One of the most crucial business revolutions in the 21st century was the beginning of IT outsourcing. Nevertheless, it’s also one of the most challenging practices, even for renowned companies. Everyone faces the same challenges and doubts: What to consider when it comes to IT outsourcing? Where to find the best tech professionals? Which tasks should be outsourced, and which should not?
These and other questions are very common when companies are considering outsourcing IT, and that’s why we want to answer them.
This article aims to pave the way for you to access the IT outsourcing industry. According to Gartner, it will reach global spending of 4.7 trillion dollars in 2023, an increase of 5% over 2022 and 10.1% over 2021.
In this regard, you need to know that if you refuse to outsource, you allow your competitors to move faster than you. According to Leslie Willcocks and Mary Lacity, authors of Advanced Outsourcing Practice, the benefits of this practice can be significant.
This is especially true when considering a meta-analysis of 1,200 companies over 15 years of research showing that outsourcing IT can bring a 20-40% improvement by widening the gap with competitors on service, quality, and cost measures.
However, to successfully embark on IT outsourcing, we have yet to mention something crucial: strategy.
Here, we will talk about building a strong IT outsourcing strategy, as without it, there is no clear goal to aim for.
What is an IT outsourcing strategy?
First, let’s start with the basics, so we all know what we’re talking about.
An IT outsourcing strategy is a plan that looks at which IT functions are better done by an outsourced IT service provider than by a company’s internal IT department, if any.
Thus, a successful IT outsourcing strategy requires input from many different departments, such as operations, legal, supply chain, and human resources.
What are the benefits of an IT Outsourcing Strategy?
Companies need to outsource their IT because it offers countless benefits, including six that stand out, according to MIT data:
- Cost reduction
- Focus on what your company does better
- Access to expertise/skills
- Improve business, processes, or capabilities
- Access to leading-edge technology
- Flexibility and control
Now that we have established what an effective IT outsourcing strategy is and how it can help us, we can move on to the first key.
#1 Review your company’s structure
Identifying which of your company’s activities are strategic and highly profitable is one of the key steps for a successful IT outsourcing process. It’s evident that the strategic and profitable activities should be kept internally, and the routine or support activities should be outsourced.
You can consider two criteria to clarify what these activities are:
Resource-intensive activities or those requiring specialized services
IT outsourcing, in these cases, lets companies enter a new market without having to make a big investment right away.
Relatively independent activities
By outsourcing tasks that are relatively independent of the company’s other functions, you can ensure that they are performed by specialists in the field. This will guarantee a high-quality delivery and allow your company to be focused on what matters.
#2 Align your teams
Once you have decided which IT tasks you are going to outsource, you need to make sure that these tasks are clear so that the company’s and the outsourcing employees don’t conflict with each other.
In this sense, the first thing you need to focus on is your local team.
To effectively involve your local team in your outsourcing strategy, you should include them in discussions and strategy implementation. It’s also important to dispel the outsourcing myth through effective internal communication, where you clearly explain why you are outsourcing a task and reassure them that their jobs are safe.
When your native team feels comfortable, you can move on to the next stage, where you strive for a common synergy. Your responsibilities here include communicating your vision, managing internal change, and working for a team’s cohesion where internal and outsourced teams work side by side. You’ll know you’re doing a good job when both teams want to reach the same goal.
#3 Clarify expectations
On the surface, IT outsourcing may seem very positive and effective, but it can be a major headache if you don’t have a clear roadmap. Establishing the business value of IT outsourcing and how it supports your company’s goals is crucial before you start any work.
We recommend you divide up the responsibilities and choose leaders for each task. Furthermore, decide what’s up for debate about the project and what’s not.
#4 Check your vendor’s reliability
The exponential growth of the IT outsourcing sector, which is expected to be worth more than $800 billion by 2025, is also a big risk because when there is a lot of demand, there may not be enough good quality supply.
In this sense, having a trusted supplier by your side is essential. When choosing a vendor, looking for reviews on platforms such as Trustpilot, Google Customer Reviews, Crunchbase, LinkedIn, or Glassdoor is prudent. In addition, one of the best practices in devising an IT outsourcing strategy is to start with small tasks and proceed by assigning more work as they prove themselves.
#5 Sign a win-win contract
As people say, words easily go with the wind, so contractual terms are the best solution to shield organization owners from unfavorable circumstances that can arise from a partnership with an outside team. That’s why negotiating a mutually beneficial contract is the most significant part of an effective IT outsourcing strategy.
When you start negotiating, it’s essential to remember that IT outsourcing is usually a long-term strategic alliance, so both parties should come out of the negotiation feeling comfortable.
But what’s the secret to achieving a win-win contract in IT outsourcing?
The key is to be open to talking to your IT business partner as much as both parties need until you reach a fair agreement.
Remember that the paper should address many of the points we mentioned earlier, such as detailed project description, the definition of responsibilities and tasks, quality expectations, schedules, costs, and expectations for both your company and the IT provider you chose.
#6 Monitor the process
Although we have already covered the keys to building an effective IT outsourcing strategy, there’s still one thing left to add.
To make sure you meet your primary goals, there needs to be enough transparency, so you can keep track of how the IT team is doing. It’s essential to do this to ensure you are receiving the service you paid for.
Now that you’re clear on how to create an effective IT outsourcing strategy, what types of tasks will you be outsourcing?