In-House IT Versus Outsourcing
Whether to entrust information technology (IT) services to an outside provider, versus fulfilling the various corresponding responsibilities in-house, is a question with which all firms occasionally wrestle. Whether requiring assistance with email configuration and maintenance, application support, special projects, server administration, cybersecurity responsibilities or another technical task, technology services are one of the functions most often outsourced by businesses, according to the US Small Business Administration (SBA).
Just as firms frequently turn to external vendors for tax and legal expertise so, too, do organizations frequently entrust technology services to a provider specializing within the IT field. Such vendors are commonly referred to as technology consultants or managed service providers (MSPs) and sometimes as computer resellers or value-added resellers (VARs), depending upon the nature of the products and services provided.
As with most any business strategy, there are advantages and disadvantages associated with outsourcing technology services. Because outsourcing IT administration and support is a long-established practice, the pros and cons are particularly well documented. Based on the wealth of anecdotes and data available, organizations can confidently list IT outsourcing’s strengths. The same can be said for potential drawbacks; they’re well known.
The consensus typically lists multiple common advantages, as well as many of the same potential disadvantages, when technology services and support are outsourced to an outside vendor. Here’s a frank examination of each pro and con.
IT outsourcing advantages
Whenever reviewing the benefits of a healthy outsourcing relationship, many advantages frequently surface. Here’s a look at each of the benefits commonly associated with outsourcing IT services.
Lowers overall operating expenses
An important and primary advantage of outsourcing technology services is the fact doing so typically helps organizations lower their overall operating expenses. This is the first benefit technology research firm Gartner lists when describing the advantages of IT outsourcing.
Because technical tasks—including administration, monitoring, troubleshooting, management, after-hours response and support—are fulfilled by the outside partner, an organization no longer needs to maintain the same level of in-house personnel, thereby reducing or eliminating the corresponding salaries and benefits costs or at least permitting the re-assignment of those resources. With competition for qualified technology professionals always a challenge, and with profound societal shifts and widespread changes in occupational philosophies occurring, the acts of recruiting, hiring and retaining technically competent employees are expensive and time-consuming tasks that are eliminated for companies choosing to outsource, as those burdens are among those transferred to an outside provider when outsourcing technology services.
Expense advantages accrue in another way, too. Since managed service providers and other IT consultants build strong relationships with various hardware manufacturers, establish multi-tiered partner relationships with a variety of software developers and purchase material in volume from IT distributors and solutions aggregators, they obtain pricing individual businesses often simply can’t match. Subsequent discounts and savings are often passed to the customer as part of a broader initiative to build strong client relationships that aren’t dependent upon hardware or software sales. Corresponding savings often further assist an organization in lowering operating expenses via outsourcing.
Eliminates service gaps resulting from in-house staff illness and vacations
Outsourcing technology services addresses another common problem firms routinely must battle. When fulfilling IT functions in-house using their own employees, many companies experience shortfalls in support, coverage and troubleshooting capacities and even operations disruptions. These issues arise regularly when in-house personnel are on vacation, call in sick or must take a personal day. Contracting technology services to an outside provider eliminates these continual coverage gaps for these essential IT functions that occur when using in-house employees.
Provides access to a wider range of technical skills and expertise
As mentioned previously, recruiting, landing and retaining technology professionals is becoming an increasingly difficult challenge. Further complicating matters, most career-trained technology experts can reasonably maintain expertise with a half-dozen technologies when, unfortunately, organizations often require personnel to be proficient with a couple dozen. Just consider a common list of requirements for even a small business:
- Voice and data circuits
- Telephony needs
- Door access controls
- Security cameras
- Alarm and life safety systems
- Integrated HVAC systems
- Structured cabling
- Wireless networking
- Server administration
- Hardware configuration and maintenance
- Cloud services
- Business continuity and disaster planning
- Desktop administration and support
- Help desk services
- Email administration
- Proprietary business applications
- Mobile device management
- Hardware procurement
- Software licensing
- Web site administration
- E-commerce needs
- Application development
- Special projects
When working with an outsource IT provider, companies typically receive access to a wide range of technical skills, knowledge and expertise, a fact industry news and analysis website TechTarget acknowledges within its description of an MSP’s advantages and disadvantages. The combined veteran knowledge often collected within an IT consultancy is difficult to match within small and medium businesses, in particular, and frequently helps consultants better understand the nuances and dependencies associated with various technology initiatives. Such knowledge should benefit clients by virtue of the consultant already knowing how to navigate common problems and helping set more realistic expectations as to how various software and hardware projects, application updates, mergers, site expansions and relocations and other endeavors will really proceed.
Businesses outsourcing IT services should find they also gain valuable new capabilities resulting from access to the consulting firm’s range of knowledge and expertise. Properly managed, the relationship can generate new strategic and competitive advantages previously unavailable.
Following international hostilities and amidst ever-sophisticated cyberthreats, private sector businesses face unprecedented cybersecurity risks. With state-sponsored and other malicious actors incorporating artificial intelligence (AI) and machine learning (ML) technologies within their cyberattack strategies, organizations must prove more deliberate planning and administering their cyber defenses.
Most organizations will find it difficult to match the cybersecurity knowledge and expertise collected within a technical consultancy. Many IT services vendors manage internal dedicated security departments to better assure they maintain pace with cybersecurity developments, which change rapidly. The speed at which various IT security applications, systems, strategies and approaches evolve shows no signs of abating, and keeping current with the latest trends and techniques can be a full-time job in and of itself. Outsourcing cybersecurity services, in fact, is almost its own cottage industry, surfacing widespread popularity in Security as a Service (SECaaS), Managed Security Service Providers (MSSPs), Managed Security Operations Center (Managed SOC) services and even Business Continuity Management (BCM) options.
As a result, working with an outside consultant or cybersecurity specialist firm can improve an organization’s cyber defenses, as TechTarget also notes. The essential nature of IT functions and the fact risks from both internal and external threats are increasing makes bolstering cybersecurity defenses an important priority. However, the range of skills needed to plan, implement, monitor and maintain cyber defenses exceeds most organizations’ in-house capabilities. Firms, subsequently, can often improve their security posture, better educate users and reduce threat surfaces by entrusting those responsibilities to an expert possessing the staff and means to fulfill those functions more effectively.
Enables the organization to focus on its core purpose and processes
Another advantage commonly associated with outsourcing IT services is the fact offloading these responsibilities frees a company to focus on its core mission. Forbes states it’s time to outsource technology services whenever the function begins taking time away from your core business focus.
By removing the need to administer, maintain, monitor and secure a multitude of technology systems, and by eliminating the need to have to remain current with new standards, requirements, products, platforms and threats, not to mention business continuity and disaster recovery strategies and solutions, organizations can dedicate time, attention, energy and salaries to servicing their unique mission and processes. The Harvard Business Review is among those noting that “outsourcing can free managers to focus on more strategic, higher-value activities.”
Competition for attention is already intense. Eliminating IT concerns better permits organizations to regain and retain an internal focus on the core interests, practices and problems unique to the company and its customers.
Permits improving disaster planning and recovery capabilities
Disaster planning strategies are, unfortunately, sometimes overlooked by many organizations. Yet, these are essential functions that must be addressed, as the US Department of Homeland Security reviews in detail on its Ready.gov website, which aims to assist organizations in preparing for and managing crises. Natural disasters, human error, purposefully malicious intent and a host of other factors routinely conspire to disrupt operations.
Once an incident occurs, it’s too late to prepare for recovery. Business continuity planning must occur in advance. Fortunately, the options and strategies available to firms are ever-increasing and frequently flexible. Technology services firms are typically familiar with the variety of software, systems and services from a host of different vendors ultimately designed to maintain operations in the event of a crisis, but organizations operating in other industries are less likely to be familiar with such options.
IT service providers can design plans and processes to meet most organizations’ needs and budgets. But the trick is to prepare in advance before disaster protection and recovery processes are required.
Technology consultants, which typically routinely must assist clients in recovering from such crises as fires, floods and thefts, to name but a few potentially disruptive events, are usually more experienced with such disasters than is a firm that’s never encountered such trouble. The corresponding disaster recovery experiences can help a technology services partner better prepare a client for the myriad necessities that arise than can a company that’s never experienced or recovered a client overcoming a disaster. Working together, a client and an IT services provider should be able to build a better business continuity management (BCM) and recovery strategy than could the client operating by itself.
Provides great scalability and flexibility
When managing technology functions in-house, it’s more difficult to increase administrative and support capacity quickly. Recruiting and hiring proficient technical staff is a challenge, as previously reviewed.
The same is true for deploying new technologies, such as converting to a new e-commerce solution or switching proprietary business applications. Accessing the required expertise can prove a sizable challenge. But technology services vendors are typically positioned to do just that.
IT services firms usually already support a number of clients working in a wide variety of industries. Whereas in-house technology professionals might prove expert with a specific firewall platform, the business’ existing software programs and another discipline, such as email administration, consultancies employ numerous professionals possessing expertise across a multitude of applications, hardware platforms, industries and disciplines. As a result, working with an outside technology services firm should provide the organization with immediate scalability (both increases and decreases in demand) as solutions vendor and Fortune 500 company CDW notes, and expertise in technologies new to the client organization. Any single company will typically prove hard-pressed to try and match the breadth of knowledge and corresponding expertise-on-demand an IT services firm provides.
IT outsourcing disadvantages
The benefits of outsourcing IT, as just reviewed, are plentiful. The resulting advantages can provide important and even critical gains, including reduced operating costs, competitive advantages and improved disaster and cybersecurity preparedness. But disadvantages arise, too. Here’s a look at each potential drawback common consensus frequently surfaces as a possible problem.
Makes the organization dependent upon the vendor for service and support
An apparent obvious observation, the fact remains that, when an organization outsources an essential function—whether for accounting, legal, tax, human resources or information technology services—the organization becomes dependent upon that vendor for fulfillment of those essential services. Should the contracted provider prove unprofessional or incompetent, poor service will result. Poor service can result in disrupted essential functions and dissatisfaction with the relationship. The US Government Accountability Office (GAO) observes proper relationship management strengthens interactions between clients and providers and assists achieving expectations.
Provides the organization with less control of quality and standards
When outsourcing service, the organization becomes a customer subject to the provider’s business model, staff, strategies and solutions. Disagreements or mismatches sometimes arise.
For example, an organization may believe deploying standalone antivirus software on its workstations is all that’s required to fulfill cybersecurity requirements, whereas the outsource technology provider may insist on leveraging a centrally managed antimalware solution that uses next-generation technologies to proactively prevent threats while integrating with a broader network cybersecurity system that’s supplemented by periodic end user education. Or, a customer may expect a printer issue impacting a single user on a weekend to receive more rapid response than the provider typically assigns such situations.
Whether selecting a tax preparation firm or a technical services provider, when organizations outsource services, they surrender control over many standards and processes. Quality of service issues—as with the case of the user having trouble printing—can also occur.
Ask providers how they address complaints. Explore, too, what mechanisms are in place, such as continual customer satisfaction surveys and similar initiatives, to monitor and adjust service as might prove necessary.
Makes the organization dependent upon the provider for project deadlines
When outsourcing IT services for a project—such as an office relocation or the deployment of a new cloud services application—the vendor scoping the project, determining dependencies, coordinating stakeholders and executing the initiative becomes responsible for setting and hitting deadlines. It’s possible the outsource provider’s priorities or capacities don’t always match the customer’s requirements, a circumstance likely to create dissatisfaction and frustration.
But that’s not a new problem. The Harvard Business Review noted back in 1995 that “a company will inevitably clash with IT suppliers over how to interpret the service levels spelled out in their contracts.”
Whereas an organization could order in-house employees to work overtime and weekends to try and meet a specific or accelerated deadline, there’s no guarantee an outsource services provider will do the same. So it’s important vendors and customers have frank discussions upfront as to how such conflicts will be resolved.
Places quality of communication responsibilities upon the outsource partner
Ultimately, the quality of communication is up to the IT vendor. Even when an organization as the customer assigns a specific employee to manage the outsource provider, and even when an organization is professional, mindful and diligent coordinating the technology services relationship, there’s no guarantee the IT services firm will respond in kind. The consultant itself must value the partnership and prioritize ensuring the customer remains satisfied with the relationship when questions or problems inevitably arise.
Cloudstaff, an international provider of outsourcing services, notes there are several steps firms can take when contracting services to an external partner to prevent communication issues. The company recommends conducting regular check-ins, adjusting communications approaches when working with remote teams and leveraging video meetings to eliminate many common problems, among other steps. CIO Magazine, meanwhile, touts the importance when outsourcing of being proactive by answering anticipated questions before they’re asked and standardizing the timeliness and formats of regular communications.
Requires trusting the outside vendor to maintain confidentiality
Not all lists collecting the potential disadvantages of outsourcing technology services include trust issues as a possible drawback, but the nature of the relationship requires customers prove comfortable forming the partnership. Because technology services vendors typically must receive full permissions enabling the consultant and its staff to administer, back up and safeguard the customer organization’s processes and data and support its employees, the organization must trust the vendor to maintain the confidentiality of that information.
Subsequently, weigh a potential partners’ reputation before committing to a contract. Meet with an organization’s representatives to learn how important the business relationships are, personally and professionally, to them. Speak with a few of the partners’ existing customers, too, if possible, as their experiences will help you better understand how the provider truly operates once work begins.
Sometimes lowers in-house IT staff morale
Occasionally overlooked as a potential drawback of outsourcing IT services is the fact in-house employee morale can suffer as a result. Whenever an organization outsources services, a natural reaction may occur in which the company’s employees worry they can be replaced or are unnecessary. In other cases, in-house hard-working staff may fear the need to outsource technical expertise means they let the organization down by failing to fulfill an obligation they believe they should have proven capable of addressing.
Anticipating such concerns is the first step. Conducting prompt and frank discussions with any potentially impacted personnel is the next. While staff members may not readily admit to any unease or anxiety resulting from the need to outsource specific responsibilities, providing opportunities to openly discuss their concerns is a critical task not to be skipped.
Should your organization outsource its technology services?
Outsourcing essential services possesses both pros and cons. When it comes to IT services, as a long-established practice the benefits and drawbacks are fairly well documented. Each organization, ultimately, must determine whether contracting with an outside vendor will work best based on its own unique set of circumstances.
While technology outsourcing advantages—such as gaining access to a vast range of technical expertise and knowledge and lowering operational expenses—are difficult to approximate when servicing technical responsibilities in-house, there are many steps firms can take to minimize the chances of potential disadvantages occurring.
Organizations considering outsourcing can perform proper due diligence before selecting a technology solutions provider, a helpful step in avoiding cultural mismatches or disagreements regarding service quality. Service Level Agreements (SLAs), meanwhile, are a common vehicle whereby technology vendors can help customers set service response expectations and eliminate corresponding concerns or misunderstandings.
Not all outsourcing disadvantages prove true, either. In-house technology professionals are sometimes relieved, for instance, when particularly trying or complex responsibilities are outsourced. Gaining access to skilled technical expertise from the outsourced vendor’s team can actually free in-house employees’ time and permit them to better focus energy on more meaningful tasks.
Firms seeking technical assistance can further judge potential service providers several ways—including by reading reviews, conducting in-person meetings to determine whether the two companies’ cultures align and speaking directly with the technicians who would service the customer. That said, there’s often no substitute for simply speaking with a few of the technology provider’s existing customers to learn first-hand about their experiences.
Still have questions?
If you have other questions regarding outsourced technology services, call Louisville Geek at 502-897-7577 or send an email to [email protected].