| This is the first post in a series that aims to help the | | | | consultant. |
| small/medium business community better understand | | | | For the longer-term nearshoring needs, then you might |
| and use IT Outsourcing. There is a lot of confusion and | | | | want to think about a managed IT service provider |
| terminology and misunderstanding as to what IT | | | | (MSP), or establishing a relationship with an IT services |
| Outsourcing is and how it works. This first post in the | | | | provider that is essentially "on call" if you need them. |
| series helps define IT Outsourcing and discuss some | | | | The next article in this series will focus on the types of |
| of the benefits as well as the complications. | | | | IT Service Providers and how to choose one. |
| IT Outsourcing Definition | | | | Business Benefits to Outsourcing |
| At the heart of IT Outsourcing is the fact that it is | | | | Why would a business use outsourcing? There are |
| really just subcontracting, or obtaining services from an | | | | some substantial benefits that can be realized by using |
| external firm. The term has been around for a very | | | | outsourcing. Most of these benefits are tangible and |
| long time as has the entire concept. Actually, the | | | | have been proven to be quite effective. Here are the |
| concept was started by Ross Perot when he founded | | | | top reasons for using IT outsourcing for your business. |
| Electronic Data Systems (EDS) in 1962. EDS would tell | | | | * Cost Savings - You can lower overhead costs and |
| companies that while they were great at producing | | | | other types of costs by using outsourcing. One of the |
| "widgets", EDS was really great at managing | | | | ways you can realize lowered costs is that you will |
| Information Technology and would then proceed to sell | | | | not be paying for benefits and/or overtime, etc. Also, |
| them IT services. | | | | you get access to an entire staff of IT professionals |
| Outsourcing is more than just subcontracting in | | | | and expertise for a single cost. Additionally you can |
| practice, but in pure definition it is subcontracting out | | | | save huge sums of money because it is in the best |
| work to another business with expertise in a specific | | | | interest of the outsourcing provider to keep your |
| area. An example is outsourcing payroll. There are | | | | systems maintained and running 24/7. |
| experts who process payroll and know how to do it | | | | * Knowledge - When you use the expertise of an |
| extremely well. A small business may want to use | | | | outsourced IT provider, you are getting a much wider |
| their services to leverage that area of expertise so | | | | scope of experience and knowledge to draw upon. |
| they can focus on other parts of their business. In | | | | * Focus on Core Business - Ever noticed how IT can |
| most all cases, outsourcing is a contractual agreement | | | | take up a lot of your time? Using an outsourced IT |
| between the two companies and that can be for any | | | | provider allows you to focus on your core business |
| period of time whether it is month-to-month or yearly, | | | | instead of focusing on the management and |
| etc. | | | | maintenance of IT. |
| Confusion of Terms | | | | * Risk Management - using the expertise of an outside |
| There isn't one single term to describe Outsourcing. It is | | | | IT services firm can reduce the risk management |
| generally agreed that it means the contracting out of a | | | | associated with backups, disaster recovery, security, |
| business function to an external provider. Here are | | | | and some types of regulations such as |
| some of the other terms for Outsourcing. | | | | Sarbanes-Oxley. |
| * Offshoring - this is the term most often associated | | | | * Access to talent - Access to a larger pool of talent |
| with outsourcing. It describes the contracting out of | | | | and a sustainable source of skills |
| business to another nation. A perfect example is the | | | | There are more reasons that are considered benefits |
| call center. During the U.S. evening hours, a business | | | | to using an outsourced IT services provider for your |
| can transfer over their call center work to another | | | | business but those are some of the main ones that |
| nation in order to provide 24/7 coverage. | | | | are also the most relevant. |
| * Nearshoring - this is a term that means the | | | | Potential Drawbacks to Outsourcing |
| contracting out of a business function to an external | | | | The list of benefits is impressive to be sure, but there |
| provider within your region, i.e., within your nation. | | | | are also some drawbacks to using outsourced IT |
| * Mulitsourcing - this is a hybrid term that means the | | | | services. |
| mixing of using internal and external resources to | | | | * Qualifications - Be sure that you are keeping in the |
| support a business function. IT departments use this a | | | | know about your provider and their staff. You want to |
| lot as they have onsite staff but use outside | | | | make sure the quality and expertise of the staff they |
| contracted help for some functions as well. | | | | hire to support your systems is up to par at all times. |
| * Outtasking - this is a similar term to nearshoring and | | | | * Security Issues - You are trusting a lot of valuable |
| essentially means the same thing as nearshoring so | | | | information with people that you don't really know. |
| they are used synonymously. | | | | Make sure to build a trust-relationship and discuss |
| This is by no means a comprehensive list of terms to | | | | security as it pertains to your systems, confidential |
| describe the entire Outsourcing function. There are | | | | documents, communications, etc. |
| many terms that come and go depending on the | | | | * Quality Risk - In order to reduce capital costs, some |
| industry involved and the current political landscape. | | | | outsourced provides have been known to reduce their |
| Since the term "outsourcing" has had such a negative | | | | staffing levels to the point where quality lacks. This can |
| connotation in the past, new terms have been used to | | | | be a drawback since it means you will be waiting |
| create a different image and perception. Suffice it to | | | | longer to get help or it could mean your systems are |
| say, there are definite differences in contracting out | | | | not being taken care of appropriately. |
| work to overseas companies versus contracting out | | | | These drawbacks are usually all addressed by any It |
| work to local/regional companies. Both are outsourcing | | | | service provider that is professional and has a strong |
| but they do have different benefits/drawbacks | | | | business practice. The benefits far outweigh the |
| associated with them. | | | | drawbacks in most situations. Keep in mind too that a |
| The rest of this "Introduction to IT Outsourcing" guide | | | | lot of businesses used a mixedsourcing model where |
| will focus on the local/regional aspect of outsourcing, | | | | they have qualified staff in-house but use the |
| otherwise known as nearshoring or outtasking. | | | | outsourcing of other IT services for areas that the |
| Short Term or Long Term | | | | in-house IT staff is not qualified for. This type of |
| The outsourcing of tasks can be short-term or | | | | outsourcing is being used more and more because the |
| long-term depending on your business needs. If you | | | | in-house IT staff member can be the liaison, between |
| are looking for something more short-term then you | | | | the IT outsourcing company and the business. |
| might seek out a consultant, such as an IT consultant | | | | Next up in this Introduction to IT Outsourcing for the |
| or a Network consultant or even a more specialized | | | | Small Business is a discussion of how to find and hire |
| type of consultant like a Voice over IP telephony | | | | the right IT services company for your business. |