Weighing the Costs and Benefits of IT Outsourcing

November 28, 2022  |  Sergei Levteev

Prices for everything seem to be increasing these days. Whether it’s due to supply chain delays, materials costs, or other issues, chances are high that your bottom line isn’t quite as solid as it was five years ago.

Like many business owners, you may think that now’s the time to tighten your belt and avoid extraneous costs, especially those that arise outside the company. So what about IT outsourcing costs? When weighing the costs and benefits of IT outsourcing, is it worth the investment?

Prices Continue to Increase—Talent Does Not

The hard truth is that prices continue to get higher for everything. Technology and the global economy have continued to surge in price. Costs surrounding food and energy push inflation around the world at a rapid pace. In the last five years, the cost of living has steadily gone up with no signs of stopping any time soon.

It’s tempting to batten down the hatches and prepare for the worst. You may wonder, is now really the time to invest in software and spend on IT outsourcing costs? Is it cheaper to develop solutions in-house? Shouldn’t I keep the money within our team?

When understanding and weighing the costs and benefits of IT outsourcing, it helps to look at the factors that continue to play a role in the global market.

One major issue that nearly every company is facing right now is a talent and labor shortage. Finding a skilled workforce is challenging, and once you’ve built one, it’s hard to keep them. Even if you have the right supplies and the needed resources, do you have people with the skills to carry out the job?

When it comes to your technology, the expertise shortage plays a considerable role. You can have great ideas and a solid stack of technology-based solutions, but you’re stuck without staffing to program, test, update, and continue to evolve your IT offerings. Without the right IT expertise, you may expose your company to complications, technology investments that go nowhere, and, at worst, a data breach.

How long will the current dearth of talent last? Experts aren’t sure, but the outlook isn’t optimistic. The UN shared that by 2030, there will be an estimated 30 million fewer workers who have ‘aged out’ of the workforce in the five key industrialized nations. While the exact numbers may be up for debate, the outlook is still clear—we will continue to fill roles with the talent and expertise needed to optimize technological offerings.

It’s time for CEOs and CIOs to look outside their company and consider IT outsourcing costs as an investment to shore up their potential labor shortfalls. The benefits of outsourcing IT can be significant to shorthanded companies.

Exploring the Benefits of IT Outsourcing

Outsourcing IT services offers many benefits to your company and your bottom line. It’s about the unique expertise that companies like IBA Group offer. It helps your company stay nimble and flexible because you always have expertise from the field, helping you avoid in-house complacency.

While many business leaders may hesitate to commit to a long-term relationship with an IT service or supplier, it’s essential to recognize that the labor shortage and global inflation are likely to continue for at least the short-term future.

The question for many becomes, how do we determine what IT services and support we need to outsource and what are the benefits to our company? Do we outsource all IT, or do we pick and choose on a case-by-case and project-by-project basis?

Look at What’s Working

Before you start to weigh the benefits of IT outsourcing, it’s important to pinpoint exactly what you need. Then, look at what’s working well for your company. The idea isn’t to force out or demoralize your (likely, already stretched) team by outsourcing their work or creating a feeling of scarcity in your organization.

Your IT staff is often your best resource to help guide you through your strategic plan for contracting IT services. Transparency will keep everyone on the same page and help contingency staffing blend into your overall workforce strategy. For example, what areas of the labor shortage are felt most deeply by your IT department? What projects are suffering, and what is needed to help them bridge the gap? Where are knowledge and expertise lacking?

It’s also important to look at the strategic picture from a broad perspective. What are the expected five-year demands and growth? What scenarios does your business expect to face, and what will your IT needs look like in the near future and the longer term? How can you bring your current technology offerings forward to meet the demands and needs of your customers?

Consider IT Outsourcing Costs

IT costs are rising (along with everything else). Some areas become more affordable as technology evolves—for example, on-site hardware costs may decrease. But just as those areas become less expensive, software, database and cloud management, automation tools, and DevOps increase.

However, with the right assessment of your needs and expert services, you will save money on IT in the long run. Much of the cost of IT depends on your industry and your revenue. For example, in the financial services industry, IT spending ranges between 4.4% and 11.4%, whereas those in retail may spend between 1.2-3.0% of revenue.

In some industries, you may focus your IT spending on machine learning, automation, or database management. In other businesses, like financial services, your investment may focus heavily on security and data protection.

How does IT outsourcing save you money? It’s essential to consider the human capital within those IT costs. The right expertise can help you find technology solutions that streamline efficiency, remove redundancies in your company, offer user-friendly customer support, and increase security. Essentially, the right IT expertise pays for itself by protecting your business and helping you lower costs in other areas.

Consider the Risk to Your Company

Just as the right IT expertise can save you money, a lack of expertise can quickly cost your company everything, including your reputation.

Intelligent automation and RPA, for example, can help streamline processes significantly. It removes the rote tasks from your workforce and helps them quickly get work done. But automation gone wrong can eat up time with troubleshooting, mis-filled orders, mistakes, and bad data.

Similarly, in manufacturing, lifecycle management tools, automation, and production performance analysis systems can help you produce more and work collaboratively across different locations. However, without the right IT expertise to support these tools, one misstep can sideline production at a great cost to your team.

Finance is no exception either. Security is paramount when managing, storing, and automating financial and private data. Your company is operating in a contract of trust with your clientele; any breach could destroy your business and standing. So, the question becomes not ‘can we afford to invest in IT expertise?’ but, ‘can we afford not to?’

Recognize the Benefit of a Global Marketplace

One major benefit of today’s global market is that IT services are available from many sources and in many different areas. You’re no longer beholden to a geographic location. You can outsource IT services from many different places, and access expertise worldwide.

Despite the supply chain shortages and pipeline problems that plagued the past few years, IT expertise is accessible worldwide. As a result, business leaders are beginning to broaden their outlook and consider tech talent outside their home base.

Not only is there potential untapped talent throughout the global market, but much of that talent can be more affordable and quickly available to businesses willing to widen their outreach.

The other benefit of a global marketplace is that despite natural disasters, political unrest, and other issues affecting your business’s central location, you can protect your assets by outsourcing IT talent and services to other and multiple locales.

IBA Group has a network of development centers in nine countries. This allows us to shift and adapt, remaining flexible to protect critical tasks in secure locations, no matter what situations arise.

If you’re considering the benefits of software outsourcing services, whether a small portion of your technology stack or a larger component, IBA Group can help. We offer a diversified spectrum of IT services, including mainframe support and development, enterprise app development, SAP support and migration, cloud computing, business analytics, and more. Throughout our 30-year history, clients have been entrusting us with transformation and automation solutions that drive their efficiencies.

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