A study in 2009 by IBM revealed that multinational companies that outsourced I.T projects overseas gained 11.8% growth in net earnings. While some people refer to it as exploitation and cheap, others, especially companies, see it an avenue for low operational costs and a window for higher profits. Outsourcing I.T has its good and bad side therefore it’s up to business owners or managers to decide if outsourcing will do their business more good or bad before outsourcing.
Pros of outsourcing I.T
Low operating costs: – When outsourcing I.T, you cut on operational costs such as office space, insurance cover and wages. Hiring a worker in the US might cost twice as much as hiring a worker from another country with the same skills and experience. This is not exploitation or cheap labor but the wages will depend on the taxes leveraged on the worker and cost of living in their country. Some countries have lower taxes and this in turn lowers the wages the workers in those countries will ask for.
Accessing better technology while cutting on staffing costs: – Just as Bill Gates said “Technology has the shelf life of a banana”. It’s unprofitable to keep up with changing technology when running a business that is not I.T related. Example: you decide to change from Windows to Linux but your current system administrator is familiar with Windows, you’ll be forced to a hire a Linux system administrator. If you outsource to an I.T company, all you have to say is change from Windows to Linux and the outsourcing company would do it.
Increased productivity: – If well planned, outsourcing can make your business run 24/7. Using different time zones, you can get work done during your weekend or when you are sleeping. An example is hiring someone located at +11 UTC. When it’s Sunday at -8 UTC it will be Monday at +11 UTC. With this you also cut on overtime costs.
Focus on your core business: If your business is not I.T related for example law or education, outsourcing I.T will cut on costs while giving you time and space to focus on your “real” business. With the additional space and revenue, you can hire more specialized staff that are in tune with your business or pass the revenue as profits.
Cons of outsourcing I.T
Danger for breach of security: When it comes to I.T, security is a priority and different nations have different laws on privacy and breach of security. Some companies have lost valuable and sensitive information through outsourcing to countries with weak or no laws on hacking or online privacy.
Unemployment: I.T professionals and employees in general have lost their jobs because of outsourcing to different countries where operational costs are favorable. Companies argue that outsourcing leads to higher profits and the profits are injected back into the economy.
Language and cultural barriers: Outsourcing to nonnative English speakers can impact a business situated in an English speaking country. This is usually a major problem faced when outsourcing customer service especially call-handling. Some cultures have distinct accents which might not interact well with your customers.
Difficulty in verifying credentials: When hiring from a different country, there is no definite way to verify who the person claims to be forcing most companies to rely heavily on experience. It’s common for outsourcers to exaggerate on their credentials or experience and some end giving a negative output once hired.
Entrepreneur.com – The Pros and Cons of outsourcing
AllBusiness – Outsourcing: pros and cons