Publication by Jamie Johnson, U.S. Chamber of Commerce

Many companies choose to outsource their information technology (IT) services to an outside vendor to save money and gain access to the latest tools and technologies. Let’s analyze the biggest benefits of IT outsourcing and how to know whether you should outsource it or keep your IT services in-house.

What Is IT Outstourcing?

IT outsourcing involves hiring an outside company to manage part or all of your company’s IT needs. These activities include providing technical support, network management, and cloud services. IT outsourcing has become increasingly common because it can help businesses save money, operate more efficiently, and access outside expertise.

Types of IT Outsourcing

Let’s look at the different types of IT outsourcing and the type of business that can benefit from each one:

• Offshore: Offshore outsourcing involves hiring a company in a foreign country to handle IT tasks. Most companies choose offshore outsourcing to cut costs, but time zone differences can present a challenge.
• Nearshore: Nearshore outsourcing involves hiring a vendor in a neighboring country. Nearshoring is another way to save money, but there are often fewer time zone differences to deal with.
• Onshore: Onshore outsourcing involves hiring a third-party IT provider that’s located within the same country as your business. This option can be more expensive than offshore or nearshore outsourcing, but vendor communication can be more timely.
• Cloud computing: With this model, companies use cloud-based services provided by a third-party provider to handle various IT functions. Amazon Web Services is a good example of this service — the company offers data storage, virtual servers, and databases.
• Project-based: If you aren’t ready to hand off your day-to-day IT operations, you can hire a vendor for a one-time project. For example, you could outsource the development of a new software application. Once the project is complete, your relationship with that company ends.

What Are the Benefits of IT Outsourcing?

Some businesses are hesitant to try IT outsourcing, but it provides many potential benefits, including the following:

• Reduced costs: It costs a lot of money to hire, train, and provide ongoing salaries and benefits to an in-house IT staff. IT outsourcing can help you save money, because you’re only paying for the services you need. And it can help you save on office space and expensive equipment.
• Outside expertise: Outsourcing can give you access to experienced IT professionals with specialized skills. These individuals often have tools and training that provide a much better experience for your company.
• Expanded time: Outsourcing IT management frees up your time to focus on other areas of your business. Your employees no longer have to spend time worrying about tech issues since your IT provider can handle problems that arise.
• Scalability: IT outsourcing allows your company to change directions or scale your services more easily. A third-party vendor can typically implement IT solutions more quickly, so you can bring new products and services to market faster.
• Reduced risk: Most third-party IT providers offer 24/7 support, so your IT issues can get resolved quickly. And your provider helps manage risks like data security, compliance, and technology upgrades.
• Improved innovation: A quality IT provider has access to the latest technology, which can help your company stay more competitive.

When Should Businesses Keep IT In-House?

IT outsourcing isn’t the right solution for every business, and there are risks involved. By outsourcing your IT functions, you’ll have less control than if you’d kept it in-house. You’re trusting some of your core business functions to an outside provider, so you want to make sure that vendor is capable of meeting the same high standards you hold.

Evaluating your company’s needs and long-term goals helps you determine whether IT outsourcing makes sense. If you prefer to have full control over decision-making and have the resources to hire and train an IT staff, keeping it in-house might make sense.

© U.S. Chamber of Commerce