IT Offshore Outsourcing for Small and Medium Businesses
In today’s business environment, even small and medium sized firms face a host of IT challenges, from managing their networks and connectivity to developing their websites and online marketing to optimizing their cloud-based services. But hiring a full-time professional does not always make financial sense, especially for small to medium-sized businesses. That is why many firms are exploring outsourced solutions to meet their needs. Outsourcing of IT expertise provides a number of benefits:
Reduced costs. If hiring, training and supporting a full-time IT professional or building an in-house team is too expensive, IT outsourcing (ITO) is a compelling alternative. ITO offers more efficiency because not only are base prices more reasonable; but companies with limited requirements can set up arrangements to pay only for the number of hours or services they require. Outsourcing also helps save costs on computers, software, hardware and other equipment required by IT staff.
Access to domain expertise. IT is rarely a core function at most companies. When businesses outsource IT services to a third party, they allow experts to do what they do best while they focus on their revenue-generating activities.
Boost competitiveness. Having access to sophisticated IT services provided by ITO firms levels the playing field between small companies and big conglomerates.
Boost productivity. A great ITO provider makes technology work for their clients by setting up the latest infrastructure to empower their clients’ staff toward greater efficiency, communication and work output. ITO providers can set up mobile connectivity and file servers that keep staff productive no matter where they are.
Reduce downtime. Just a few seconds of downtime can mean big losses in production and profits. With a dedicated ITO provider, companies get reliable IT support and immediate fixes when glitches happen. ITO providers have sophisticated systems maintenance, security and data backup procedures in place to keep businesses running smoothly.
IT Outsourcing Market and Success Stories
According to CenturyLink’s 2014 Global IT Leadership Report, companies will have outsourced about 70 percent of their IT infrastructure within five years. Many strategic IT goals will also be achieved through outsourcing. IT outsourcing continues to attract CIOs due to its capacity to reduce costs significantly as well as improve an organization’s competitive advantage.
CenturyLink reported that businesses that outsource IT services save an average of 11 percent of their annual IT budgets, with savings growing more than two-fold over five years. Revenues also pick up by 8.5 percent for 90 percent of companies that predict a revenue increase. In addition, 36 percent of organizations realize better service quality from outsourcing compared to internal solutions (Global IT Trends: IT Outsourcing Fuels Business Growth, CenturyLink Technology Solutions 2014).
Third platform technologies are also changing the IT outsourcing landscape, with outsourced cloud adoption expected to exceed in-house cloud solutions in three years. However, the majority of organizations today still prefer in-house IT models. Only about five percent of enterprises depend on cloud outsourcing. Within four years, CenturyLink predicts a reversal of this trend, with most organizations preferring outsourced cloud over limited internal platforms. CIOs commonly outsource non mission-critical applications, followed by data center facilities, storage, content management applications, and mobility solutions.
Beyond the corporate environment, IT outsourcing is making a positive impact in the public sector. United States municipalities and local governments across the world are realizing the power of IT outsourcing to transform their organizations and reduce costs. For example, the city of Sandy Springs, GA undertook a full-scale IT outsourcing campaign for its municipal network systems in 2006. The city partnered with IT provider CH2M HILL in a five-year outsourcing agreement worth $1 million. The vendor provided IT staffing solutions, disaster recovery, and remote infrastructure and security support. Sandy Springs was able to reduce costs, maintain a lower tax burden and maintain a high level of service quality by outsourcing IT to a third party (CH2M HILL Managed Services, 2006).
What to Do Before Hiring an IT Outsourcing Provider
Before deciding to contract an ITO provider, companies must make sure they do due diligence. Find out which IT functions, if any, will be better managed by a third party. Virtually all IT functions can now be outsourced, from labor-intensive software development and systems and applications implementation to non-core IT services like support, security, backup and recovery, and maintenance.
The benefits of outsourcing will vary with the type of business, the services to be farmed out, and the quality of the ITO provider. Once the decision has been made on which functions need to be outsourced to a third party, then a company can find an outsourcing partner to match those IT service requirements.
When it comes to ITO partners, it’s important to move incrementally and commit slowly. Businesses or public entities should not commit to a three-year contract before testing the waters and evaluating the outsourcer’s performance. It is advisable to try outsourcing one small project to get a feel of the process and get local staff comfortable with the switch. After that, the enterprise can consider moving on to hiring IT professionals for ongoing needs or other functions.
How to Choose an ITO Provider
From established experts to small firms that offer a wide range of services, there’s a host of ITO providers for small and medium-sized businesses to choose from. After selecting which function to outsource, it’s best to compare pricing models from different firms. Businesses outsourcing their IT must understand their existing IT architecture in detail to figure out which firm offers the best value for money.
Some companies choose to outsource to a third party firm in the same country, while others seek an offshore provider. Offshore ITO providers may be able to offer the best rates, but offshoring can be tricky for those who are doing it for the first time. Clients should look for firms that make setup quick and easy and offer flexible pricing options. Research the company (stability, services, flexibility), the management and staff, processes, and technology.
Business owners must also consider legal and regulatory procedures that cover data protection, the person or entity responsible for auditing services and fixing problems, and some degree of linguistic and cultural compatibility. To get the most out of the relationship with the ITO provider, whether located nearby or offshore, regular meetings and performance monitoring are crucial.
When choosing an ITO partner:
- Choose a reputable organization that can back up their claims with a guarantee.
- Make sure that the provider has appropriate data security measures in place and procedures that allow the client to act properly in case of a security breach or other problems.
- Partner with an ITO provider with a shared language, history and culture.
- Understand the technical language and best practices of the organization.
- Work with someone who creates a custom solution for their clients and provides multiple options.
- Delegating wrong jobs to outsourced IT service providers
- Vague scope and expectations for the outsourcing project
- Focusing solely on costs and ignoring value
- ITO firms that promise the world
- Rigid contracts and lack of flexible services
IT Outsourcing in the Philippines
The Philippines is one of the world’s top destinations for BPO and ITO. The country is very attractive to investors not only because of low labor, rental and setup costs, but also because of a robust labor force composed of experienced and highly-motivated IT professionals. Filipino workers are highly proficient in American English, and the country’s culture is more westernized than destinations like India and China, providing cultural compatibility with clients and their customers.
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