IT outsourcing vs insourcing: Which is the best option for your business?

Many of us have wondered whether outsourcing IT is the best choice. How do we know if we are ready to do it? Keep reading, and we will show you the answer.

IT outsourcing vs insourcing: Which is the best option for your business?

In recent years, the IT departments of companies have acquired a cross-cutting nature, becoming a strategic element for their competitiveness.

We are also witnessing an IT outsourcing services phenomenon, among which is the development of systems, applications or software products that ultimately help raise productivity levels. An example of this phenomenon is the Deloitte’s study, which shows that 72% of companies outsource IT services to serve their businesses.

Even though most organizations agree on the importance of new technologies, in an increasingly global economy, not all of them are clear on whether to develop systems in-house or whether it is better to outsource them to experts in the field.

Read as well: Why outsource software development and why it works!

The alternative of insourcing is generally recommended when we are facing very complex contexts that demand a very particular expertise or when the company is able to respond to the software needs required with infrastructure, personnel, and a high specialization component.

When the company already has this component of specialization in this area (because it has a solid development or IT team with qualified personnel), it can achieve a competitive advantage over its competitors. Here are some examples where insourcing is convenient:

  • Complexity and high business specialization: When a business is focused on a very small or specific market niche, there may be difficulties in finding specialized personnel, software, or hardware. In these cases, it is convenient to do an in-house development to protect this asset.

IT outsourcing vs insourcing: Which is the best option for your business?

  • Advantage over its competitors: When a company is a pioneer in a development or business area, it is likely that it will aim to maintain this advantage it has over its competitors by resorting to the personnel within the organization. Something similar happens when the business demands a constant technological update since it is important to keep it internal.
  • Business confidentiality: There are certain companies in which the development is a strategic pillar of their business and cannot interrupt it at any time, or when the information security is vital, so it can lead to these organizations forming an internal department over which they have total and absolute control.
  • Maintenance savings: Sometimes, the maintenance services of ERP systems (or similar) can be high, therefore justifying insourcing.

On the other hand, we have outsourcing where an organization delegates a portion of its business process to a third party since it could be performed more efficiently by that other company.

Do not miss this: 8 benefits of an offshore software development center

Outsourcing frees the organization from this responsibility and helps it to focus on the core function of its business since the outsourcing company has the tools and methodologies to work on its client’s software needs.

In line with this argument, here are some of the advantages that IT outsourcing brings:

  • Updating, specialization, and further qualification: A great advantage of outsourcing is having personnel more qualified in the development (new technologies, methodologies, programming languages, testing, etc.). Many times, these capabilities are limited when the in-house team is small or has little expertise.

IT outsourcing vs insourcing: Which is the best option for your business?

  • Equal conditions: It allows companies with small structures to compete and provide services that would otherwise cost them a lot (time and money) to obtain.
  • Good practices: The value that an external company brings is the sum of its experience in different projects and in diverse industries/technologies. A large number of successful cases with other clients and users makes it possible to perceive the origin of problems and their solutions more quickly.
  • Transforming fixed costs into a variable: At first it may not be noticeable, but in the mid and long term, outsourcing avoids certain less direct costs, such as staff turnover, holidays, or layoffs, which are not considered when outsourcing.
  • Fast capacity increase: Hiring an external technological partner permits the company to increase its capacity to develop certain activities in which it is not specialized, allowing for such development to be delegated to specialized organizations.

To Sum Up

With these criteria, choosing an IT outsourcing model over an insourcing one is more than justified for many small and medium sized corporations; however, it is always essential to analyze the pros and cons that each model brings to your business to make the right choice.

Content related: 7 tips you should consider when outsourcing software

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