The outsourcing of IT companies in the delegation of functions from one company to another specialized in this task. Its main benefits include cost reduction and access to new technologies, among others. However, if the service provider does not have sufficient capacity to perform this function.
In this article, we will see how this tool can work tactically or strategically and can adapt to the needs of the company requesting the service, being implemented at different levels of the organization that do not necessarily need to gain competitiveness. Let us see:
- What do we mean by outsourcing of IT companies?
- What are the advantages and disadvantages of outsourcing of IT companies?
- Which IT outsourcing models to use?
- What are the outsourcing levels?
- What areas can IT outsourcing apply to?
- How is the IT outsourcing decision process?
- Why do we know that outsourcing works?
- How can we help you learn more about outsourcing of IT companies?
1. What do we mean by IT outsourcing of it companies?
IT outsourcing can also refer to outsourcing or subcontracting. It represents an efficient management tool that consists of delegating to a specialized company, tasks ranging from the most basic, such as maintenance, to entire processes such as accounting or recruitment of personnel.
This allows the organization the space and time necessary to engage in activities and processes that are its essence. Those tasks make up the turn of the company, to achieve its objectives.
This process implies a high degree of trust since it gives control of a part of the company. However, this degree of trust and responsibility varies depending on the activity or process to delegate.
It is important to bear in mind that in some cases the quality of the product that the company wants to obtain by outsourcing may not meet the standards required by the company.
1.1. How did the outsourcing begin?
Due to the arrival of globalization and the evolution of markets, IT outsourcing companies began to see the need to delegate some of their business processes. Previously they preferred to do all their processes independently. This to avoid dependence on suppliers was considered the best strategy at the time.
However, over time this strategy began to decline due to lack of capacity, incompetence, lack of technology, or the financial situation that some companies began to present. These were the factors that led organizations to use outsourcing.
This phenomenon has been known to have started in the 1940s in the United States. The earliest records of outsourcing date back to the mid-1960s when organizations felt the need to hire centers of computer specialists to assist them.
Around the 1980s, the way for the advent of outsourcing opened up due to the need for companies to compete with others on a global scale. With this, some of them had to move or open branches abroad allowing them to position themselves in these markets. This process brought with it several advantages such as minimizing personnel costs, injecting marketing in different markets.
2. What are the advantages and disadvantages of outsourcing of it companies?
The use of outsourcing brings several benefits. First, it allows you to focus on what is important: the activity that makes the company money. Lower costs, since you can pay less for certain functions, for example cleaning. Some outsourcing companies have technology that is not so accessible to the company that wants to use it.
It allows having a lean organization. It gives rise to innovation since new ideas can be obtained. The company’s image can improve by contracting specialized services. Some processes corresponding to the human resources area, such as negotiations and recruitment, become delegated.
Although it is an efficient tool, it can have some drawbacks. It must say that the cost reduction may not be sufficient. On the other hand, there is the possibility that clients may dislike the service of the outsourced function. Not to mention that not many outsourcing companies have sufficient qualifications to perform the functions delegated to them.
If the outsourced company does not perform well the task entrusted to it, one of the three main areas of the company may be affected. If the company lacks the readiness to delegate a task, a culture clash can occur. In some cases, direct contact with the customer becomes lost.
3. Which IT outsourcing models to use?
Let us start by talking about tactical outsourcing. This type of IT outsourcing refers to the simple outsourcing of a function that plays a less essential role for the company. Generally, the main reason for implementing it lies in the need to reduce costs.
Then there comes strategic outsourcing. The objective of which involves creating a stable relationship with the company to which a function has been delegated. It considers a strategic alliance that consolidates a function of the interdependence of the delegated task with concerning the others that make up the company because it seeks to improve the quality of the delegated function.
We also have Co-sourcing. This IT Outsourcing model occurs when both the company that delegates the function and the company that provides the service share the responsibilities and in some cases the risks of providing it. Finally, we have In-house, off-shoring and off-site. In-house means that the requested services are performed within the facilities of the requesting company.
Off-shoring refers to when services are requested from a company located abroad. it occurs when the company offers lower costs compared to domestic ones. And finally, off-site occurs when services take place in the facilities corresponding to the company that provides them.
4. What are the outsourcing levels?
Let us start with the level of complementary parts. It consists of the purchase of parts or sub-parts that make up the final product, to another company specialized in the manufacture of such parts. Usually, apply when the company no produce them or as a strategy to reduce costs.
On the other hand, the individual level applies when it only needs to delegate the function or set of tasks of a worker or administrator. It mainly applies to those positions or activities that the company uses regularly but that does not require the employee to work full time in the company.
As for the functional level, it comes into play when it becomes necessary to delegate a function that requires a set of knowledge skills in a specialized way. And at the process level. It involves the delegation of an entire process to another company that specializes in the set of tasks required. It has regular use in the area of human resources with the hiring process.
5. What areas can IT outsourcing apply to?
It generally falls under the purview of investment firms, as they can delegate that part of financial services, as well as hedge funds and mutual funds. In finance and accounting, the functions that make up this area of business operations tend to become delegated because they no longer form the core of the organization’s operations.
The area of real estate management involves responsibility for certain functions such as customer service, cafeteria, parking lot leasing, security, disaster recovery, and others.
Human resources appear to have been the area that has seen the most movement and attention. Among the functions that have been outsourced include payroll, recruitment, training, administration of complaints and suggestions, and administration of employee benefits.
Also, logistics Involves non-primary functions for the company concerning procurement and supplier management such as deliveries, inventory, packaging, facilities, warehouse management, maintenance or cleaning, receptionist services, among others.
6. How is the IT outsourcing decision process?
The process involved in the decision to implement the outsourcing of information technology involves a series of steps. This begins by making the person responsible for the process commit to selecting and implementing the best decision, based on a broad vision of the objectives to achieve and the changes that it will generate in the organization, on which a strategy generates.
The tasks or functions to outsource must get identified, and then a prior selection process must take place by searching for and analyzing companies specialized in that activity. When the time comes to choose the company, a group of companies is analyzed one by one concerning specific criteria depending on the needs of the company and the experience.
At the time of the contract, the document becomes negotiated in such a way that neither of the two parties needs to consult it since it details the agreements to reach, as well as the restrictions and obligations of both parties. Then, a transition plan stipulating the progress measures to follow for the contracted company appears in the document.
Since IT outsourcing requires a structure, it must therefore require review by both parties. So someone must put someone in charge of supervising the operation, a system of standards needs to establish to measure the efficiency of the service and to check that the objectives have been met. Subsequently, a feedback system develops and evaluations take place.
7. Why do we know that outsourcing works?
An outsourcing company that has dedicated to the settlement of salaries in the local and international market for more than 30 years. This company enters into an outsourcing agreement with another company whose objective is the manufacture and marketing of raw materials.
Thanks to this work-sharing arrangement, the second-ranked company’s payroll gains multiple benefits. Firstly It has experienced industry professionals, does not require in-house payroll clerks, does not have to maintain or even purchase payroll software, and payroll receipts and affidavits delivered promptly.
Among the success stories in the use of outsourcing, there are also several marketing companies. The companies that use them admit that outsourcing frees up their time. It also saves the company money and provides external input on how to view the organization and the business.
Therefore, this makes it possible to suggest solutions that allow the company to grow. In the specific case we are talking about, the partner has the more operational capacity and it is not necessary to use all the social and human costs of the marketing department.
8. How can we help you learn more about outsourcing of it companies?
IT Outsourcing represents a way for a company to get rid of those IT activities that are not so essential. At Connect Tech we help you with these non-essential activities so that your company can focus on those that leave a profit margin. Not to mention the cost savings from outsourcing to us.
Although outsourcing entails some inconveniences, with Connect Tech these inconveniences will be minimal. Because we offer an outsourcing service that meets the quality the organization that requests it demands.
So, you are looking for more information about IT outsourcing? We are your best choice. You can contact us at +971 433 16 688. You can also contact us via email at CONTACT@CONNECTECH.DEV.
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