Should we Insource or Outsource our IT Department?

Provisioning IT services to large enterprises requires a lot of skill and inevitably involves substantial costs. Many companies consider outsourcing IT in an effort to save costs, but outsourcing brings challenges of its own. Plus, the cost debate is not always all that clear cut when it comes to outsourcing IT provisioning. So, should your company insource or outsource IT? Here are a few points to consider.

Outsourcing: Why Managed Services Can Be Better

Information technology is a highly technical field that requires very specific skills. It is difficult for a non-technology business to maintain an army of workers that can cover every single IT skill to a high level of competency. In comparison, outsourced IT providers have a highly skilled expert on almost any topic. So, outsourcing can bring to the table more skills that are better developed.

Availability is another issue. Outsourced providers can respond to requests around the clock, seven days a week. Internal IT staff may not respond until the next working day starts. With an increase in flexible working, this responsiveness can really pay off.

Yet it is often cost that is cited as the biggest advantage of outsourced IT services. Internal IT teams rarely operate at maximum efficiency, but large outsourced IT providers can maximise efficiency due to their scale. Outsourced providers also have more retained IT knowledge which can help keep costs low.

Why Insourcing Can Make More Sense

Perhaps the biggest disadvantage to outsourcing lies in institutional knowledge. As much as some IT activities and tasks are purely routine – getting a printer up and running, for example – technology work that involves processes, planning, and strategy relies on an understanding of the underlying business.

Internal technology staff have a better understanding of the purpose of an organisation and know what its unique requirements are. Yes, outsourced providers can also gain some of this understanding, but it takes time and translating institutional knowledge across to an external partner is imperfect and costly.

As such many companies feel that having an internal team that is close to the business can override some of the purported cost efficiencies that outsourcing involves. Management teams can also feel that keeping a certain level of internal knowledge is advantageous. With zero internal IT skills it can be difficult to evaluate a vendor’s recommendations, never mind choosing a vendor in the first instance.

Choosing Between Insourcing and Outsourcing

The choice is not straightforward and there is no one-size-fits-all recipe. Instead, enterprises should weight up the pros and cons of each model and see how it fits in with their operations, taking into account historical experience too. Some points worth considering are:

  • Size of operations. Global multinationals stand a good chance of building a competent IT team that can cover all bases, but small to medium sized businesses can struggle to build comprehensive teams.
  • Historical experience. Can C-level leaders build and manage a technology team, or does your organization regularly end up with teams that draw complaints and who do not operate cost effectively?
  • Business processes. If your business operates well-understood, industry standard processes that can easily be handled by off-the-shelf technology an outsourced provider could potentially get up to speed quickly.
  • Security and client preferences. Some businesses, particularly those operating in a regulated industry, may need to think twice before outsourcing entire IT departments. Or, search for an IT partner that understands how and why security is particularly important in your field.
  • Existing IT knowledge. It goes without saying that it is far more difficult to build up a team from scratch, in which case outsourcing can make a lot of sense. On the flipside, enterprises should think twice about getting rid of a supremely capable internal team just on the basis of cost.

Finally, it is worth pointing out the insourcing and outsourcing is not necessarily a binary choice. Many enterprises opt to run lean technology teams, outsourcing large aspects of their IT requirements while keeping some knowledge and decision making in-house.

Cloud vendors are often a stepping stone, allowing companies to get rid of a lot of internal hardware and operational capabilities while keeping some skills on-site. This middle way ensure institutional knowledge contributes to a company’s IT requirements, while simultaneously maximizing IT skills and lowering costs.


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