IT outsourcing: an opportunity to accelerate digital transformation?
Should you outsource your information systems? Perhaps the health crisis has revealed the need for IT outsourcing within your company. When the question of outsourcing information systems is raised, we need to ask about the opportunities, but also the risks, in order to ensure that best practices are adopted.
Do you need to outsource your information systems?
According to the latest study by IDC’s Cloud Observatory, the 2020 health crisis will led to a 3.7% reduction in investments in France. This means that CIOs have to rationalize their IT project portfolio and reduce operational management costs, while keeping strategic projects under control.
However, IT infrastructure spending is still expected to grow by nearly 4% overall, driven by business demand for cloud services: IDC estimates that the Cloud has been the fastest growing segment in 2021, with the market growing by over 10%.
To ensure that their IS evolve at the pace of their short- and long-term growth, companies are adopting agile and efficient digitalization strategies. The cloud is one of the most suitable levers in this process. A survey conducted by Markess International on 85 companies indicates that 37% of CIOs believe that they can achieve a higher ROI by outsourcing their IT infrastructure to the cloud compared with using traditional managed services and hosting.
But while the cloud has its advantages, it is also essential to ensure the security, stability, and efficiency of outsourced services.
Optimized costs
By outsourcing their IT infrastructure and applications, companies avoid the need to invest in expensive equipment and software and the running costs related to their maintenance.
Flexibility
The pay-per-use principle (monthly subscription or services billed on demand) of cloud outsourcing allows companies to respond to temporary needs or peaks in activity in a very reactive way. It also helps to keep infrastructures and software up to date by reducing costly capex investments.
High quality services and materials
Cloud service providers enable companies to benefit from automated and industrialized processes. They also provide them with access to the latest technologies for tools and applications. Since the upgrade of tools is generally automatic, the risk of obsolescence disappears.
Accessibility
The cloud frees users from a specific geographical location, hardware, or operating system. Data are fully centralized and remotely accessible.
Leveraging resources for innovation
By opting for outsourcing, companies no longer devote as many resources to developing and maintaining their system and can allocate more resources to their core business and to innovation.
The risks of outsourcing information systems
Dependence on the service provider
Outsourcing can make the company dependent on its suppliers. Companies that use outsourcing need to acquire new skills to control the relationship with their service provider: knowledge of service and deployment models (public cloud, private cloud, hybrid cloud, etc.), knowledge of risk analysis and cybersecurity, mastery of auditing and managing service providers, ability to drive an implementation strategy, etc.
Data hosting
Data may be hosted in different geographic locations by different providers. The risks are significant in the event of an economic, political, or health crisis in the countries in which the service providers are located: loss of physical and remote access to equipment, loss of access to application data, etc.
Best practices for successful IT outsourcing
Risks can be controlled by respecting the “best practices” for information systems outsourcing.
Define your needs
It is essential to identify upstream the activities affected by the information systems outsourcing project and to clearly define the needs of each activity. These needs must then be formulated very precisely in the service contract with the service provider.
Choose the right service provider(s)
Companies must ensure that the proposed service provider’s technical skills and customer support procedures are adapted to their needs. They must also be vigilant about the country hosting the data to ensure that the data security procedures comply with the GDPR.
Develop your organization in order to manage the service provider relationship
It is important to keep an eye on how the outsourced service is managed and to adapt your organization to this new activity. In the short term, you must therefore acquire the skills required to manage an outsourced service, while offering opportunities for internal teams to evolve.
Whether in terms of skills or culture, outsourcing brings about a fundamental transformation of activities, which involves:
Allocating technical and human resources internally to ensure a good match between the service provider’s offer and the company’s functional and technical needs.
Establishing supplier performance measurement indicators (service availability, response time, security level, service quality, etc.).
Regularly re-evaluating the sourcing strategy according to the evolution of functional and technical needs and indicators.
Controlling the risks of remote access: it is essential to implement secure gateways dedicated to outsourced service access and to ensure remote maintenance.
Conclusion
The health crisis enabled the most digitalized companies to be more reactive than others (teleworking, supplier/customer/administration exchanges, remotely accessible data, etc.).
From this point of view, it has been a powerful indicator of the importance of digitalization. For companies that decide to initiate or accelerate this transformation now, outsourcing certain IT services is an opportunity to go faster – provided that best practices are adopted.