The speed by which technology changes, coupled with the costs of maintaining a fully trained and equipped IT department, has outstripped the ability of many mid-sized companies to cost-effectively maintain their IT infrastructure. The expense and difficulty of recruiting, training, and retaining quality IT staff has become a financial and human relations nightmare.

Faced with the perennial threat of technological obsolescence and the knowledge that competitors are fighting harder for a larger share of a shrinking market, many executives now look at IT outsourcing as not only a logical and cost-effective solution, but as an absolute necessity for maintaining business viability.

By outsourcing IT needs either on a full-time or project-by-project basis, a company is able to maintain a high level of both internal and external customer support, access required skill sets on an as-needed basis, temporarily ramp up to meet seasonal or market-specific demands and then scale back to a skeletal staff when requirements are light. This reduces employee costs, project overhead and allows targeted teams of professionals with project-specific skills to focus on a project's core requirements.  

The decision to outsource is cost-effective and logical when viewed against the alternative of staffing a bloated, multi-discipline IT department that may or may not have all of the required skills and tools for any specific requirement.

Even companies with a cost-efficient IT department can benefit from outsourcing specific tasks that do not warrant a full time position.  For example, a Database Administrator may only be required for occasional database tuning and maintenance when necessary, or to make changes in tables to support the requirements of a specific project. Staffing this position full-time does not make economic sense when an outsourced DBA can be called upon only when required.

Beyond the cost of staffing, executives must also consider the costs of proficiency training and licensing the tools and software that internal IT staff needs to perform their jobs.  Typically outsourced personnel come equipped with their own tools and the client has no expenditures related to their use.

There are less tangible costs to be considered as well.  Time to market, lost opportunity costs, and drops in service quality levels due to staff overload all affect the productivity and profitability of any company.  When a company brings in an outsourced team to assist on a specific project, or to complete that project entirely, the company's internal IT staff members are free to focus on the tasks required to run the company on a day-to-day basis.  It is necessary to factor all of these issues into the decision whether or not to outsource.
 
Many businesses reach the decision to outsource their company's IT infrastructure when they conclude that they simply do not have the time, personnel or financial resources to maintain the infrastructure themselves.

Companies that outsource their IT projects need only manage the client/vendor relationship while the outsourcing vendor manages the technical aspects of the project.  This can save a company as much as 65% in labor costs alone verses completing the project in-house. 

According to a recent report issued by AMR Research, the number of companies outsourcing parts of their Information Technology (IT) organization will grow 50% in the next two years.

However, AMR warns, in order to get the most benefit out of an outsourcing partnership both parties need to build their relationship on shared goals first and then cost savings. This ensures that both the client and vendor's core business philosophies are aligned and that the two organizations share common goals and measure success the same way.

AMR also says that companies which are able to establish a partnership with their service provider are seeing better returns (as much as 80% higher savings) and getting access to process improvements and the unique skills of the service provider.

The Cutter Group, another Internet Research Company, recently conducted a business-IT alignment study of 154 companies and 29% said that hiring difficulties was the greatest motivator for them to outsource their IT requirements.  The complete breakdown of responses included:

Reason                                             % of Responses

Difficulty hiring skilled IT professionals    29%
Lack skills in-house                             20%
Budget                                             14%
Business changes                               12%
CIO or senior management mandate       12%
Reorganization                                     7%
Downsizing                                          2%
Other                                                 4%

As you can see, only 14% of the respondents viewed IT outsourcing from a strictly budgetary point of view while the majority sought outsourcing relationships to offset staffing-related challenges.

If you see your company in any of the figures reflected above then you should investigate IT outsourcing to see if your company will benefit in any of the key areas mentioned above.