IT Outsourcing Versus Insourcing

by Modis on April 29, 2014

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Pros and cons of IT outsourcing versus insourcing and in-house IT's
In today’s ultra-connected, ultra-competitive business climate, technology is everywhere. It’s part of every business, every department and every function. And new technologies are emerging every day. This demand for advanced technology is creating demand for equally advanced technologists. Unfortunately, the supply isn’t keeping pace. And while IT outsourcing proved to be an answer to this challenge in the past, many companies are moving away from outsourcing – and with good reason.

In our new white paper, “Moving Away From Outsourcing: IT Department Trends,” we explore the reasons fueling the shift away from outsourcing and provide guidance to companies looking to overcome the shortage of available IT talent in the jobs market.

Why do companies outsource?

At the dawn of the 21st century, companies began to invest unprecedented time and money into building computerized systems to take advantage of the e-business boom. However, these expenses proved to be extremely costly, and it became increasingly difficult to hire IT professionals with the right knowledge. Thus, U.S. companies turned to offshore outsourcers.

The main reasons why companies outsourced IT functions included:

  • Offshore IT outsourcers could offer scale in the number of professionals available with the skill sets companies needed.
  • IT outsourcing companies responded to demand by adding new services to handle infrastructure solutions, business process outsourcing and software/QA testing.
  • Outsourcing contracts offered companies a predictable level of IT spending.

What’s driving the demand for IT professionals today?

Companies today are experiencing a phenomena similar to the one faced by businesses in the early 2000s. They are investing in new technologies, like enterprise resource planning solutions, Health IT systems, marketing automation, mobile apps, big data systems and others. These investments are spurring demand for qualified IT professionals. However, the unemployment rate for IT professionals is about 3.5 percent, well below the rate for the general population. As a result, the pool of available candidates remains very shallow.

Click To TweetTweet This: The unemployment rate for #IT is about 3.5% – much lower than the general population. This means a shallow #hiring pool.

Understand IT outsourcing advantages and disadvantages

While IT outsourcing proved to be an effective approach back in 2004, it doesn’t seem to be working today. Demand for IT outsourcing in countries such as India has already leveled off, according to The Economist. In addition, KPMG predicted that the outsourcing concept will die out.

The reason for this reversal is because the disadvantages of outsourcing are starting to outweigh the advantages. The disadvantages of IT outsourcing include:

  • Projects take too long
  • Rising or hidden costs
  • Loss of control of data security and disaster recovery
  • No control over how services are delivered
  • Lack of service quality or expertise
  • Some IT functions are not easily outsourced

Outsourcing versus insourcing

A better approach to meeting today’s IT challenges appears to be insourcing – bringing IT functions and departments back in house. Of course, this approach brings you back to the original problem of an IT skills shortage.

Fortunately, there are proven ways to insource in your organization, and we explore them in detail in our white paper. Some of the advice we provide include:

Before you outsource your next project or professional, find out why so many companies are moving away from outsourcing and learn how to effectively insource in your company. Download your free copy of our white paper now.

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