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5 reasons why IT outsourcing works – deflating the myths

Posted on: 11-08-2015

“Outsourcing”, the name sometimes has negative connotations, but let’s refute that right now.

Any negativity is a hangover from the early 2000s when globalisation was a vogue term. Outsourcing was then defined more in terms of mass production labour. For example, the United States were averse to the term because they understood it to mean massive job losses as labour went to countries with lower wages.

History has taught us a different lesson.

Outsourcing today generally refers to capability. Whereby companies who specialise in one area, outsource to another in order to access technology and intellectual property they don’t possess.

It is about increasing productivity.

The IT industry is a perfect example, and one of the most readily outsourced industries. A working example is this invented scenario.

A company that sells flowers want to expand their business by moving online. They do not have the resources to hire their own IT employee, so they outsource by contracting an IT company like TYPENT, to provide the infrastructure in order to achieve that.

The flower company moves online and accesses a new revenue stream. Out of their increased profits they pay the IT company they outsourced to, gaining a return on their investment. This is a mutually beneficial business relationship that has increased production and revenue.

Here are 10 reasons why outsourcing IT works:

  1. Access to technology and capability: For a tiny percentage of what it would cost to create your own IT system, you can access proven infrastructure, the latest data, trends and updates.
  2. Reducing operation costs: Hiring an IT employee can be a very expensive ongoing cost. They may also take time to complete IT builds, before you company can use the system. With outsourcing the system may already be built and running and updating of this system is completed by the IT company for a set fee.
  3. Freeing capital funds for core business: Without the costs of creating your own infrastructure, you can invest in your specialty, growing your business on multiple fronts.
  4. Increasing productivity: Time taken for someone with basic understanding to run, update and learn new systems is ineffective when you can have a professional company handle this, freeing employees for other tasks.
  5. Reducing risk: Building your own infrastructure does not come with a guarantee the resulting product will be fit for purpose. Outsourcing usually means access to proven systems or guarantees of quality, and ongoing support services.