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Outsourcing IT Operations for Small Business: A Complete Guide

Outsourcing IT Operations for Small Business: A Complete Guide
August 8, 2018

Outsourcing IT operations has long been seen as a strategic decision for large organizations to reduce cost but with the advancement in technology and communication systems, small businesses can also benefit immensely from outsourcing their IT operations.

With the ease of various communication methods, small businesses can reap the benefits of professional services from anywhere in the world, without the overhead of hiring professionals on the payroll.

Why Outsource IT?

Every business aims for better financial results. Outsourcing some of your non-core activities can be a great mechanism to achieve cost saving and get higher returns.

While the primary reasons for companies to prefer outsourcing their IT support is cost saving, there can be many other reasons. Owning and managing IT operations requires an overhead particularly for organizations where IT is not the core activity.

The whole pressure of having a trained set of employees to handle your IT operations can be relieved by outsourcing these services to people who are good at it.

Outsourcing provides you with an option of hiring highly trained professionals at much lower labor rates. You enjoy the benefits of having a highly trained set of professionals who not only save cost but also provide you with high-quality services with their knowledge and expertise.

The outsourcing firms bring with them a sound knowledge of industry processes, tools and technologies. Use of the industry best practices will enhance operational efficiency for your organization, which in-turn will increase your productivity.

Another important aspect that small businesses gain by outsourcing the day to day front-office of back-office tasks is that the business owner has more time to focus on generating income and to focus on their core business.

Outsourcing can be very rewarding for small business if done in the right manner. To summarize, here are the benefits:

  • Cost Saving and no overhead of having teams on your payroll
  • Highly trained and experienced professionals to work for you
  • High Operational Efficiency and productivity
  • Better quality products and services
  • Business Growth as you focus more on your core business

What Are Some Downsides to Outsourcing Your IT?

There are two sides to every coin and IT outsourcing comes with some potential drawbacks. You may lose control over one of your critical service and your dependency increases on the abilities of your service provider.

So, if your service provider does not do a good job, you may face some difficulties. There could be a bad product delivered or inadequate customer service provided which may impact relationships with your customer.

Some service providers may also not be flexible enough or need a lot of hand-holding. You may feel that you are spending a lot of time monitoring your service provider and micro-managing them.

However, all these potential downsides can be handled by hiring a service provider who has a good reputation in the market and making your requirements and performance parameters clear to them up front.

What to Outsource?

Typical IT operations that can be outsourced include:

  • Development of applications and IT systems
  • Implementation of Applications
  • Back office or front office functions
  • IT service desk and support
  • Maintenance of applications or systems
  • IT Security
  • Back-up and restoration, etc

How Do I Outsource My IT?

Once you have figured out which operation or function you would like to outsource, the first step is to make a business case.

The business case would point out all the benefits that you will achieve out of outsourcing the operations. The subsequent step is to find the right outsourcing partner. As pointed out earlier, one with a good reputation is always a safe bet.

There are many large organizations like Accenture/Cognizant which provide a broad range of outsourcing services and there are many small and specialized IT service providers who are equally good. The decision should be made on the basis of your comfort level and value for money that you get.

Another important aspect that should be carefully evaluated is the financial benefits that this partnership will result in. You should clearly understand the cost of your operation and evaluate the pricing model offered by the outsourcing partner to clearly understand financial viability of the arrangement both in short term and long term.

Which Is Better – Offshore or Home-Based?

This is one of the key decisions that you need to take while choosing an outsourcing partner. An offshore partner may be able to offer you much lower rates than a home-based partner. The downside of an offshore service provider can be

  • You need to comply with regulatory requirements the country that an offshore partner belongs to. Some of the key areas that should be looked into are data protection and other legal requirements.
  • You may feel lesser control over offshore service providers. You need to plan how things will be handled when a critical problem arises or how their activities will be audited or monitored.
  • The cultural difference may also create problems in running the operations smoothly between you and your partner, with people related issues popping up at times. This need to be handled and people on both sides sensitized on each other’s culture. Language and culture of the customer will also be important decision criteria in-case work involves direct dealing with the customer.
  • The time difference may also pose a problem. For a successful association with the outsourcing partner, regular meetings and performance evaluation against targets are required. This may become difficult with an offshore vendor.

You may not face these problems with a Near Shore or Home-Based vendors but you may not get utmost financial benefits as you may get from an offshore vendor. Your decision should be based on the financial benefits vis-a-vis extra effort that would go into monitoring, cultural sensitization or your comfort with the regulatory compliance of the country.

Should I Go for SaaS (Software as a Service) Instead of IT Outsourcing?

Software as a Service (SaaS) is typically services provided by a vendor to manage a business application for you. They will provide you access to their application and keep a backup of all information related to your usage. You will sign an agreement with the vendor on the use of the business application and the responsibilities that they have in maintaining the applications for you.

The most suited services that can be managed through SaaS are finance operations, human resource functions, Email Configuration and Sales Force Automation, etc.

Outsourcing can be a game-changer for your business if some key decisions on services that need to be outsourced and the vendors are carefully taken. It will not only give you financial benefits but can also help you leverage talent from across the globe and increase your organization’s productivity and quality of the services.

‘Do what you do best, Outsource the rest’- Peter Drucker

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