Outsourcing – When You Should and Shouldn’t Go There

Nothing stirs controversy and speculation in an IT Department like the whisper of one dirty word: outsourcing. The mere thought of this practice makes the rank-and-file worry about keeping their jobs in an uncertain economy. On the other hand, executives may not want to outsource but are sometimes forced in that direction to cut costs and keep their operation solidly in the black. Don’t tell anyone, but these guys are worried about their jobs, too.

While there are some very good reasons to outsource, this practice isn’t an instant solution to any problem, and there can be substantial hidden costs that can’t be neatly quantified on even the most detailed proposal. Here are a few examples of when you should, and should not, consider outsourcing:

1. Legacy Systems – Consider Outsourcing When Your Talent Pool Shrinks

Many companies continue to rely on legacy systems to run their day-to-day operations. If your workforce begins to retire before this older technology is replaced, consider outsourcing the basic maintenance tasks instead of hiring full-time employees who may soon be forced to update their skills or move on.

2. Routine Changes – Outsource When Your Staff Can’t Keep Up

Although it’s been a long time, Y2K was the perfect example of a routine change that could overwhelm an entire IT department. If you have a fairly simple change that needs to be made throughout your system in a relatively short time, outsourcing could be the most cost-effective solution.

3. Disaster Recovery – Outsource In Partnership with Your IT Staff

Outsourcing in this area is a recognized standard in the industry. It is the most cost-effective way to ensure your operation can be back up and running in the shortest timeframe if your IT resources’, including your staff, is dealing with a major disaster. However, no disaster recovery plan can be developed in a vacuum; it should be created in cooperation with your entire IT staff.

4. Non-Core Systems – Outsource When it Makes Financial Sense

Systems that are considered nice-to-have, but aren’t critical, are perfect candidates for outsourcing if the development and support costs are reduced.

5. Core Systems – Only Outsource as a Last Resort

Your core systems require more than coding skills to develop, enhance and maintain. Over time, your IT staff accumulates a level of business knowledge that can’t be quantified on any balance sheet. You can’t rely on an external company to develop that type of knowledge overnight, and simple misinterpretations can lead to very expensive mistakes that impact your most critical operations. This is an even bigger risk when you consider offshore outsourcing. If you must outsource in this area, maintain an expert internal team for final testing and quality assurance.

6. Sensitive Information – Don’t Outsource If You Have Any Other Option

It’s hard enough to protect sensitive information in-house and on-site. If you bring another entity into the picture, it adds another layer of risk. Whether you’re protecting trade secrets or your customers’ financial information, outsourcing at this point can be very risky.

7. Customer Facing – Carefully Weigh Your Options

Even if you cut costs to the bone, the savings could be offset if it results in customer dissatisfaction. Some people have a fundamental problem with outsourcing, especially if it’s offshore. If you go down this road, make sure that your customers are given the same or better service and that all cultural differences are accounted for.

No matter how you feel about outsourcing, one thing is certain: It’s not going away. Current estimates show that about 28 percent of all outsourcing involves IT jobs. Whether you choose to go with on-shore, near-shore or off-shore outsourcing, the decision should only be made after examining all sides of the issue.

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