IT Project: Internal Development or Outsourcing — Advantages and Disadvantages
Companies literally suffocate if the software is not thought out or out of date. The capacity of changes in business and the need for automation of the routine processes lead to queues for IT tasks. This is true for young startups, middle-size businesses, and massive corporations. And if for the first segment the needs quite often can be covered with the small in-house development team, the corporate software solutions demands strong expertise and powered IT departments to support the regular needs. So, we are coming to the lack of IT resources, and have to widen the IT infrastructure. This leads to extra management costs, the necessity to educate new staff, and decreases the speed of development.
Changing the approach to software development in non-core companies
IT takes up an increasing share of the customer’s business process, its budget, and the impact on efficiency. There has been a fundamental change in the understanding of the role of the IT service in the structure of the company. It has grown into a powerful business unit, and often the CIO is the second person in the organization. Companies have realized that in today’s world of information exchange and quick decision-making, quality software has become a key success factor.
Companies themselves cannot always afford to engage a software development. This is easily explained by the fact that software development is a rather specific and unconventional sphere. Not every company can do such work. Therefore, IT outsourcing enters the scene, that is, the involvement of an external contractor. After all, what is it if not hiring a professional to solve an unusual task for you?
To put it simply, IT outsourcing is the transfer of work on the maintenance of the IT infrastructure to a certain specialized company, as defined by serokell.io. At the same time, the contractor can be entrusted with both the entire system (full outsourcing) and its individual components or services (partial outsourcing). Service refers to the development, implementation, and maintenance of the IT infrastructure.
Of course, not all outsourcers are equally useful, and you need to make a choice in time between a company that can, as it were, everything in the world, and a company that can only do what you need.
The advantages of outsourcing
The advantages and prospects of use are:
- high-quality IT management, due to which cost reduction and the fastest possible solution of indirect problems are achieved;
- reduction or elimination of budget spending on the search for professionals with relevant specialized and technical education, savings on education and training, certification and licensing;
- there is no need to organize substitutions and duplication in the event of illness or weekend employees, pay for labor leave and sick leave;
- use of the company’s resources for the main tasks and specialized purposes;
- attracting highly qualified personnel for one-time specialized work and supporting the functioning of networks and servers in an uninterrupted mode, thereby maintaining the required quality and necessary service.
Which is better – outsourcing or a hired professional?
To figure out how to better organize the work of an organization – by hiring dozen of specialists in the company’s staff or by hiring an outsourcing company – you need to weigh all the advantages and disadvantages and compare the options.
Benefits of Hiring Professionals for work in-house:
- direct management and organization of the work of hired personnel;
- the ability to involve employees in third-party actions that are not related to specialization;
- lack of dependence in decision-making and performance of tasks from the contractor.
Disadvantages of keeping a specialist on the staff:
Permanent payments from the budget for maintenance, that is, salary, vacation pay, sick leave.
Additional management efforts for monitor and evaluate the work.
The need to search and select professionals and the cost of competition, training, and certification. This is especially true for small companies with high staff turnover.
Problems in the implementation and integration of new technologies and the emergence of innovations in the work, because of this, an increase in the risks associated with this, and an increase in the deadlines for completing tasks.
Decrease in the quality of performance of duties due to the presence of a guarantee of the preservation of the workplace and the monotony of the work process.
Pros and cons of outsourcing
As for an external IT outsourcing company, the advantages of engaging it are as follows:
- a guarantee from the company in terms of the quality of work performance and the provision of service in general;
- distribution of activities in such a way that maximum attention is paid to the main directions and processes without being distracted by additional tasks;
- no need to search and select personnel, check the compliance of a specialist, training and certification;
- fast integration of innovative ideas and technologies into the company’s activities;
- instant mastering of knowledge on innovations and training of customer’s personnel.
As for the shortcomings of ordering the services of an outsourcing company, there are practically none. However, many business leaders point out:
- fear of dependence of the organization on the contractor;
- the risk of loss or leakage of information that is confidential for the customer.
Outsourcing is perceived by many as a dangerous service with high risks. This is justified by the lack of confidence in third-party organizations. Often, misconceptions arise from myths spread on the Internet by employees in order to save jobs.
But the objective advantages of IT outsourcing still outweigh the likely disadvantages. And if you take a closer look, it becomes obvious that all possible risks are somehow connected with the shortsightedness of the customer or the bad faith of the contractor. That is, in order to protect yourself, it is enough to comply with just a few conditions:
- clearly plan a business strategy;
- predict the profitability of IT outsourcing;
- not transfer too many processes to one contractor;
- cooperate only with trusted and reliable performers.
Nowadays, the volume of software development required for the work of each specific organization is constantly growing. The desire to control this incomprehensible and non-transparent process is quite normal. At the same time, this is an alien task for a non-core company, and not every company can successfully work with it. Avoiding risks, instead of creating a full-fledged development center within itself, the company logically chooses outsourcing. And now, when deciding to switch to outsourcing, she needs to solve two issues: developing a competent approach to transferring projects outside and linking new projects with existing systems. Can the company do this? Only if the approach to IT in it is correct in general.
Often in business there is a desire to save money. And it would seem the easiest way to agree on a cheaper labor force when choosing an outsourcing company. But this is not true in IT. It will be better to choose experts with higher hourly rates, but get a reliable solution in a short time. Your win is insecurity, invulnerability. Plus, three hours of professional work can cost less than a week’s work of a mediocre worker, and the results are incomparable.
Attracting outsourcers gives a lot of advantages to companies whose resources do not allow them to independently control all production processes. But even large corporations prefer to outsource IT in order to concentrate directly on the business. This is exactly what IKEA, Kodak, Mazda, Danon, Unilever, and many other industrial giants have done.