Understanding Outsourced IT Teams: Simple Answers from the Experts

In today’s technology-driven world, businesses of all sizes are increasingly turning to outsourced IT teams to manage their complex IT needs. Hiring Outsourced IT Teams has become a widespread practice globally, with businesses of all sizes embracing its potential to enhance their IT capabilities. Therefore Era Biz Solutions spoke with our experienced professionals in the field of IT Outsourcing for the answers to commonly asked questions.

Statistics

• According to statistics by the International Association of Outsourcing Professionals (IAOP), “Chief Information Officers (CIOs) at companies ranging from General Motors to Applied Materials to McGraw-Hill outsource as much as 50 percent or more of their IT budget dollars”.
• In an article by CIO, it was reported that the IT Outsourcing Market was expected to have a CAGR of 5% from 2020 to 2024.

Hiring Outsourced IT Teams presents a strategic opportunity for businesses to optimize their IT operations, reduce costs, and gain access to specialized expertise. By carefully considering the benefits, risks, and best practices, businesses can make informed decisions about hiring Outsourced IT Teams, empowering them to leverage technology effectively and drive business growth.

To help businesses make informed decisions about hiring Outsourced IT Teams, we at Era Biz Solutions compiled a comprehensive guide on this topic. Drawing from expert insights, we’ll delve into the benefits, risks, and best practices of hiring Outsourced IT Teams, empowering businesses to navigate this complex decision with clarity and confidence.

Why is an In-House IT Team Considered Costly?

While Era Biz Solutions offers very affordable costs, we wanted to find the average costs and costing factors that impact IT Teams in general. Therefore we spoke to several of our clients to get a cost-estimate of what they pay when they need to employ staff for their in-house IT teams. Here’s a cost breakdown of what you have to pay for in an in-house IT team*:

Category	Type of Cost	What You Pay
Human Resources	Salary of IT Staff/head	Avg. US $77,000 – 127,000 annually (Glassdoor)
	Employee Benefits	Approximately 30% of Salary (ILS)
	Recruitment costs (job board fee, background checks, training, relocation costs)	Avg. US $7500 – 28,000 per recruitment (SHRM)
	Lost productivity during hire	Approximately 60% of hiring costs
	Cost of Turnover for 1 employee	100% – 300% (Harvard Business Review)
	Rate of Turnover for IT industry	12.9% (Turnover Report by LinkedIn)
Downtime	Downtime costs for system down if staff on sudden leave and unable to get system up on time	US $20,000 – 40,000 per hour for SMBs (TechRadar). This could be as high as US $6.48 Million for certain financial organizations
	Unmanaged Computers	US $5,000 per annum (Solutions Review)
	Average IT Downtime	545 staff hours per year (Solutions Review)
Equipment	Technology Equipment Costs	US $500 – 5000 per employee per annum
	Office Supplies	US $ 639 – 1844 per employee per annum (OPI)
	Software costs (SaaS)	US $13,000 per employee per annum (ITAM Review)

Accordingly, companies may be shelling out as much as three times the salary of the employee (or more) in terms of total costs when recruiting an employee for their inhouse IT department.

What are the Benefits of Outsourced IT Teams?

Hiring Outsourced IT Teams presents a compelling solution for businesses seeking to optimize their IT operations and reap tangible benefits. In the current economy where the smallest advantage can mean the difference in success, outsourced IT teams may be the difference. Here’s what you stand to lose if you don’t hire an Outsourced IT team such as we have at Era Biz Solutions:

• Cost savings: Hiring Outsourced IT Teams can significantly reduce labor costs associated with hiring, training, and retaining in-house IT staff, along with reduction of downtime costs (as Outsourced IT teams have their own risk mitigation processes for downtime) and equipment costs. It is not an exaggeration to say that organizations may be able to hire as many as 5 talented IT professionals for the cost of one if also using an offshore IT team which reduces costs further.
• Access to expertise: Hiring Outsourced IT Teams grants businesses access to a global pool of highly skilled IT professionals with specialized expertise in various domains, such as cloud computing, cybersecurity, and software development. This is of critical importance in countries where there is a short supply of IT professionals.
• Enhanced focus on core business: By offloading IT responsibilities to an external provider, businesses can free up resources to focus on strategic initiatives that drive business growth and innovation. While they may still have to keep a few in-house IT staff for sudden emergencies, these staff only need to handle hardware setups, upgrades and servicing for other departments. Hence, even a small IT team of less than three to five members can handle a major organization with thousands of staff working inhouse. All other tasks can be outsourced.
• Scalability: Hiring Outsourced IT Teams enables businesses to scale their IT resources up or down seamlessly, adjusting to changing business needs without incurring significant upfront investments in infrastructure or personnel. This flexibility and scalability on the short-term can save hundreds of thousands of dollars. You don’t have to worry about reallocating IT staff when not needed or suddenly hiring staff for an unexpected requirement that you didn’t budget for.

Can my Outsourced IT Team Work In-House?

Yes, they can work both in-house or remotely. While remote teams are the preferred outsourcing method, you may choose still choose to have them working in-house for security and better control. That said, this will require you to pay the full equipment costs and any relocation costs (which would be costly for an offshore team). An alternative is to open a separate Offshore Software Development Center only for your organization, which gives better security and full control over your work. Era Biz Solutions can help you with this.

What are the Risks of Outsourcing IT Teams?

While hiring Outsourced IT Teams offers numerous benefits, it’s crucial to acknowledge and address the potential risks involved:

• Loss of control: Hiring Outsourced IT Teams can lead to a perceived loss of control over IT systems and data. To mitigate this risk, businesses should establish clear service level agreements (SLAs) and maintain open communication with their outsourcing provider.
• Communication and cultural barriers: Effective communication and collaboration are essential for a successful outsourcing relationship. Businesses should ensure that their IT Outsourcing company aligns with their company culture and communication style.
• Security concerns: Hiring Outsourced IT Teams can increase the risk of security breaches, particularly when dealing with sensitive data. Businesses should thoroughly evaluate the security measures and protocols in place at their outsourcing provider.

What are the Different Types of IT Outsourcing?

There are three main types of IT Outsourcing:

• Offshore Outsourcing: Offshore outsourcing involves outsourcing IT work to a company in a distant much lower cost country.
• Nearshore Outsourcing: Nearshore outsourcing involves outsourcing IT work to a company in a neighboring country.
• Onshore Outsourcing: Onshore outsourcing involves outsourcing IT work to a company in the same country.

How do I Choose the Right IT Outsourcing Company?

Selecting the right IT Outsourcing company is crucial for maximizing the benefits of Outsourced IT Teams and minimizing the associated risks. Here are key factors to consider:

• Experience: The provider should have a proven track record of delivering successful Hiring Outsourced IT Teams solutions for businesses of similar size and industry.
• Reputation: Seek recommendations from industry peers and consult online reviews to assess the provider’s reputation and credibility.
• Pricing: Evaluate the provider’s pricing structure and ensure transparency in their cost breakdown.
• Communication and collaboration: Assess the provider’s communication style and willingness to collaborate effectively with your internal IT team.

What is the Best Way to Manage an Outsourced IT team?

Effective management of an outsourced IT team is essential for achieving the desired outcomes of the outsourcing relationship. Key strategies include:

• Establish clear goals and expectations: Clearly define the scope of work, deliverables, and performance metrics to ensure alignment with business objectives.
• Foster open communication: Maintain regular communication with the IT Outsourcing company, providing updates on business needs and addressing any concerns promptly.
• Monitor performance: Regularly review the provider’s performance against agreed-upon metrics and SLAs to ensure they are meeting expectations.
• Build a strong relationship: Cultivate a strong partnership with the IT Outsourcing company based on trust, mutual respect, and open communication.

Case Studies: Hiring Outsourced IT Teams for Real-World Success

Numerous companies worldwide have successfully leveraged Hiring Outsourced IT Teams to achieve their business goals. Consider the following case studies:

·       Case Study 1: Unilever – When a Single Strategic Decision Leads to Millions in Savings

In 2005, Unilever outsourced the development of its new ERP system and other software to a few trusted third-party service providers as part of its “One Unilever” initiative to transform business technology. Multiyear contracts with the service providers allowed them to unify their processes and streamline them with the ERP system. On completion it led to US $713 million in savings.

·       Case Study 2: Slack Technologies – An Epitome of Success through IT Outsourcing

Workplace communication service provider Slack used Outsourced IT Teams for its MVP development, beta testing, software development and more. This allowed it to operate at reduced cost at the startup stage from 2013 -2017, reaching rapid growth and securing over US $250 million in funding in 2017. The organization is now valued at US $5 billion with over 10 million users.

·       Case Study 3: Google – A Success that is Exemplary to Others         

Google as a major tech company did not hesitate to outsource their non-core processes such as IT infrastructure management and software development since 2016. This allowed them to get ahead of their competitors in building and monitoring new products that increased their user count significantly.

These case studies demonstrate the diverse applications of Hiring Outsourced IT Teams and its ability to address a wide range of business challenges.

About Era Biz

Era Biz Solutions is an offshore software development company in the UK and Sri Lanka that was formed in 2011. The organization focuses on providing custom software development, web development, and mobile app development services to clients in a transparent and reliable manner. It is known for the innovation and creativity of its talented dedicated developers and dedicated teams sourced by its tech hub in Sri Lanka. In addition to the custom development projects offered in the form of full project outsourcing, Era Biz also provides flagship solutions for CRM, ERP, LMS and Logistics that have many loyal users over the years.

Conclusion: Hiring Outsourced IT Teams for a Competitive Advantage

In today’s dynamic business landscape, hiring Outsourced IT Teams has emerged as a strategic tool for organizations seeking to gain a competitive edge. By leveraging the expertise and resources of an outsourced IT team, businesses can optimize their IT operations, reduce costs, and focus on their core competencies, ultimately driving innovation and achieving their business goals.

Over the last 12 years, Era Biz Solutions has helped hundreds of startups and entrepreneurs innovate their products and develop them with the help of outsourced IT teams. Are you eager to leverage the power of our outsourced IT teams too? Contact Era Biz Solutions to get started right away!