Should Your Company Outsource IT Services? - InformationWeek
IT Leadership // IT Strategy
08:34 PM

Should Your Company Outsource IT Services?

IT consulting has become increasingly popular among smaller businesses. But you need to do your homework before deciding whether or not your business should outsource its tech functions.

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The Next Step: Evaluating IT Service Providers
Before you request price quotes or contact any outsourcing companies, it's a good idea to make a list of all the services you require. This should be fairly simple, especially if you're switching from an in-house IT department to an outsourced or IT management consulting firm.

For businesses with minimal experience with IT in general, start with the basics: server, software, and maintenance requirements, data storage needs, on-site or virtual support for employees, customer support functions, and plans for expansion. Keep in mind that you can split your needs among multiple providers if one company can't do everything you require.

One of the largest factors to consider when making any outsourcing decision is cost. In-house costs are fixed (for example, $50,000 or more yearly in salary for very basic IT duties) but are not "guaranteed" in the same way that outsourced services are. With outsourcing, these services are contracted for -- if they aren't delivered, you might be eligible for refunds or penalties from the outsourcing firm.

The Outsourcing Contract
IT consulting companies use contracts to outline services performed and specific costs. A separate service level agreement (SLA) outlines the specific details. The SLA specifies the "nuts and bolts" of the transaction: for example, that the help desk will be available between the hours of 7am and 10pm daily. The outsourcing contract itself should include the general details of the transaction:

  • Cost and Scope of Work: Outsourcing contracts should outline what you're purchasing in easily understandable terms. Most of the time, you'll pay a monthly rate for ongoing services. Even temporary project costs can be paid as a series of payments. Prices for IT services can fall quickly as technology improves, so make sure your contract includes a "benchmarking" provision, which allows for a third-party opinion (and often renegotiation) if you suspect that ongoing expenses associated with your project have dropped.
  • Work Monitoring/Governance: Governance software, which allows you to evaluate work as it is completed, can be a valuable tool for both parties in an IT outsourcing transaction. The service contract should allow the use of governance software and contain provisions that specify actions you can take if service level requirements are not met.
  • Disengagement Plan: Disengagement plans describe the "unwinding" of an outsourcing relationship, whether that means terminating the contract or handing tasks over to an in-house IT department as projects are finished. The contract should address ownership rights, information and data transfers, and other issues associated with terminating an ongoing service.

Though IT consulting has become increasingly popular among smaller businesses, whether or not your business should outsource remains a complicated issue. Do your research and make an educated decision before you trust a third party with the technological keys to your kingdom.

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User Rank: Apprentice
12/8/2015 | 9:17:40 AM
From Ukrainian perspective
According to our experience at Redwerk outsourced IT services are not only about saving money. Some of our clients are ready to pay quite the same rates, and the main reason why they outsource is resources shortage in their country.

In the US, Western Europe and other golden billion countries IT industry is growing expanentially, that's whe there is a natural shortage when it comes to hiring IT specialists. In that respect offshore and especially nearshore IT development resources could be very handy.
User Rank: Apprentice
5/17/2015 | 8:08:44 PM
It's a great article...
I love the focus on this article toward new business outsourcing. However, I went to read your posted study from Gartner, Inc., and the link is dead. Can you fix? 


User Rank: Apprentice
5/4/2015 | 2:06:55 PM
Great post!
Especially in the case small businesses and startups - which might not be as experienced with technology as larger enterprises- IT costs can significantly hobble an organization. That's especially true where growth is concerned; a business might find itself restricted from becoming larger because it simply cannot afford the cost required to expand its infrastructure. Factor in competition and pricing wars and the need for some sort of cost reduction is even more obvious.

Taking all of this into account, it should be fairly clear that in order to maintain any advantage worth noting - especially in hosting, which is typically an extremely competitive field - you need to cut costs wherever you can. But you need to do that without impacting the experience of your employees, customers, and clients. Outsourcing is one of the best ways to do that.
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