Management can decide to outsource IT services for several reasons. The most important reasons for reaching such decisions involve the operational, technological and financial benefits to be derived.

Operational benefits

Despite the pervasive presence of IT in modern business, the operation of increasingly sophisticated data processing environments is often not a core competency for many organizations. The need to improve service quality, attract and retain competent IT personnel, and develop and maintain robust systems can severely strain management’s resources and reduce the effort devoted to the real business value drivers of the organization. The operational benefits of outsourcing, then, support achieving business value by transferring service delivery of IT activities to a “specialist,” thereby allowing management to focus on the organization’s core activities. By minimizing the resources devoted to non-core activities, a business might be able to improve its performance through restructuring or reengineering business processes.

IT outsourcing can also reduce time to market. Rather than devoting time and capital to the development and implementation of suitable IT processes in support of new businesses, processes or products, businesses can take advantage of the ready solution outsourcing offers. In this same fashion, outsourcing can support mergers and acquisitions by offering a scalable solution for the integration of newly-acquired organizations. Outsourcing is also a common option for minimizing start-up times and avoiding the high costs of entering new markets.

Technological benefits

Achieving IT efficiencies may be an organization’s major expectation from outsourcing. By outsourcing, an organization may have access to people, processes and technology that it might not otherwise economically obtain. Outsourcing often provides access to advanced technology that can result in distinct technical leadership. It can be a way of keeping up to date with changing technology and gaining access to IT expertise and, through this, improving the quality of IT services delivered to the business and to customers.

Financial benefits

An important benefit often sought by management in IT outsourcing decisions is financial in nature. Outsourcing offers the possibility of bringing IT costs under control through the efficiencies that might be delivered by the service provider or the sharing of common costs among the service provider’s customer base. In addition, outsourcing can reduce the risk of investing in the wrong technology or significantly limit the required capital investment, making financial resources available for more strategic activities.