Outsourcing IT/Computer Science Services
- Outsourcing is a contractual arrangement under which a client hands over a certain business function to a supplier
This usually includes planning, management, and operation of this function
- Very common in some situations: few people generate their own electricity or drill their own wells
- Logic is that a company specializing in a particular area, e.g. catering or office cleaning, is probably better at it
- Helps an organization to focus on their core competency
- IT services are not that different, people and organizations have always purchased from third parties such as software package suppliers or software houses
- However, there is a change as companies and governments handed over whole IT departments
Software companies even started to outsource programming tasks
- IT/Computer Science outsourcing contracts are usually very complex and depend on individual circumstances
- Important points that need to be addressed are
- Service level agreements:
How is performance monitored and managed?
What happens if performance is unsatisfactory
2. Which assets are transferred
3. Staff transfers
4. Contingency plans and disaster recovery
5. Duration of agreement and termination provisions.
- Experience has been varied, but not all organizations were happy with the result
- Cost/benefit ratio did not work out
Losing expertise and control
- There has been a trend to “in source” services again
- Studies show that the effects of outsourcing have been overstated (IMF working paper 04/186)
- The US and the UK export more services than they import
Advantages of outsourcing IT/Computer Science Services
- Reduce and control operating costs. When you outsource, you eliminate the costs associated with hiring an employee, such as management oversight, training, health insurance, employment taxes, retirement plans etc.
- Improve company focus. It is neither practical, nor possible to be a jack of all trades. Outsourcing lets you focus on your core competencies while another company focuses on theirs.
- Gain access to exceptional capabilities. Your return on investment is so much greater when you outsource information technology to a firm that specializes in the areas you need. Instead of just the knowledge of one person, you benefit from the collective experience of a team of IT professionals. Outsourced IT companies usually require their IT staff to have proper industry training and certifications as well.
- Resources are not available internally. On the flip side, maybe you don’t have anyone in your company who can manage your IT needs, and hiring a new employee is not in the budget. Outsourcing can be a feasible alternative, both for the interim and for the long-term.
- Maximize restructuring benefits. When you are restructuring your company to improve costs, quality, service, or speed, your non-core business functions may get pushed aside. They still need to be handled, however, and outsourcing is an optimal way to do this. Don’t sabotage your restructuring efforts by failing to keep up with non-core needs.
Disadvantages involved with outsourcing IT/Computer Science Services
- Some IT functions are not easily outsourced. IT affects an entire organization; from the simple tasks’ employees do every day to the complex automated aspects. Be sure the outside vendor is qualified to take care of your greatest needs.
- Control may be lost. Critics argue that an outside vendor will never be as effective as a full-time employee who is under the same management as other employees. Other concerns include confidentiality of data and disaster recovery. However, a supervisor that is knowledgeable in managing an IT staff member will usually be required.
- Employee morale may be affected. This is particularly true if you will be laying off employees to replace their job functions with an outsourced firm. Other employees may wonder if their job is at risk, too.
- You may get ‘locked in’- If the vendor does not document their work on your network and system, or if you’ve had to purchase their proprietary software, you may feel like you can’t go anywhere else or take back your network. Many outsourced companies require you to sign a year to year contract which limits flexibility.
The Rewards of outsourcing IT/Computer Science Services
- Access to the latest and greatest in technology. You may have noticed how rapidly software and hardware becomes obsolete in this industry. Outsourcing gives you the benefit of having more than just one IT professional. And since it’s the core competency of the company, they can give you sound advice to put your IT dollars to work for you.
- Cost savings. Outsourcing your IT services provides financial benefits such as leaner overhead, bulk purchasing and leasing options for hardware and software, and software licenses, as well as potential compliance with government regulations.
- High quality of staff. Since it’s their core competency, outsourced IT vendors look to hire staff with specific qualifications and certifications. You may not know what to look for if you’re hiring someone to be on staff full-time, so you may hire the wrong person for the job.
- Flexibility. Vendors have multiple resources available to them, while internal staff may have limited resources and capabilities.
- Job security and burnout reduction for regular employees. Using an outsourced IT company removes the burden from your staff who has taken on more than he or she was hired for because ‘someone needs to do it’. You will establish a better relationship with your employees when you let them do what they do best and what they were hired to do.