IT Outsourcing For Small Business

IT Outsourcing For The Small Business | A Foundation

This is the first post in a series that aims to help the small/medium business community better understand and use IT Outsourcing.  There is a lot of confusion and terminology and misunderstanding as to what IT Outsourcing is and how it works.

This first post in the series helps define IT Outsourcing and discuss some of the benefits as well as the complications.

IT Outsourcing Definition

At the heart of IT Outsourcing is the fact that it is really just subcontracting, or obtaining services from an external firm.  The term has been around for a very long time as has the entire concept.  Actually, the concept was started by Ross Perot when he founded Electronic Data Systems (EDS) in 1962.  EDS would tell companies that while they were great at producing “widgets”, EDS was really great at managing Information Technology and would then proceed to sell them IT services.

Outsourcing is more than just subcontracting in practice, but in pure definition it is subcontracting out work to another business with expertise in a specific area.  An example is outsourcing payroll.  There are experts who process payroll and know how to do it extremely well.  A small business may want to use their services to leverage that area of expertise so they can focus on other parts of their business.  In most all cases, outsourcing is a contractual agreement between the two companies and that can be for any period of time whether it is month-to-month or yearly, etc.

Confusion of Terms

There isn’t one single term to describe Outsourcing.  It is generally agreed that it means the contracting out of a business function to an external provider.  Here are some of the other terms for Outsourcing.

• Offshoring – this is the term most often associated with outsourcing. It describes the contracting out of business to another nation.  A perfect example is the call center.  During the U.S. evening hours, a business can transfer over their call center work to another nation in order to provide 24/7 coverage.
• Nearshoring – this is a term that means the contracting out of a business function to an external provider within your region, i.e., within your nation.
• Mulitsourcing – this is a hybrid term that means the mixing of using internal and external resources to support a business function.  IT departments use this a lot as they have onsite staff but use outside contracted help for some functions as well.
• Outtasking – this is a similar term to nearshoring and essentially means the same thing as nearshoring so they are used synonymously.

This is by no means a comprehensive list of terms to describe the entire Outsourcing function.  There are many terms that come and go depending on the industry involved and the current political landscape.  Since the term “outsourcing” has had such a negative connotation in the past, new terms have been used to create a different image and perception.  Suffice it to say, there are definite differences in contracting out work to overseas companies versus contracting out work to local/regional companies.  Both are outsourcing but they do have different benefits/drawbacks associated with them.

The rest of this “Introduction to IT Outsourcing” guide will focus on the local/regional aspect of outsourcing, otherwise known as nearshoring or outtasking.

Short Term or Long Term

The outsourcing of tasks can be short-term or long-term depending on your business needs.  If you are looking for something more short-term then you might seek out a consultant, such as an IT consultant or a Network consultant or even a more specialized type of consultant like a Voice over IP telephony consultant.

For the longer-term nearshoring needs, then you might want to think about a managed IT service provider (MSP), or establishing a relationship with an IT services provider that is essentially “on call” if you need them.  The next article in this series will focus on the types of IT Service Providers and how to choose one.

Business Benefits to Outsourcing

Why would a business use outsourcing?  There are some substantial benefits that can be realized by using outsourcing.  Most of these benefits are tangible and have been proven to be quite effective.  Here are the top reasons for using IT outsourcing for your business.

• Cost Savings – You can lower overhead costs and other types of costs by using outsourcing.  One of the ways you can realize lowered costs is that you will not be paying for benefits and/or overtime, etc.  Also, you get access to an entire staff of IT professionals and expertise for a single cost.  Additionally you can save huge sums of money because it is in the best interest of the outsourcing provider to keep your systems maintained and running 24/7.
• Knowledge – When you use the expertise of an outsourced IT provider, you are getting a much wider scope of experience and knowledge to draw upon.
• Focus on Core Business – Ever noticed how IT can take up a lot of your time? Using an outsourced IT provider allows you to focus on your core business instead of focusing on the management and maintenance of IT.
• Risk Management – using the expertise of an outside IT services firm can reduce the risk management associated with backups, disaster recovery, security, and some types of regulations such as Sarbanes-Oxley.
• Access to talent – Access to a larger pool of talent and a sustainable source of skills

There are more reasons that are considered benefits to using an outsourced IT services provider for your business but those are some of the main ones that are also the most relevant.

Potential Drawbacks to Outsourcing

The list of benefits is impressive to be sure, but there are also some drawbacks to using outsourced IT services.

• Qualifications – Be sure that you are keeping in the know about your provider and their staff.  You want to make sure the quality and expertise of the staff they hire to support your systems is up to par at all times.
• Security Issues – You are trusting a lot of valuable information with people that you don’t really know.  Make sure to build a trust-relationship and discuss security as it pertains to your systems, confidential documents, communications, etc.
• Quality Risk – In order to reduce capital costs, some outsourced provides have been known to reduce their staffing levels to the point where quality lacks.  This can be a drawback since it means you will be waiting longer to get help or it could mean your systems are not being taken care of appropriately.

These drawbacks are usually all addressed by any It service provider that is professional and has a strong business practice.  The benefits far outweigh the drawbacks in most situations.  Keep in mind too that a lot of businesses used a mixed sourcing model where they have qualified staff in-house but use the outsourcing of other IT services for areas that the in-house IT staff is not qualified for.  This type of outsourcing is being used more and more because the in-house IT staff member can be the liaison, between the IT outsourcing company and the business.

Next up in this Introduction to IT Outsourcing for the Small Business is a discussion of how to find and hire the right IT services company for your business.

Article Source: Blog-Gorilla-Force.com

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