Almost every enterprise company outsources some part of its IT services in an effort to control costs, gain access to specialized expertise, increase service efficiency, and focus on its core business. However, deciding exactly which IT services should be outsourced is a critical business decision that requires careful consideration.
In this article, we’ll take a look at the IT services that businesses should and shouldn’t outsource and how to mitigate the risks associated when proceeding with IT outsourcing.
This article is a part of our Multi-Vendor Management series — you'll find more in the upcoming weeks over on our blog.
First, let’s take a look at IT services that can (and in many cases, should) be outsourced.
Facts about the outsourcing industry
IT services that can be outsourced
There are few companies that exist today that can operate without IT services. From a food truck using Squarespace for payments and Gmail for communication to the biggest of the Fortune 500 using multiple managed service providers, IT services are synonymous with modern business.
Information technology (IT) services are a range of activities that involve the design, development, implementation, and management of information technology systems and solutions to support various business operations. IT services can be provided by companies that specialize in providing IT support or by internal IT departments within organizations.
In general, there are strong reasons both for and against IT outsourcing, depending on the company’s unique situation: what they offer in the market, internal capabilities, and strategy. That being said, IT outsourcing can be particularly beneficial in large organizations, and/or where IT services cannot be delivered effectively by an in-house team.
The scope of IT services can vary depending on the needs of the organization, but we’ll cover the main services that can be outsourced below.
Help Desk Support
As one of the most commonly outsourced IT services, companies can outsource their help desk support to specialized vendors who have the necessary resources, experience, and technology to handle customer support requests efficiently. Outsourcing help desk support can also result in significant cost savings compared to having an in-house team.
Companies can outsource their service monitoring to specialized vendors who can monitor the performance of IT systems and applications, detect potential issues, and resolve them before they cause any disruption. Service monitoring vendors can also provide insights into system performance, identify potential bottlenecks, and recommend solutions to optimize performance. This service is also often offered by Cloud Services IT providers.
Various cloud services
Outsourcing cloud services can provide businesses with access to scalable, reliable, and cost-effective computing resources, such as infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). Cloud vendors can also provide expertise in cloud migration, cloud security, and cloud management.
Data storage and backups
Outsourcing data storage and backup can ensure that businesses' critical data is protected, secure, and available in case of a data disaster. Vendors that specialize in storage and backups can provide automated backup and recovery solutions, 24/7 monitoring, and data encryption to ensure data security. This service is also often offered by Cloud Services IT providers.
Companies can outsource their cybersecurity to specialized vendors who can provide protection against a wide range of threats, such as malware, phishing, ransomware, and denial-of-service attacks. Cybersecurity vendors can also provide threat intelligence, incident response, and compliance consulting services.
Software development and maintenance
Companies can outsource their software development and maintenance to specialized vendors who can provide expertise in various programming languages, frameworks, and technologies. Outsourcing software development and maintenance can also result in cost savings, improved efficiency, and faster time-to-market for new products and services.
Outsourcing database administration can provide businesses with access to expertise in database design, implementation, optimization, and maintenance. Database administration vendors can also provide 24/7 monitoring, backup and recovery, and security services to ensure that databases are secure, available, and performing optimally.
Companies can outsource their access management to specialized vendors who can provide expertise in access control, identity management, and authentication technologies. Access management vendors can also provide 24/7 monitoring, reporting, and compliance consulting services to ensure that access policies are enforced, and risks are mitigated.
Asset and device management
Companies can outsource asset and device management to specialized vendors who can provide inventory management, patch management, and remote device management services. Asset and device management vendors can also provide compliance reporting, asset tracking, and asset lifecycle management services.
As you can see, there are numerous elements of your IT service ecosystem that can (and should) be outsourced to companies that can provide best-of-breed, niche expertise.
Some companies do, however, have the mindset that anything that could be completed internally should be done so, to retain control over the service, quality, and decision-making. This is in part true, though companies must also acknowledge not only the risk of stretching a (usually) already overworked IT service team too thin, but the inability to properly specialize in the business-critical areas of their IT ecosystem.
Next, let’s wrap up the three main benefits of IT outsourcing before moving on to the IT services you may want to think twice about handing over to an external party.
3 main benefits of IT outsourcing
1. Focusing on your core business
IT outsourcing allows your organization to focus on core activities and more effectively scale your business. For instance, you can use the savings in money, time, and personnel to work on an ISO-9001 certification or on R&D related to the product you deliver to the market. This can help differentiate your offer from your competitors, even though the actual IT services may not differentiate you from others.
2. Switching from CapEx to OpEx
Outsourcing services can transform capital expenses (CapEx) into operating expenses (OpEx). This means you can manage your budget more efficiently and adopt new technologies quickly. For instance, you can replace expensive on-premise infrastructure with a cloud infrastructure that usually follows a pay-per-use model, which is available (almost) instantly.
3. Quickly filling skill gaps
Outsourcing IT services can help you quickly fill skill and capability gaps, which can be challenging to do on your own. Accessing talent dynamically and flexibly means you can incorporate the knowledge and capacity you need to meet business needs temporarily and release them when you no longer require them.
IT services that should not be outsourced
While it’s true that everything can be outsourced, not everything should be. Generally, it’s best to keep strategic planning and decision-making, business process analysis and re-engineering, and most client-facing roles in-house.
That’s not to say that every single aspect of these functions needs to be completed in-house, however. Let’s take a few examples of IT services that may need some extra planning and consideration before thinking about outsourcing.
Strategic IT planning and decision-making
Planning your IT strategy and developing the IT architecture of your organization is a critical process that requires careful consideration. While it's common to seek outside specialists for assistance (particularly if there’s a particular provider who specializes in strategy for your niche) it's essential that you and your team take an active role in ensuring that the plan accurately reflects the direction you want to move in.
Additionally, involving your staff in the process can increase their buy-in and commitment to the plan's implementation. Therefore, it's important to prioritize this task internally and engage your team in the process.
Business process analysis
Nobody knows your business processes better than you do, there’s no question about it. However, what your business can benefit from is working with (not outsourcing to) a company that specializes in business process analysis or process mining to provide guidance, technology, and support in managing this process.
Before outsourcing client-facing roles, it’s important to consider a few factors, namely: the depth of knowledge needed to provide the service, the quality of the service provider you’re looking to outsource to, and their ability to deliver a service that fits in with your brand image.
Overall, while it’s possible to outsource almost any process within a business, orchestration (or the unified management of IT services and resources) is a key consideration.
How to decide which IT services to outsource
We hear you: there’s a lot to consider.
A great thing about outsourcing is that you have full control over what you outsource and what you don’t. In fact, you can choose to only outsource a fraction of your IT services, or the whole lot.
Your business’s requirements for outsourcing to an IT service provider will differ from even your closest competitor, however, they’ll likely revolve around a few key areas.
Outsourcing can be a cost-effective way to access specialized expertise, reduce staffing costs, and improve service quality. According to a study by Deloitte, outsourcing can result in cost savings of up to 70% for some IT functions.
However, outsourcing also comes with certain risks and challenges, such as security and confidentiality risks, quality risks, communication and cultural risks, and legal and regulatory risks.
To mitigate these risks and ensure a successful outsourcing partnership, enterprises should carefully evaluate potential service providers based on several key factors, including:
- Core competencies: Outsourcing non-core IT functions can allow enterprises to focus on their core competencies and strategic goals. In fact, over 70% of enterprises outsource some or all of their IT infrastructure and operations.
- Cost savings: Cost is often a key driver for outsourcing decisions. Enterprise companies may choose to outsource their IT services to a provider who can offer the same or similar service at a lower cost. What should be considered, however, is the total cost to the organization, including project management costs, and the cost of the risks of outsourcing.
- Service level agreements (SLAs): SLAs are a critical component of outsourcing agreements, as they define the scope of services, performance expectations, and penalties for non-compliance. It’s important to consider SLAs and the provider’s confidence in meeting SLAs when choosing to outsource an IT service.
- Risk management: Outsourcing can introduce certain risks and challenges, such as data security risks, regulatory compliance risks, and quality control issues. Enterprises should evaluate potential service providers based on their experience, qualifications, and track record in managing these risks.
- Scalability: Enterprises should ensure that potential service providers have the capability to scale services up or down to meet changing business needs.
How to mitigate the risks of IT outsourcing
Despite having numerous benefits, outsourcing also carries its own set of risks. From data breaches to communication breakdowns, businesses need to be aware of the potential risks associated with IT outsourcing and take steps to mitigate them.
To minimize the risks of IT outsourcing, businesses should consider implementing the following strategies:
- Conduct a risk assessment: Before outsourcing any IT services, businesses should conduct a thorough risk assessment. This will help identify potential risks and vulnerabilities that could impact the outsourcing process. A risk assessment can also help businesses develop a plan to mitigate these risks and ensure a successful outsourcing experience.
- Choose a reliable vendor: It should go without saying, but when outsourcing IT services, businesses need to work with a vendor they can trust. Look for vendors with a proven track record of delivering high-quality services, and check references and reviews from previous clients, third-party review websites, and specialized analyst groups. Additionally, consider vendors that specialize in the specific IT services that your business needs – otherwise known as a best-of-breed approach.
- Establish clear expectations and communication channels: Communication is key to success in life and in outsourcing relationships. Make sure you establish clear expectations from the outset, including project timelines, milestones, and deliverables. Set up regular check-ins to ensure that both parties are on the same page and that any issues are addressed as they arise.
- Ensure contractual protection: Your outsourcing contract should clearly outline the terms and conditions of the outsourcing arrangement, including data security and confidentiality agreements. Make sure you work with a lawyer to draft a contract that protects your business's interests and includes provisions for terminating the contract if necessary.
- Monitor vendor performance: Once you've established an outsourcing relationship, make sure you monitor vendor performance regularly. Track key performance indicators (KPIs) and metrics to ensure that the vendor is meeting the expectations outlined in the outsourcing contract. If issues arise, address them promptly to minimize the impact on your business.
- Manage vendor relationships systematically: IT outsourcing is a long-term relationship, and businesses need to manage it accordingly. Establish a systematic approach to managing the outsourcing relationship, including regular check-ins, performance reviews, and contract renegotiations.
- Integrate vendors properly: One of the biggest challenges of IT outsourcing is integrating the outsourced services with your existing IT infrastructure. Using integration as a service, for example, can help simplify the integration process and ensure that your outsourced IT services work seamlessly with both your existing systems and with other vendors.
If we were to add a final consideration to the decision-making process it would be to trust your intuition. When interacting with potential vendors, take note of the feelings that arise. Does the vendor seem enthusiastic about their solution? Are they asking insightful questions about your specific use cases and taking the time to understand your business needs? Ultimately, the vendor you choose will become a long-term partner for your business, so it's crucial to select one who genuinely cares.
In conclusion, IT outsourcing is undoubtedly a smart move for large organizations or those that struggle to deliver IT services effectively in-house. However, it's essential to carefully consider which services to outsource and to select the right vendors who can deliver the necessary outcomes. Multisourcing is, in that regard, a beneficial approach that allows organizations to choose the best-of-breed and niche suppliers for each of their IT functions.
Choosing to outsource non-core services can be more profitable in the long run, but the selection process must be diligent to ensure you're partnering with the right vendors. Additionally, the business needs must be considered carefully, particularly if end-to-end service delivery is a goal.
Finally, successful outsourcing partnerships require a willingness from vendors to integrate with your business. Developing an effective integration strategy is critical to achieving the desired outcomes and realizing the benefits of outsourcing. By keeping these factors in mind, organizations can make informed decisions about which IT services to outsource and how to choose the right partners to deliver them.
To learn more about vendor integration and how to implement an integration strategy that makes connecting to vendors scalable and repeatable, and provides a united process for service orchestration, read our in-depth guide.