IT outsourcing risks

iacinternational/ April 15, 2019/ Blog

Every business that needs to extend its capability to handle the tasks they face has two choices: grow their in-house team or contact an IT outsourcing company Both variants have their pros and cons, and today we will discuss them.

It is natural for any business to try to form a top-notch team to be able to solve the challenges the company faces. However, forming such a team and retaining it is a long and effort-consuming endeavor. Aside from the time and money invested, it requires a great deal of correct culture, attitude and living up to the team expectations to ensure they stay motivated.

The risks of growing an in-house team are as follows:

  • time-consuming recruitment — the project has certain deadlines while the success in hiring the required team in time cannot be guaranteed
  • continuity risks — from the salary standpoint, it is unwise to hire 2 specialists where 1 would suffice. However, should a unique specialist fall ill or quit — this aspect of the work stops
  • expenses — hiring a specialist full-time means you pay them no matter if their services are needed at the moment. This means that once the project is complete you must either employ the talent on another task or fire them — and they might be needed again in the future, but they might be not available then.

There are certain benefits to building an in-house IT team, too:

  • gathering the expertise — your in-house specialists know your systems and infrastructure in and out, so they can use them to the max
  • improving your brand standing — having highly qualified talents on staff makes the company look better in the eyes of their customers, competitors and applicants
  • technical backup — launching a new product or service will definitely be more smooth if you have solid technical expertise at your disposal.

Thus said, an in-house IT team is definitely a valuable asset and it would be a wise decision to invest in it. The question is — how well will you be able to mitigate the risks of keeping such a team and to what extent will you be able to use its benefits?

IT outsourcing — a smart way to save money and time

Opting for IT outsourcing is quite a drastic step for most of the businesses. Many consider it as a loss of independence or admission of incompetence: “do you really think I will not be able to deal with it myself?”

The point is that working with IT outsourcing company is not a sign of weakness in the least! it is a sign of strategic understanding and correct planning of resource allocation. Any new project involves some degree of uncertainty and poses risks. The business risks losing time and money invested in case of incorrect product development, infrastructure implementation or ongoing management. IT outsourcing is all about minimizing those risks.

Thus said, there are 4 main IT outsourcing risks and below we will explain how to mitigate them.

  1. Control loss. Once any process is delegated to an IT outsourcing company, you have no direct control over it and have to rely on the contractor doing their part well for the project to succeed. This can be a hard decision to make for managers who are used to ruling with a strict hand on everything.

    Solution: design a procedure for remote control of the project progress and enact it before the project starts. Select the communication channels, the frequency of reports, the procedure of adjusting the estimates if any party is not able to follow the initial plan — make sure you keep the hand on the pulse of your dedicated team.
  2. Compromise on quality. The team that believes in their product pay their utmost attention to make it perfect. In software development, subpar code and technical debt are the main reasons for the failure of many promising projects. Therefore, your remote team must work with the same level of commitment to quality, as your in-house IT engineers.

    Solution: Work with an IT outsourcing company with the same high level of commitment to quality. Look for independent reviews or ask them to provide 3-5 references to their previous projects. If the company did well — their satisfied customers will be glad to share the word. If the IT outsourcing provider tells you all their projects are covered by NDA — it would not hurt to find someone who can provide references.
  3. Unexpected expenses. One cannot plan for everything, but the main goal of outsourcing IT operations is still to cut costs. Thus said, there can be multiple reasons why the contractor wants to exceed the initial project budget — from on-site software/hardware upgrades to troubleshooting the current issues or working long hours. Unfortunately, these things do happen — you just have to be ready to react to them correctly.

    Solution: Sign a Service Level Agreement or SLA and define all your requirements and required course of actions in response to the aforementioned issues. As one cannot provide for everything, it is wise to settle a procedure for solving force-majeure issues as they arise. This will leave you with a solid ground to stay upon and a convenient instrument to evaluate the need for additional payments, should the need arise.
  4. IP theft and claims. Every company has Intellectual Property (IP) rights on everything they created, trademarked, patented or otherwise count as their rightful claim. Working with a third party is a risk of disclosing this data, either inadvertently or with malicious intent.

    Solution: Sign an NDA. A Non-Disclosure Agreement will define the rules and workflows of handling the data and IP you provide to the IT outsourcing company, as well as the legal consequences of disclosing such knowledge. Legally binding a partner to adhere to best practices protects both parties.

Final thoughts on IT outsourcing risks

As you can see, working with an IT outsourcing cloud computing provider can pose certain risks, but these can be mitigated. IT outsourcing provides multiple benefits for small business, however, and this is why the global IT outsourcing market grows for many years in a row. Just choose a reliable Managed Services Provider with good customer reviews, sign an SLA and NDA and embark on a journey to a successful IT outsourcing project!