Making a case for IT Outsourcing
Making the decision to outsource either some or all of an internal IT function is a complex and involved procedure.
IT outsourcing involves handing over responsibility for all or part of your IT function to an external IT service provider. This means that activities that would have previously been carried out internally are instead undertaken by the aforementioned provider, which provides the client with services of an agreed extent for an approved charge, fully in-line with a service-level agreement. This process may or may not result in a workforce downsizing as the need for existing IT support staff will depend on the scope of the projects to be outsourced. Many medium and large enterprises outsourcing specific IT responsibilities also maintain an in house IT team to provide other IT support services internally.
With every business seeking to become more streamlined with its overheads and maximise both productivity and efficiency, IT outsourcing is an increasingly attractive prospect. But, what are the potential benefits that it offers and how can your own firm make a case for it?
Weighing Up the Need for IT Outsourcing
Developing a business case for outsourcing any internal procedure requires a logical, detailed and impartial approach. The analysis for IT outsourcing should be led by the Board, and it is typically owned by the Finance Director.
General Outsourcing Considerations
Before even looking at the implications for IT management and IT support internally, the business case should factor in a few outsourcing basics:
- A three to seven year approach is used as standard when any aspect of a business is being considered for outsourcing
- A comparison of internal vs. external costs must be included and should reference both on going and expected adhoc costs
- A savings target as a result of outsourcing must be included. Typically, targets will be chosen from within a 10-30% threshold
- Any savings projections included in the report should be verified by the Finance team
- Internal costings should be based on current costs, not expected costs in 3 – 7 years time. Comparing current costs with costs from three years ago provides a realistic picture of annual increases throughout the life of the project
What are the business benefits of IT outsourcing?
Any business considering IT outsourcing will be familiar with at least some of the benefits it is said to offer – advantages such as massively reduced internal IT costs, access to the best vendors and simply being able to allocate IT responsibilities to trained experts capable of minimising company downtime are just a few of the most prevalent.
In practice, IT outsourcing can be said to minimise the amount of money a small, medium or large company needs to spend on its IT infrastructure. Savings are generated by eliminating the need for internal staff and resources.
Choosing to place responsibility for IT support, IT management and other IT functions with an experienced company gives certainty about IT spend and allows the peace of mind that comes from knowing that your IT is budgeted for and taken care of. Employees can concentrate on their core responsibilities and monetary resources better allocated to other areas.
A professional IT outsourcing company will offer a range of packages, allowing for complete flexibility and the freedom to work alongside an existing in-house team depending on precise requirements.
Popular IT service packages include consultancy services such as compliance checks, disaster recovery and network audits. The latter can be undertaken to establish IT outsourcing needs before a more extensive agreement for such services is agreed with the provider. This depth of knowledge is received from experts specialising in particular IT fields, giving best of breed information that may not be realistically achieved in-house.
Are there common misconceptions about IT outsourcing?
There are several common misconceptions about IT outsourcing. The most widely held belief is that the cost of such an activity is prohibitive, making it cheaper to employ a team than outsource to a secondary supplier. In reality, it is often more economical and more effective to outsource. Consider, for example, the amount of money needed for the recruitment, training, holidays and ongoing salary for one in-house IT person. To employ such a person over the course of the year, a salary of £40,000, holiday cover of £5,000, training costs of £3,000, sickness costs of £2,500, National Insurance of £5,000 and pension costs of £1000 are accrued. That is a huge £54,500 per annum for ONE member of staff. By investing in IT outsourcing from a professional supplier such as The Internet Group, there is 24 hours a day, 7 days a week, 365 days a year access to experienced support, highly skilled engineers and a fast response time. Although actual costs vary, an average saving of around £30,000 per year are achievable.
An average of 99% of incidents logged by The Internet Group outsourcing team are fixed remotely, using the correct technical tools, with effective incident management. This, combined with a First Contact Resolution time of 70%, has resulted in extremely high month-by-month scores for year satisfaction – demonstrating that in most cases, an external supplier can work more efficiently than internal teams.
To find out more about IT outsourcing, visit http://www.theinternetgroup.com