Disadvantages of IT Outsourcing
Outsourcing a range of business functions has become common practice for enterprises across the world. In recent years, the number of companies outsourcing the IT function is increasing. IT outsourcing refers to the process of handing over the responsibility of your entire IT infrastructure as well as processes to another entity. According to the Arvato UK Outsourcing Index, investment in Information Technology accounted for 68 percent of the total public sector outsourcing expenditure in 2018. Of the companies currently outsourcing their IT in the world, majority of them are doing so to reduce cost, but at the same time, there is a percentage of them which are actively planning to bring it back in-house soon. Lowering expenses is a consideration of many businesses when it comes to deciding whether to outsource. However, as with most if not all things, there are two sides to it. Today we are looking solely at how outsourcing IT can impact your business and its operations negatively.
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Losing granular control over IT functions is one of the most commonly cited reasons why people shun outsourcing. Even if you can provide detailed directions, it is ultimately another company which handles the project management. Hence it becomes difficult to implement close monitoring on the actual progress of the product. Additionally, you will lose the ability to rapidly respond to or carry out changes because there will now be an extra layer of people and processes to navigate through.
While it is feasible that joining forces with a vendor may result in savings, it is also likely that there will be some form of hidden costs. Usually, you will sign a contract with the outsourcing company that will encompass the details of the service that they will provide and anything not covered in the contract will be the basis for extra charges. Fees for additional works can be a big concern as bumping new functions into the process, bugs and red flags that need resolving are some of the most frequent issues. Whether the pricing model is a fixed amount or an hourly rate, you might have to pay more than you expect to fix certain pressing problems. Furthermore, there could be legal fees to be paid to engage a lawyer to review the contracts and make any required changes. It is of utmost importance to define your objectives clearly before pairing up; otherwise, the cost-effectiveness of outsourcing could be absolutely zilch.
The company you outsource your IT to will not be driven by the same standards or metrics that drive your company. Instead, they will be driven by profit, and they may very well be trading off quality to achieve profit. Quality is a major characteristic that every organization should look out for when considering outsourcing IT. When a low-quality product is launched, companies have to pay a lot more to fix it, or worse, their reputation might suffer as well. Although they are not fail-proof, a couple of suggestions would be to follow their process as closely as possible so that issues could be highlighted and adjusted earlier and talk to some of their previous clients about whether they delivered on time and within budget.
Outsourcing is not a one-for-all solution for developing a product. If you pair up with the wrong kind of vendor, they may even push you to invest in equipment or software that you do not need at that stage. This usually happens because vendors may have more expertise in those particular pieces of equipment or software.