The Emerging Trend of Outsourcing IT & Tech-Based Functions
February 28, 2019
The constantly evolving state of technology has transformed the way organizations function over the last decade and has significantly influenced how they do business. The impact of technology is the main driving force behind the rapidly shifting face of business. Incredible growth is within reach of any organization, regardless of size, but the presence of opportunities doesn’t make growth any less challenging.
Because of the frequency at which technology is growing, organizations are rethinking how to strategically approach their IT needs and redeploy efforts in a more efficient and value-added way. This nimble method of operating has led to the emergence of a new trend – outsourcing members and functions of the IT department.
Should You Outsource IT?
The decision to outsource IT begins internally, by firmly understanding the role IT plays within a particular organization. Every organization is different, and every organization’s recognition of IT’s role will be unique to them. It is important for organizations to know whether or not technology is either a necessity of doing business, or if their technology is a key differentiator. Coming to this pivotal understanding is an incredibly challenging endeavor and is by no means an overnight process.
Having a strong perception of how technology is viewed internally is key. What is its current role in the organization? What is its future role? Technology will always have a place, but to what degree is the ultimate question. Many organizations are finding it significantly more cost and process effective for them to outsource, but the decision to do so is not strictly a technology decision. It is a business and operational decision that should be made with the participation of the organization’s executive leadership.
If the technology is innovative and truly unique to the business – a function that is mission-critical – it’s best to leave that in-house. Organizations that fall into this category typically have professionals who are supporting their differentiating tool because they understand the business better than anyone, and that’s what makes the technology a competitive advantage.
When it comes to outsourcing there are many different areas in which an organization can benefit, but the decision to outsource may ultimately come down to talent. In many regions throughout the country, attracting the right people is a challenge. And retaining them once they’re found can be equally as difficult in such a competitive environment. A lot of organizations know what they need to do from a technology standpoint but can’t always find the right individuals to fill the role. There are instances where a particular function may be vital to operations, but it may not justify full-time personnel. Talent availability and the organization’s need for specific talent are a significant factor in an organization’s decision-making process for outsourcing. The decision to outsource rests on an organization’s ability to manage, hire, and retain someone who can fill the role and execute its function in the most constructive way.
The Top Functions Being Outsourced
There has been an overwhelming insurgence of innovation and technology available for organizations to leverage to stay competitive and dynamic. But for every new piece of technology and every new device that emerges, so to emerges a new challenge – understanding and applying it. It is impossible for a business to stay completely current on everything; it’s an unreasonable and unrealistic pursuit, which is why organizations are turning toward strategic outsourcing to remain competitive and efficient.
Several key functions have been targeted by organizations as prudent areas for outsourcing. Whether it’s available expertise and talent, or reduced cost and efficiency, outsourcing these components provide substantial advantages:
- Infrastructure – Up until the past few years, organizations have generally owned and operated their own technology. But that level of ownership is disappearing in favor of renting or leasing the required technology to operate the organization. More organizations are doing this than ever because it provides a substantial boost to operational efficiency to not be bogged down with the maintenance and costs associated with running on-premise technology systems.
- Application Development and Engineering – Organizations are opting for outsourced partners that bring teams of designers, developers, engineers, and project managers to the engagement. Even if an organization already has people with development experience, it’s more than likely they will have to bring on additional people to fill the gaps during development. In this scenario, an outsourced team will provide a much greater understanding of the technology and development than a generalist will.
- Service and Help Desk – Outsourcing this IT function enables the department to focus on their core initiatives and goals. Oftentimes the IT department and service desk lose their strategic focus when having to spend too much available time on the minutia of solving employee technology issues.
- Cybersecurity – Hiring and retaining an in-house cybersecurity management expert is the most difficult IT position to fill. Security remains a top issue for nearly every organization, and is not something to take lightly. Outsourcing the position and the function of cybersecurity is one of the best ways to ensure an organization’s security needs are being adequately met.
- The Role of the CIO – If IT is outsourced from a tactical perspective, it makes having the outsourced CIO leadership even more important, because it means the organization has now engaged a number of vendors to provide solutions. An outsourced CIO can help to quantify the importance of technology investments. They are not a typical day-to-day tactical vendor, which means they are capable of offering unbiased guidance to an organization, while also managing other vendors and keeping the internal burden of managing technologies as minimal as possible.
Outsourcing the CIO Position
Whether an organization is entering into a new, fast growth market, or facing competitive pressure, they can benefit from an outsourced CIO. Having this outsourced position enables an unbiased, independent perspective for technology decisions. Similar to an outside audit, an outsourced CIO helps evaluate and counsel the organization’s executive leadership on the technological aspects of their business. In a similar fashion to organizations hiring an independent party to evaluate their finances and operational effectiveness, an outsourced CIO accomplishes comparable results from a technology perspective.
An outsourced CIO also helps to keep the internal burden of managing technologies as limited as possible, enabling the C-suite and senior management to focus on more pressing operational issues. Not only does this free up valuable time and resources for the organization, it guarantees a knowledgeable and experienced individual is in the position to help push the business forward. An outsourced CIO is meant to be an extension of an organization’s team, and much more than a typical consultant.
How Much IT to Outsource
Knowing just how much of the IT function to outsource is generally dependent on the organization’s needs. Some organizations are capable of outsourcing the entire IT department. Others choose to outsource only fragments of the department.
The 80/20 Rule is a good baseline to follow but should be adjusted depending on the technology requirements of the organization. In many organizations, there’s about 80% of the IT functions that could easily be outsourced. The other 20% are functions that are unique to the organization – the key differentiators. The differentiators will always be initiatives the organization should keep in-house, or face the risk of losing their competitive advantage.
This hybrid approach to technology outsourcing is the norm, but by no means the rule. Certain organizations, like startups, often completely outsource their IT because it makes the most sense for their business. Organizations with largely remote workforces typically do the same. The degree to which an organization outsources their technology depends on their industry and what’s best for their business.
Responsibility of Outsourcing
Outsourcing technology, functions, and people does not mean an organization is outsourcing the underlying responsibility of overseeing technology. Executive leadership must be vested in strategic conversations with outsourced roles and active in the implementation of solutions.
Technology is continuously forging how businesses operate and compete. When selecting a partner, expertise, culture, and collaboration are the driving forces of a successful engagement, and are considerations all organizations must make. An outsourced partner will have a profound influence on how a company operates, and should be chosen with the utmost regard to the effect they will have on an organization’s long-term success.