Outsourcing Services – Risks And Advantages

Outsourcing Services – Risks And Advantages

Outsourcing non-core activities represents an essential preoccupation of every modern IT company. But, as IT companies consider the vast positive aspects and allure of IT services outsourcing, they must balance the risks and issues with the potential for labor arbitrage (the economic phenomenon where jobs move to countries where labor and the cost of doing business is inexpensive).

Advantages

  • Save money: Organizations that decide to outsource IT services, whether offshore or through a nearby service provider, transform fixed expenses to variable ones, liberating up capital for utilization in other areas.
  • Focus on Core Operations: Outsourcing IT services enables you to pay attention to the core capabilities of your company.
  • Having IT resources near those of big companies: Outsourcing IT systems and services creates a more reasonable playing field between small firms and large organizations.

Risks

Purchasers of outsourcing services must seriously consider risk. The results are often included in the outsourcing contract. Because many IT companies outsource their infrastructure to cloud suppliers, a Service Level Agreement is an essential topic. According to IBM, a Service Level Agreement “defines how the consumer will use the services and how the provider will deliver them”. I recommend you to read further about this topic on this article.

The potential risks of outsourcing IT services are:

  • Questionable Accessibility: Companies that depend on an outside service run the risk of downtime during critical system failures, leading to possible decline of productivity. Usually, providers offer warranty for operations in 99.9% of the time, so this risk is minimized.
  • Loss of Personal Touch: An in-house system manager becomes familiar with the system he/ she manages. As a result of this, he/she can provide results more efficiently, rapidly and professionally. IT outsourcing solely can’t provide a personal touch that comes close to that of an in-house IT professional. The solution consists in considering IT outsourcing provider being an extension of the own team.
  • Questionable Security Protocols: Companies must examine whether the outsourcing provider utilizes security procedures as powerful as their own. This is especially important when interacting with offshore providers. While these often have outstanding security standards, there is always the risk that one of the outsourcing company employees will break security. You must be careful when you negotiate the Service Level Agreements with the provider. It is also important for you to understand exactly how your applications and data will be protected and the policies that the IT services provider follows to maintain the security of your data.

Before taking the decision of moving to the cloud, every company manager should take into account the risks and advantages for its company and make the most appropriate decision for the organization.

By Rick Blaisdell

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