Guidelines That Appeal in Getting IT Outsourcing

Guidelines That Appeal in Getting IT Outsourcing

Posted by: Chirag Shivalker | Posted on: September 19th, 2014

Cost-effectiveness is “THE” driving force for IT outsourcing. A wide array of company’s functionalities is growing increasingly IT dependent. This is because IT outsourcing can help businesses cut down costs and hence increase their savings in not just the predictable ways like curbing IT operating costs but also non-IT areas of business as well. IT Outsourcing has not lost its glitter.

A recent article by MIT Sloan management, The Real Savings From IT Outsourcing, is of the opinion that multitude of companies are trying to curb their operating costs through IT outsourcing. According to a research conducted, outsourcing IT may also assist in curbing other expenses including sales, general and administrative costs that are up to 4 to 5 times of IT costs.

Managers skeptical about IT outsourcing opt for a slender approach and hide many probable cost benefits. Approximately around 300 U.S. companies had an increase of $96.14 million in IT outsourcing spending with an average drop out of #121.14 million in operating costs in other non-IT functions at the company.

It was also observed that IT outsourcing is not a mere substitute for an in-house set up and the internal IT investments, particularly investments in personnel. Even though outsourcing was associated with a significant reduction in non-IT operation costs, that reduction was greater for companies that made higher levels of internal IT investments. This is probably the reason that IT outsourcing can enhance operational efficacies of prevailing procedures and free-up resources, thereby enabling resource reallocation.

On top of it, companies with complementary internal investments in IT can make business processes more information-intensive and enable coordination with vendors, thereby amplifying outsourcing’s cost-cutting effects. Various components of internal IT investments encompassing hardware, software, and employees etc., only investments in employees have a concentrated effort in curbing non-IT costs.

As an alternative, managers should concentrate on savings. The research further suggested that IT outsourcing assists in curbing other expenses including sales – general and administrative costs that are frequently 4 to 5 times of IT costs. Enlisted are some recommendations from the research to help managers’ articulate strategies and distributing budgets:

Managers require a poised approach to their investments in both in-house operations and outsourcing to earn greater benefits in terms of monetary savings. Simply exchanging IT outsourcing for internal IT might not prove effective.

Managers need to scrutinize the effect of outsourcing on non-IT costs and articulate strategies for capitalizing on savings on these incidentals to get the best returns out of their outsourcing outlay.

Evoke that benchmarking IT budgets with respect to competitors alone may be counterproductive. Too much concentration on IT cost reduction may oversee significantly higher savings in sales, marketing and R & D.

Companies should endure to generate investments in their IT professionals and further assist them to enhance their skills through sustained education, training and amassing of pertinent industry experience.

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About the Author:

Chirag Shivalker is one of the very few business writers with flair of social commentary through his technical writing. With A decade long experience in technology writing and trend analysis Chirag is an expert in technology and technological trends along with business writing. Technology in mind and words at will Chirag is an all-rounder who has established his writing capabilities’ in multiple technology disciplines.


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