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IT Outsourcing: Everything You Need to Know

For businesses big and small, outsourcing internal IT processes is essential to maintaining healthy continuity and growth – ensuring that personnel are able to carry out their roles without being laboured by non-essential tasks. IT outsourcing is a particularly effective strategy for startups and SMEs, who may lack the internal resource to manage all elements of their business with only a small team.

There are many different areas in which a business may seek to outsource elements of its IT infrastructure, from software development and support provision to the everyday management of IT systems and hardware. One of the most common forms of outsourcing in today’s business landscape is data storage, in which a company entrusts its information to another for a more agile solution to data storage and management.

IT outsourcing is a flexible way for businesses to stabilise and scale their operations without investing in building an internal team, which can often prove more costly. This is just one of the many benefits of outsourcing IT infrastructure, and we’ll cover more in our guide on everything you need to know about IT outsourcing below.

Use the links to explore our guide and find the information you need.

What does IT outsourcing mean?

IT outsourcing is the process of subcontracting elements of internal IT functions to a third-party. It’s used to free-up internal resource, facilitating healthy business maintenance, continuity and growth.

As businesses have become more and more reliant on internal IT functions, so too has outsourcing risen to become a sensible growth strategy for businesses in all sectors. Now, companies of all sizes are choosing to outsource elements of their IT infrastructure, with external parties becoming an extension of their business.

IT outsourcing has changed the way brands do business, allowing for greater flexibility when managing day-to-day IT tasks and functions. Often, it’s significantly cheaper for companies (particularly SMEs) to outsource their IT function rather than building their own in-house team, and the growth in outsourcing as a viable economic strategy now means that businesses can outsource almost any part of their IT structure – for greater freedom and control.

While IT outsourcing has become the go-to term for this kind of business strategy, the process does go by other names, including sub-contracting and ‘farming out’. And, recently, ‘virtual’ has become associated with this form of outsourcing, with many businesses seeing their outsource partners as ‘virtual workers’ operating within their wider business.

Different Types of IT outsourcing

As IT outsourcing has developed, a number of models have emerged, allowing companies to align their sub-contracting efforts in different ways. Depending on the type of IT outsourcing a business chooses, they can expect different benefits and pitfalls, and we’ve outlined these key considerations below.

Time and material

Time and material is the oldest and most prevalent form of IT outsourcing. It works on the basis that the third party will deliver a service in which the final goal has been stipulated by the business. For instance, an IT development company will build a piece of software to a company’s specification, charging for the man-hours used. This is generally a single-use form of outsourcing, in which the project ends when the third party completes the work and the client signs off on it. However, it can lead to an on-going partnership, in which the two parties continue to work together on new projects or develop a closer working relationship.

Fixed-price outsourcing

Fixed-price outsourcing is similar to time and material, but with one significant difference: the cost of the resources used by the third-party in providing IT provision isn’t disclosed to the client, but is instead agreed upfront as a total cost to complete the work. Fixed-price outsourcing is particularly popular for SMEs, whose budget constraints mean they need greater control over how much different outsourcing projects are affecting their bottom line. By knowing the total fee upfront, startups and SMEs can budget more effectively and stay in control of their spending.

Offshore outsourcing

Thanks to the development of cloud technology and increased web-based collaboration, many companies are now turning to offshore IT outsourcing as a means of making excellent savings on the cost of managing and developing their IT infrastructure. Offshore outsourcing allows companies to take advantage of lower costs for sub-contracting IT functions overseas, particularly to countries with a more favourable economic climate. It also allows them to tap into talent, trends or processes which are either lacking or yet to hit the mainstream, and to take advantage of technological advancements which haven’t yet been widely adopted in their home country.

Dedicated development

Dedicated development outsourcing is the closest thing to having an internal team, with a contractor supporting day-to-day IT maintenance and development through the use of remote workers who the business can deal with directly. A dedicated development contract can run for any allotted time, be it for a limited project or an indefinite arrangement, and it gives businesses total freedom to work closely with external partners without investing in internal resources and additional HR provision. Depending on the relationship, dedicated development can be relatively flexible, with the client setting pre-defined parameters about what they expect day-to-day and what kind of permissions the third party company must abide by.

Homeshoring/onshoring

Homeshoring is a growing form of IT outsourcing in which members of your internal team elect to work from home or another physical workplace, freeing up space or resources on site. It’s often used as a means of saving money on things like hardware and floor space, with personnel working away from the main place of business while still supporting every day IT functions. This is particularly common for startups and SMEs, who may lack the physical space required to support the scale and scope of their business.

Pros and Cons of outsourcing IT

As you might expect, IT outsourcing has its advantages and pitfalls, and these will need to be carefully assessed before making a decision on whether it’s the right move for your business. Below, we’ve outlined some of the pros and cons of outsourcing IT functions, so you can make a better-informed decision.

Pros

Cons

Examples of services typically outsourced

Naturally, some IT functions are more suitable for outsourcing than others. Here’s a list of some of the IT functions and processes businesses most regularly outsource to third parties:

This is by no means an exhaustive list, but it does give some idea of the types of IT functions commonly outsourced, and demonstrates just how far businesses can go in freeing up internal resources.

Tips for choosing an IT outsourcing provider

If you’ve decided that IT outsourcing is the right fit for your business, here are our top tips on how to choose the perfect outsourcing partner:

If leveraged correctly, IT outsourcing is a powerful business strategy, giving you the flexibility to scale your business and free-up internal resources that are crucial to growth and development. At CDL, we aim to be a reliable partner to your brand, working with you to ensure the safe, secure and responsible management and destruction of your IT hardware and data. To find out more, visit our homepage or call our team today on 0333 060 3113.

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