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5 Hidden Costs of Outsourcing IT Services

Many organizational decision-makers choose to outsource because they see it as an easy way to cut costs. What they fail to realize, however, is that it’s rarely ever that straightforward. And since there’s little motivation for service providers to be transparent about these financial risks, business leaders must be diligent about identifying and accounting for these additional expenses. In many instances, it’s actually far less costly to keep IT services in-house. If you are considering an outsourcing arrangement, keep the following hidden costs in mind.

Change Orders

When it comes to outsourced IT services, just about every minor change comes at a price. Those managing outsourcing agreements must stay aware of what these change orders entail and how much they’re going to cost in the end. This can all be avoided, of course, by bringing IT on premise, where fixed IT staff can make changes to how work is performed and take on special projects at no additional costs.

Consulting

Another factor that can send costs spiraling out of control unexpectedly is consulting. These days, nearly all IT and digital engagements are led by consultants, which can skyrocket expenses far beyond what was originally anticipated. While some areas of IT service have moved to outcome-based pricing models, the consulting piece is still typically assessed on the basis of time and materials, which can vary. And while some organizations appreciate the added value, others may find the additional expenses difficult to justify.

Loss of Control

Over time, things change. Business leaders rotate, companies evolve. As a result, criteria originally agreed upon in the outsourcing contract can become obsolete. It’s imperative that someone holds the service provider accountable to deliver what was agreed on and paid for. It’s also important to audit and eliminate services that may no longer be needed. According to ISG, the average outsourcing contract loses anywhere from 5 to 15 percent of its value because the client is paying for more than what is actually being delivered.

Lack of Agility

One of the costliest things about outsourcing, and sadly one of the most often overlooked as well, is how these contracts can stifle a company’s ability to innovate and therefore compete. Far too frequently, a client will find themselves locked into an agreement at a time when dynamic change is occurring all around them. As such, they become locked out of next-generation technology opportunities, like robotics, AI and deep learning. Likewise, many traditional sourcing models don’t support things like data analytics and mobility. Adapting an existing outsourcing relationships to account for these changes can be incredibly costly, both in terms of time as well as money.

Employee Disengagement

When the costs associated with outsourcing are discussed, one thing many fail to consider is the impact such an arrangement can have on staff retention – particularly during the initial transition period. When IT employees have to make the shift from performing the work to simply managing it, there can be a sense of frustration. This is especially true for highly technical resources. The change in focus can lead to a feeling of being out of touch, and the inability to roll up their sleeves and get their hands dirty can cause a spike in attrition levels. Along with that inevitably comes the cost of hiring and training.

In conclusion…

At first glance, outsourcing IT services can seem like a great way to cut costs and stay competitive, but if you’re not careful, it could end up having the opposite effect. Decision-makers considering outsourcing should carefully weigh the financial risk – including the hidden costs, such as those listed above – to determine whether such an arrangement is truly a viable option.

On-premise IT services, on the other hand, can be surprisingly cost-effective, particularly once all the true costs of outsourcing are revealed. For instance, with on-site IT, changes can be made without additional expenses incurred and there is no need for costly consultants. And with internal control comes the ability to scale and adapt to changing technological landscape. Employees are happier and the company is able to compete at a higher level.

Curious about whether in-house IT services would be feasible for your company? It starts with the right foundation. Right now, you can experience our fully functional, next-generation IT automation and orchestration platform free for an entire 30 days. Click here to start your free trial today.

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Deliver IT Services Faster, Cheaper, and Better – Impossible?

Deliver IT Services Faster, Cheaper, and Better – ImpossibleWhile IT professionals certainly embrace technology as an integral component of the ongoing success of any business, the “powers that be” view technology as simply a means to an end. High level management and other stakeholders in the organization don’t care about the driving force behind what’s making the company run efficiently and productively – they really just care about the results. The ultimate goal is to continue to deliver a high level of IT Services in a way that is faster and less expensive. How do I&O leaders accomplish this without having to reinvent the wheel? By prioritizing service management and IT Process Automation. Here’s how.

Identify

The first step in prioritizing automation for IT Service Management (ITSM) is identifying the key areas within the organization that need to be addressed – the pain points, if you will. What areas are causing the most significant delays, expenses, and general frustration both internally and externally amongst customers? The problem with service management is that the customer focus has somehow become lost along the way. To be successful, IT professionals must begin to regain that focus and realign their planning to match up with the needs of the customers.

Design

Once the areas that present the most need are identified, IT professionals can set to work designing and developing the most effective solutions to meet these needs. In many cases, automation will be a key factor in streamlining operations and making the business run more efficiently as a whole. The more efficiently run the business, the better the output and service levels for the customer, so it’s a win-win. Not only can individual tasks be automated, but entire manual workflows can be designed to address whatever unique barriers were holding that particular business back from becoming more successful.

Implement

With the right plan in place, implementation should be a breeze. That’s why the first two steps are key. New processes and workflows can be rolled out, first in the IT department, then across all lines of business to create a more efficient operation overall. The concept of each department as a separate entity should be replaced by a more unified approach where IT departments and other teams work together toward a common goal (as we pointed out in our recent article about DevOps and IT Process Automation.)

Optimize

The last step in the process is an ongoing one, and that is to continuously monitor, measure and analyze the outcomes to ensure that they are consistently optimized. IT personnel must ensure the ongoing availability and quality of business services, both within the organization and externally. Not only should they ensure that previous processes and workflows are still being run at the highest level of efficiency and improved productivity, but they must also work proactively to ensure continuous improvement moving forward.

Essentially, service management and IT Process Automation go hand in hand and are critical in streamlining and optimizing the operations of any business. Yet simply understanding and embracing this concept isn’t enough to make the process a success. IT professionals must learn to prioritize the process and execute it in the most effective and efficient way possible to achieve the ultimate goal of improving the quality and timeliness of IT service delivery. This will better ensure that the “powers that be” see the ever-important results that they rely so heavily on and keep the business plugging on toward future success.

Could your service management process use a boost? IT Process Automation is the key.



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