What is IT Services Outsourcing? - Full outsourcing involves the transfer of a businesses entire IT function to an external service provider, including the people and assets. Outsourcing has become particularly popular with the IT function of larger businesses, due to the large acquisition costs of computer hardware and software, coupled with the high management costs of employing support staff. IT services outsourcing is usually underpinned by a long-term service level agreement (SLA), which defines every aspect of service delivery, including call to fix response times, hardware infrastructure provided and supported, asset utilisation and responsibilities of the client. Larger traditional hardware manufacturers have created dedicated support businesses with global reach, offering the capability to completely take over the IT department businesses large or small. Outsourcing is sometimes referred to as 'offshoring', in situations where remote support is handled from call centres based in a foreign country. Offshore call centre operations are designed to save money through utilising a pool of cheap, highly skilled labour in places like India and China.
Local IT Services Providers - although outsourcing has traditionally been favoured by multinational and national organisations with huge IT challenges, an increasing number of smaller firms are opting to outsource their IT requirements to local IT services organisations. This would typically provide a call centre helpdesk for remote telephone expert assistance, onsite installation of application software, remote hardware server management and administration, backup and restore services, firewall management, network LAN and PC support call out for when hardware fails. For smaller firms, it is unusual that their own IT staff are transferred and employed by the IT services outsourcing supplier. However, the total managed service provided usually reduces the need to employ multiple in-house IT administrators within the small firm itself.
Evaluating and Choosing an IT Services Supplier - outsourcing is usually adopted when firms can perceive obvious cost saving advantages, as well as improving service levels to end users, (compared to becoming more efficient or cost-effective through internal in-house IT restructuring). The process normally begins by a firm evaluating which of its in-house information technology services should be outsourced. A request for proposal (RFP) is normally sent to a small number of proven IT suppliers, to invite them to all bid and submit a specific service proposal by a certain date. Clients would then normally narrow down possible supplier candidates based on objective comparison of the proposals submitted, against their own criteria for success. Presentations and face-to-face meetings would then be undertaken to clarify questions and answers on both sides. These would identify the risks and benefits of an outsourced partnership. Following a process of due diligence, contract negotiations would hammer out a binding legal document, linked to a watertight service level agreement. The SLA dictates the activities of all parties involved, deadlines and roles and responsibilities - so there is no confusion once the service commences.
Business Benefits of IT Outsourcing Services - the main benefits to businesses seeking to outsource their IT services operation are as follows:-
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Reduced IT Service Costs - most SLA's define a 'per seat' user price which can be easily adjusted based on a number of employees being served. The IT services outsourcing company is then free to use its own internal resources as they see fit to deliver the service, while making a healthy mark-up. Most firms will not have the same flexibility and economies of scale of an outsourcing provider. Large providers command lower hardware and software acquisition costs and attract and recruit highly skilled engineers and support staff.
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Focus on Core Activities - Business managers of firms can free up time wasted dealing with IT services issues and instead concentrate on their own core business activities. Time invested focusing on key strengths adds more business value than time and money wasted fire fighting information technology support issues.
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Improved Customer Service - firms external customers will be able to receive a consistent and higher level of customer service, due to the underlying service level agreement. Most SLA's penalise the supplier for delivering below agreed service levels.
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Improved In-House Expertise - the IT staff members of the firm will be working closely in partnership with the outsourcing team on a daily basis and building up close working relationships.
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Business Flexibility - firms can grow organically without worrying about restrictions of in-house IT capabilities. For instance, change occurs when firms employ or more staff, sell more products and services or open new offices. These changes are manageable by an outsourcing provider, who can simply add or reduce more user 'seats' and locations to their existing service delivery contract.
Drawbacks to IT Outsourcing - there are some business drawbacks to entrusting delivery of IT services to a third party provider. The main ones are as follows:-
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Lack of Control Over Customer Service - many organisations that have relied on foreign call centres have suffered from customer complaints regarding poor customer service. Basic language and cultural differences have sometimes frustrated customers to the point where they have taken their business elsewhere.
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Over Reliance on a 3rd Party - firms may find it difficult to switch poorly performing outsourcing providers halfway through a contract. Terms and conditions may restrict early exit as the day to day business relationship breaks down during disputes. In addition, the practical technical realities of providing in-house service is usually not something that can be arranged overnight as an alternative to outsourcing.
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Changes to Suppliers Knowledgebase - many IT services companies suffer a high turnover of qualified staff, who is seeking better employment opportunities elsewhere. This can sometimes create a vacuum of knowledge which means the client suffers while the supplier employs and retrains as a replacement engineer or consultant.
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Security Threats to Sensitive Client Data - the more access to data is given held to a third party supplier, the greater the probability that a security breach might expose sensitive client data to hackers or criminals.