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IT Outsourcing Trends and Use Cases

How organizations are shifting IT processes to service providers and the subsequent impacts of outsourced labor.

Information Technology Outsourcing (ITO) is the delegation of IT-related responsibilities in exchange for contracted labor, offered at lower rates. ITO organizations have utilized their established expertise as IT support providers to build outsourcing services, now offering skilled staff tailored to enhancing productivity, efficiency, and security for clients. With ITO support, companies can limit the cost and time of hiring highly-skilled IT staff, as ITO employees possess specialized knowledge in many IT topics such as cloud computing and cybersecurity.

Core Trends in IT Outsourcing

The COVID-19 pandemic has had a significant impact on the way organizations function, shifting towards the digital realm, where cyber security and efficiency are paramount, and productivity is gauged via different metrics than traditionally measured. Studies indicate that nearly 87% of organizations have begun allocating key processes and procedures to the cloud due to impacts of remote work and focus on enabling a faster and more flexible enterprise environment.

The need for enhanced cybersecurity services has been greatly magnified in the wake of the pandemic, as cyber crime rates and data breaches are growing substantially, with YTD numbers by Q3 in 2021 setting new records for criminal activity— easily surpassing 2020 numbers and illustrating the severity of using ineffective controls to mitigate attacks and protect corporate, employee and client data.

The Shift to the Cloud

Outsourcing companies are increasingly counting on cloud-based platforms to collaborate effectively with teams around the globe and share and edit information in real-time. Outsourcers typically utilize three types of cloud computing services to achieve their strategic goals in outsourcing corporate activities.

  • Software as a Service (SaaS): Business process outsourcing companies utilize CRM solutions including Salesforce to manage all of their prospects' information on a single platform.
  • Infrastructure as a Service (IaaS): BPO companies are increasingly storing and processing sensitive data on remote servers. Personal information, financial data, and other data concerning customers are typically included.
  • Platform as a Service (PaaS): BPOs use PaaS platforms to build their own services. Rather than making a large upfront commitment, these firms can subscribe to a PaaS and add new services as needed.

Increased Focus on Cybersecurity

Cyber attacks in the form of data breaches accelerated in both frequency and scope in 2021, with average costs increasing from $3.86M to $4.24M last year alone, the highest the IT sector has seen in nearly 17 years. And high-level data security will be one of the most essential themes in the coming years. According to a Gartner analysis, the worldwide organizational expenditure on the information security industry is expected to reach $170.4B annually this year.

Cybersecurity threats and data theft are of critical concern to the executive team of a company that is looking to pursue the outsourcing route for its operations. Outsourcing firms are now working to prioritize enhanced data security measures in their operations. To maintain the security of their clients' data, these providers have invested in VPN, SSL and multi-factor authentication.

Service providers are shifting toward using cloud containers (IT processes housed in the cloud which allow enterprises to bundle processes and data in a simplified and performance-oriented manner) to house processes which offer more scalable systems. Containers-as-a-Service are now used to outsource processes to the cloud and allow an enterprise to bundle its data in a less sophisticated manner and one which promotes high performance.

Application Development & Infrastructure Management

Developing a new software application internally for business use can take up valuable resources, both from costing and timing perspectives, and can be challenging without an experienced developer. Valuable time devoted to developing applications in-house is a resource that could be more effectively allocated to core, revenue-generating business initiatives.

Outsourcing these activities through a partnership with a trustworthy and experienced team is a core opportunity in any business transformation initiative. Outsourcing can ultimately lead to more efficient development of applications for your business and can make better use of your team’s time and capital, in both the short and long term.

After assessing IT requirements, your team may determine that it does not need an in-house team to manage IT processes. An in-house team can reduce the emphasis on core business operations and ITO service providers can provide scaling capabilities through their labor forces, allowing your team to concentrate on scaling your revenue-generating workforce as needed.

Outsourcing service providers can also provide valuable insight into relevant IT skills market trends that enhance the performance of your organization. Outsourced IT teams will have a well-rounded understanding of the types of systems, applications and processes that will best fit your organizational needs and can provide standby support for fixes and patches to your applications.

Decision-Making and Implementation Process

Executives are tasked with determining which parts of their IT function to keep in-house and which to outsource. This decision often comes down to identifying if the in-house IT operation is a unique and core strategic part of the firm.

If the function does not provide a marginal competitive benefit, outsourcing should be considered as it can often allow this function to be performed at a similar quality but at a lower cost. If the organization does not need to have enormous flexibility and control over the function, then there is certainly value in outsourcing. 

Once a manager decides to outsource IT, a team of high and mid-level managers across all impacted business units should be created. It is important that this team is given autonomy over decision-making and that each member has accountability to see through the results. The next step is to outline the scope and implementation as outsourcing IT that function effectively and efficiently requires careful planning and organization.

Working closely with the outsourcing vendor is also paramount for ease of implementation and risk identification. Depending on the function, vendors have scrum masters, project managers, and program managers that should be utilized to work alongside your organization's staff.

If Technology Platforms are outsourced - like AWS, Google Cloud, or Microsoft Azure - vendors will have application support specialists, developers, and automation testers. Although your organization’s team should be composed of managers that best understand the firm’s operations and structure, specialists at the outsourcing vendor should complement the in-house group.

Outsourcing IT functionalities can be critical in growth and sustainability

The path an organization takes in opting to outsource IT functionalities can be a critical juncture in the growth and sustainability of the organization. The benefits offered by shifting from on-premises solutions to cloud-based alternatives can provide an organization greater flexibility to focus on their core business and more easily pivot to the latest and greatest technologies. In shifting operations to SaaS/PaaS/IaaS models, an organization can benefit from more robust cybersecurity infrastructure offered by cloud-based solutions.

It is important that businesses look for ways to improve the efficiency of their processes and the quality of their offerings. Organizations, especially those in growth stages, should consider outsourcing select components of their IT infrastructure to maximize their window of growth. IT outsourcing can create tremendous value for an organization, allowing for the business to focus more on their core business strategies and operations.

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