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How a Business Should Decide When to Outsource Its IT

by jcp

By: Probrand

There’s a quote common to bad managers: “If you want something done well, do it yourself.” It dates back more than two centuries to French comic playwright Charles-Guillaume Étienne. We’re betting that he never had to run an IT department.

These days, there are plenty of IT & IT Support jobs that are best delegated to other people. The modern IT function is too complex for most companies to do all aspects of it well, or cost-effectively. The entire IT outsourcing industry is built on this premise. The question is, what should you outsource, and what should you keep in-house?

When deciding what aspects of your IT to offload, consider these factors:

Does it have strategic value for your business?

Some of the technology functions that differentiate your business from others are tailored to your particular market and customer needs. They might be best kept in-house because you want control over the things that give you a competitive advantage.

That doesn’t mean you should retain everything with strategic importance, though. There are other factors at play.

Do you have the in-house talent to take it on?

Even the most strategic projects aren’t always manageable in-house. One factor affecting your decision is the amount of internal expertise you have available.

A bespoke software development job that is part of a broader digital transformation project might take too many new and esoteric skills to source from your internal team, and it might be prohibitively expensive for you to hire and co-ordinate contractors. Instead, it might be better to outsource that part of the process while concentrating your efforts on the broader business goals that it supports. Just ensure that you retain the appropriate intellectual property from the contract.

When making these decisions, draw distinctions between those skills that will bring you long-term benefit, and those that you’ll only use sporadically. If you’re migrating your entire IT portfolio to run as microservices in the cloud, it might make sense to invest in those skills internally because you’ll be maintaining and adminstering it for years to come.

Can someone else do it better?

Some IT functions are so complex they’d take an army of in-house experts to manage. Cybersecurity is a good example. It has many complex moving parts including email scanning, web content scanning, firewall configurations, and vulnerability analyses among others. Handing this off to a managed services provider that does this as its primary business is a no-brainer.

Can someone else do it at lower cost?

Commodity projects that others can do better are often far cheaper when outsourced, too. Specialist service providers have the economies of scale that are hard for customers to find.

As outsourcing decisions grow more complex, a decision-making framework can help. Career management company MindTools describes an outsourcing decision matrix that uses two axes: strategic importance, and contribution to operational performance. The quadrant that is low in strategic importance but high in operational impact is the sweet spot for outsourcing. There are other alternatives, though. Strategic projects with a relatively low operational impact could benefit from a strategic alliance, which is a form of outsourcing in which you retain more control as opposed to a ‘fire and forget’ arrangement.

When to outsource

Having identified good candidates for outsourcing, the next decision is when to do it. If you’ve already identified a process best performed elsewhere, then it often pays to drive efficiencies by offloading it early. You might choose to keep a process in-house if the workload is low enough – and your understanding of the process mature enough – that existing employees can handle it without too much extra effort. However, when you see work beginning to pile up and can identify clear backlogs, it’s definitely time to look at taking on a partner.

So, not all jobs are worth doing yourself. Perhaps a more recent quote is more applicable for today’s IT manager: “I get by with a little help from my friends.”

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