Imagine your employees come to work one day and discover that your system is offline. Also, you and your team do not have access to your work devices and equipment, and you have pressing matters to attend to throughout the day. So, what would you do? There is no doubt that the more we incorporate computers, laptops, and technology, such as IoT, into our business processes and procedures, the more we rely on them.

From sales and manufacturing to accounting and finance, we leverage technology and applications to simplify and streamline our business operations.

As technology continues to prevail, evolve and expand across almost all aspects of our lives, businesses and companies in Australia are increasingly relying on external services to provide them with the tech support and guidance they need to manage their internal IT departments successfully.

You may have thought about outsourcing your organization’s technological services. Nowadays, it is quite common to outsource specific processes or aspects of operations to a specialized company. And among these technology subcontractors, the most common is technological or IT outsourcing.

Sometimes, organizations think they can handle everything, but they need some help and support. You should know that the word “help” here means that they don’t want to waste too much time, resources, and materials and focus on what they already did well.  With IT outsourcing, businesses of all sizes in Australia can speed up workflows and enhance their products or services.

What is IT Outsourcing?

Information technology or IT outsourcing means hiring an external party – an outsource services firm or an experienced and talented freelancer) to perform services like consulting, software development, quality assurance, cybersecurity, software maintenance, support, etc.

Did you know that software outsourcing has become prevalent for companies and businesses all over the world? And many startups and large corporations have a long-term and fruitful partnership with outsourcing providers in different parts of the world.

According to Statista, the international outsourcing market amounted to a whopping $88.9 billion in 2015. And India, Malaysia, and China are the top three countries that companies and businesses outsource.

IT outsourcing is a common practice among enterprises in all industries, verticals, structures, and sizes for an important and valid reason. IT outsourcing is beneficial in several ways.

It is worth noting that outsourcing IT department responsibilities in your company is much like outsourcing customer support and HR services, in that you hire third-party providers and firms to deliver a wide range of required IT services effectively.

The most common tech services that enterprises outsource include:

Statista revealed that the outsourcing services market would witness a revenue increase each year. Keep in mind that by 2025, total revenue is expected to exceed $133 billion.

What’s an IT Outsourcing Provider or Company?

An IT outsourcing company is a service provider hired by organizations and businesses to provide technology services, such as help desk services and resources. This is different from an in-house tech team, which comprises employees who work permanently for your business.

In other words, an outsourcing company or firm acts as a third-party vendor that usually works with multiple clients in order to develop technology solutions on either a contract or as-needed basis. 

Types of Technology Outsourcing

Depending on the distance, there are several types of IT services outsourcing.

Onshoring

Under this arrangement, your business can outsource IT services, such as web development, to another organization or person within your home country. Onshoring means trusting some or all IT services to a third-party or service provider located in the same city or country.

For instance, a company based in Sydney may outsource services to a provider based in Melbourne. In most cases, this is the most convenient and flexible arrangement. This is because there are no cultural or language barriers and minimal — if any — timezone issues and discrepancies. However, it’s often the most expensive arrangement as well.

Nearshoring

This kind of IT outsourcing implies that either both companies are present in the same time zone or the time difference doesn’t exceed two hours. So, the process of sending IT-related work, such as web design, to a provider in a country or region that shares a border with your own is known as nearshoring.

Offshoring

Finally, outsourcing to an offshore service provider or partner means working with a firm overseas. For example, a company in Australia could outsource IT services to China or India. You will be happy to know that this is often the least expensive arrangement.

However, you should be aware of some complications, like communication issues and geographical barriers. In most cases, the time lag or difference between business partners is five hours and more.

Tech Outsourcing in the Existing International Context

You know that remote working has increased as a means of practicing social distancing during the unprecedented COVID-19 health pandemic. Led by businesses and companies in response to several calls from the WHO (World Health Organization), remote working is helping companies manage the issues triggered by the novel coronavirus.

The international health pandemic had a considerable influence on the number of businesses using IT outsourcing services. Also, many businesses and firms that did not even consider outsourcing IT in the past are now seeking a trusted IT services vendor in order to handle an unstable economic backdrop. However, to make the most of your outsourcing arrangement, you should keep communicating with your IT outsourcing partners.

Top Benefits of IT Outsourcing

Cost Reduction

Delegating software or application development processes to a third party is beneficial as it saves your company’s resources and time. When you have fewer employees on your payroll and don’t need to acquire specialized IT equipment and devices, outsourcing IT requirements will help your business save money. Also, keep in mind that decreased operating expenses mean improved profits.

More Focus on Your Core Business Activities

Outsourcing your IT needs can free up your business to concentrate on its strengths, as third-party IT providers or vendors take on the responsibility of daily operations and tasks. This will allow your staff to focus on their main tasks as well as on future strategies.

Share Risk

You will be happy to know that compliance, functionality, security, and other IT-related risks are mitigated or reduced when you outsource projects or tasks to a third-party provider. Note that this is because the IT provider will share the risk and responsibility as a partner in the venture, making you safer and more secure overall.

Increased Efficiency

Keep in mind that choosing an outsourcing provider that specializes in the service or process you want to outsource will help you achieve a more efficient and productive service, usually of greater quality.

Outsourcing – Due Diligence Checklist

A due diligence checklist or questionnaire acts as a compliance check with certain standards. The checklist helps buyer organizations understand the processes and procedures of an IT potential vendor and filter out the suppliers and companies that don’t comply with required standards. The Information Technology managers in your organization should use IT Outsource Due Diligence Checklist Templates as a valuable guide to determining the outsourcing candidate’s capability and expertise to provide services. 

You should ask for references and contact names. What is the vendor’s history? How long have they been operational? Have there been any strange valleys or peaks? Has the IT vendor been in any significant disputes or litigations?

You should also confirm that the supplier company has the required licenses and permits to do the work that it says it does. Apart from basic contact details, the checklist should cover the company registration number, tax number, and information about company ownership.

You should also consider if there are any pending or threatened claims or lawsuits that could affect the vendor’s financial standing. Has the IT vendor acquired or divested entities recently? Does the IT vendor often partner with another entity in order to provide certain services? If so, what is the relationship with the partner?

Specialization and Expertise

Are you looking for a specific skill set? If that is the case, make sure your outsourcing vendor or firm has that skill set and expertise available from its workforce.

For example, if you’re a healthcare organization or medical provider outsourcing your marketing content creation, it is vital to make sure that the firm you outsource to has the experience and knowledge in the healthcare industry.

Drawbacks of IT Outsourcing

Although IT outsourcing can be a smart and simple way to lower internal expenses, there are some potential downsides, as well. By handing over responsibility for specific aspects of your operation to other specialist companies, your IT capabilities may become more limited.

As outsourcing entails handing over direct control over a business process or function to a third party, it comes with some other risks as well. For instance, when outsourcing IT operations, you might experience problems with:

• Service delivery – which might fall behind time or below your expectations
• Security and confidentiality – which can be at risk
• Flexibility issues – The contract may prove too rigid or inflexible to accommodate change

Also, outsourcing your IT processes can adversely affect your production if something catastrophic, such as a natural disaster, happens at your vendor’s location. This is why you should not become too reliant on a single vendor.