As 2010 comes to an end and companies contemplate a new year, with its attendant new budgeting cycle, they will inevitably revisit their strategic IT decisions. One of these will be whether to retain functions in-house or outsource them. This will be, as it always is, a vital decision and it should never be entered into lightly. So, in the spirit of the looming new year, here are 11 reasons to outsource in 2011:
1. Strategic alignment. Outsourcing should always be driven by strategic imperatives, first and foremost. If outsourcing can improve strategic delivery, without compromising issues such as security, integrity and service delivery, it should be considered.
2. Cost. Most of the time, it is more cost-effective for an outsourcer to deliver a service than for this service to be provided in-house. This is partly due to the extent of specialisation of an outsourcer, and the critical mass to be had from managing multiple contracts. Cost should never be the primary reason to outsource, but it is undoubtedly a factor.
3. Skills acquisition and retention. It has often been stated that in the 21st century, the company with the higher level of skills wins. Outsourcers can provide staff with a variety of jobs and positions, and a growth path that encourages both the acquisition of superior skills and their retention. Conversely, employers struggle to acquire, upskill and retain good people.
4. Specialisation. There are some skills that are in extremely short supply and very high demand - consider enterprise performance management, services-oriented architecture or voice biometrics. In all of these cases, it is far better to contract with an external specialist than to try and attract and retain these skills.
5. Guaranteed service delivery. If a company's in-house team fails to deliver according to mandate, there's not much that can be done about it. If the outsourcer misses deadline, functionality or exceeds budget, a company always has the fallback of contractual penalties.
6. Focus on core business. IT has to a large extent become commoditised, and many of its functions are rote. It is almost certainly not worth a large corporation's time and effort to retain skills for break-and-fix or call centre services, but this is the core focus of an outsourcer that has chosen to focus on this area. That leaves management free to get on with its main purpose of existence, which is to focus on shareholder and customer considerations and to make a profit.
It is far better to contract with an external specialist than to try and attract and retain these skills.
Andrew Holden is MD of Bytes Outsource Services.
7. Enhance return on equity. Companies such as Walmart and Nike, which do not tie up their precious resources on in-house functions that are best outsourced, make far better use of their capital and ensure it works for the company, rather than vice versa.
8. Lay a foundation for software as a service (SaaS). SaaS is very much the way of the future, to the extent that the Internet is now being viewed as the ultimate computing platform - even an operating system. It is a way of delivering IT as a service rather than IT being an end unto itself. Outsourcing paves the way for SaaS and its myriad benefits.
9. Easily accommodate new technology waves. Consider Windows 7, which has been a corporate showstopper, or virtualisation, which many companies wish to embrace, but whose complexity deters adoption. Both are better outsourced.
10. Acquire capability without headcount. Post-recession, companies are disinclined to hire, but they still need skills. Outsourcing gives management the internal capability on the one hand, without the cost to company on the other.
11. The ability to move expenses off balance sheet. Taking budgetary items off balance sheet and to opex is a very attractive prospect for management, which also do not have to go into budgeting cycles and reviews to acquire new equipment or software.
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