Outsourcing in IT – a way to invest and save your money or blow it away: part 1

Transfer of responsibility, access to specialists.
"If there is something we are not able to do more efficiently, cheaper and better than the competition, it does not make sense to do it, and we should hire somebody who will be better in doing the job than we are." – Henry Ford

Transferring responsibility, rationalized expenses, access to top specialists – this is the rationale behind outsourcing corporate IT processes.

Outsourcing in IT – what does the market look like?

The market of IT outsourcing services is still growing. Though this growth is not as spectacular as only a few years ago, it is nevertheless impressive. According to Gartner, global expenses in 2013 on IT outsourcing reached USD 3,673 billion, while the expected growth this year at 2.1% will yield USD 3,749 billion. As the Polish Outsourcing Study (Ogólnopolskie Badania Rynku Outsourcingu) of 2013 indicates, services which get outsourced are mostly book-keeping (70.25%), IT (65.5%) and HR/payroll (63%). Companies usually delegate such services to third parties as they want to focus their corporate resources on their core business instead of wasting time and effort on auxiliary areas that ensure proper operations.

“In order to build your own server room to run the SAP platform you need to spend PLN 630 thousand, while monthly maintenance is almost 30 thousand. Outsourcing is cheaper by 7-8 thousand on average for the same period.”

Outsourcing in IT is definitely more than a trend and it will not fade away any time soon. It is a decision to be made in the next few years by any company that wants to foster innovation and growth in their core business. In the Polish Outsourcing Study, this type of thinking was shared by 85% of companies.

Transfer of responsibility

Such a high rate of businessmen who understand the potential of outsourcing in IT comes from the assessment of their micro and macroeconomics needs. The current economy forces companies to take bold and fast action in order to improve performance and cut operating costs. The growth of economy, globalization and technological advances stimulate the growth of the outsourcing market. Companies that want to keep up with the ever-changing needs of consumers and clients must work on innovation and the competitiveness of their products and services. Here, growth is fostered by advanced IT systems which require constant monitoring – both technical (to prevent overloads and ensure fast services) and functional (to continuously improve the systems as the company grows).

According to the Outsourcing Study, the main benefit of outsourcing is ongoing IT support – which comes first for 94.45% of managers. Respondents stressed that their decision on outsourcing is motivated by financial benefits and cutting costs, ensuring security and high-quality business processes to their companies. However, the main benefit of outsourcing is the fact that a given subcontractor assumes responsibility for the entire IT structure.

Specialists most wanted

When hiring an internal team of IT specialists, a company must not only consider basic costs like salaries, recruitment or administration, but also any expenses related to keeping and training its employees. In the times when IT specialists have no problems with finding jobs and the best of them are prized by headhunters and companies, attractive work conditions, professional growth and various bonuses come practically as a standard. Ongoing training which matches the evolution of the internal corporate systems, IT infrastructure, changes in the market and business requirements are definitely expensive.

On the top of that, the work of in-house teams of specialists may experience interruptions, if only due to sickness or holiday leave. The induction of new employees takes time, without any guarantee that they will meet expectations or even stay at the company for longer. What is more, the diversity of the IT area, ever-changing technologies and the need for comprehensive solutions for complex problems require more and more narrow competencies. We cannot expect a few people in the IT department to provide comprehensive services, hence, it is usually better to trust a third party rich in specialists and assets. As the above study suggests, 89.95% of managers prefer outsourcing as it offers them access to specialist knowledge and know-how.

Go to part 2.

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