page in terms of communication and mutual understanding. Most MSPs are well versed in streamlining communication despite having a vibrant workforce, but it’s always important to fine-tune language and culture changes.

5. Distance

If your company needs MSPs to make frequent visits to the sites, you need to look for someone closer to home. If distance is not going to be an issue, you should always look to outsource IT to people who are experienced the most, align with your models, and provide the best value. 

Companies that are outsourcing IT 

If outsourcing IT seems a daunting task to you, you might be at ease knowing how big companies have been doing the same for years, and with success. 

1. Google

Google is a great example of how outsourcing IT can help tech companies scale exponentially. Google famously outsourced a big chunk of its customer service reps to more than 50 countries. The pattern grew further and by 2018, Google outsourced almost half of its workforce to remote contractors. Seeing how 2020 reinforced the importance of a flexible, virtual workforce, there’s no reason to believe Google won’t continue to outsource more and more operations in coming years. 

2. Slack

Slack is synonymous with communication in the corporate world. The collaborative tool is one of the most positive examples of how outsourcing can improve a product. Back in 2013, Slack’s founders hired a foreign agency to tweak the design and improve its website and copy. Slack released the beta version with better design language across platforms to select people and received good feedback. This led to Slack launching an ironed out, functional application that changed how companies communicate.

3. Microsoft

In the last decade, Microsoft has outsourced a lot of its services to countries like India. Microsoft took advantage of the cheaper labor cost and IT potential of India by outsourcing IT help desk and application support. Microsoft has also pumped in money to develop infrastructure to bolster outsourcing processes. Not just India, but Microsoft has outsourced to more than 100 countries in the last few years. 

4. BaseCamp

BaseCamp is another company that outsourced IT development in order to make the product better and scale faster. In their initial days, BaseCamp struggled to keep up with their growing number of customers. The founders then outsourced BaseCamp’s core development to freelance developers, leading to a steep rise in BaseCamp’s satisfied user base. 

5. WhatsApp

Before WhatsApp hit big with the Facebook acquisition, a major part of its services were outsourced to Russia. In the initial days, WhatsApp’s Mountain View office hosted less than 50 employees who mainly focused on customer experience. On the other hand, the Russian contractor helmed the entire technical development. 

How to know if your company is ready to outsource IT? 

Now that you have a fair idea of what outsourcing IT is all about, you need to ask yourself, is your company ready to outsource IT? To answer this, you need to know about a few things. 

1. What to outsource?

IT is the backbone of any company running in the 21st century. If you decide to outsource your IT operations, you can decide to what extent you should outsource. Companies can have their proprietary platforms that are best suited for in-house IT teams. Other operations such as day-to-day maintenance and IT strategy can be outsourced to MSPs as they have the technology and experience to provide seamless service.

2. How much to control?

Outsourcing IT to a partner changes how much you can control your day-to-day business activities. Naysayers often cite how companies can lose access by handing over key operations to MSPs. This again is a futile argument in a professional world. MSPs grow their business only by providing the best possible services to their clients. Any mishap may ruin their reputation and trustworthiness. Instead of an in-house IT team that you can control, think of MSPs as partners who can collaborate with and assist you to grow your business. 

3. What is the state of employee morale?

The practice of outsourcing IT to third parties can throw your employees into a state of anxiety and insecurity. This will inevitably impact productivity. Before you start outsourcing, make sure you communicate clearly to your employees what it means for them, including the advantages. They need to be assured their jobs aren’t at risk all the time and how outsourcing can actually help them shift their focus to core strategies of the business. 

Summing Up

In-house vs outsourcing IT is a conundrum faced by a lot of SMBs. But the year 2020 has changed how businesses see the practice of outsourcing. As AI and cloud computing become more and more advanced, traditional models such as having in-house teams will lose their shine faster. It doesn’t mean having some sort of on-site IT team is not necessary, it’s just that their role is going to be modified further to focus on the core business strategies of a company. This will be possible by letting MSPs take care of the day-to-day tasks and manage certain operations. 

Companies are already outsourcing IT to cut down extra operational costs and dead weight. This leads to businesses scale faster and in the coming days, this will be the norm. If you’re looking for reliable MSP to help you strategize your IT operations and outsource a portion of it, just get in touch with use – we’ve been at it for years and can help!

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