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Outsourcing specialised ICT services - save money, cut through red tape.

Johannesburg, 18 Sep 2009

Outsourcing within the ICT environment is something that is becoming increasingly popular as a way to cut costs and bring scarce and specialised skills into organisations.

While some detractors of outsourcing profess that keeping resources in-house is the only way to maintain control of the IT environment, the fact remains that there is a serious skills shortage in South Africa, and those with certain specialised skills are prohibitively expensive to employ fulltime.

Not to mention the red tape involved with hiring and firing, labour disputes, total cost of employment and all of the other aspects involved with fulltime employees.

When one considers all of these factors, outsourcing within ICT, particularly for certain highly specialised tasks, becomes a very attractive concept.

Real cost of fulltime employees

The cost of an employee is not limited to the salary a company pays each month. When hiring staff full time, the services of a placement agency are often used to help narrow down the field to suitable candidates. These agencies charge a significant fee for their services, up to as much as 20% of the chosen candidate's annual salary, which can add a large chunk of overhead when hiring expensive, highly skilled specialised staff.

In addition, there are all the little extras that go hand-in-hand with fulltime staff, such as training, something which is vital in the ever-changing ICT industry; leave; sick leave; study leave; cellphones; land lines; computer equipment; insurance on these; parking bays; medical aid; retirement annuities; bonuses; and all of the human resource (HR) and administrative work that goes along with providing the above.

Outsourcing cuts through these issues, as the expense of most of these aspects is covered by the outsourcing company itself, and the company is only responsible for paying a fee to the provider. If these services are offered to an organisation at a reasonable price, the cost of outsourcing is far less than that of hiring fulltime staff, and greater return on investment (ROI) can be realised.

Minimising labour disputes

Labour law is undeniably in favour of the employee, and it is difficult for employers to replace staff who are not performing adequately. The process for dismissing staff is long and complicated, involving much time and expense, from HR to disciplinary hearings to hiring lawyers. It is an expensive, time-consuming and unproductive process that gives many employers countless headaches.

This red tape is completely avoided with outsourcing. Since an outsource provider is simply another supplier of the company, if the staff it provides are not delivering, it is much easier to rectify the situation, or to terminate the contract and find somebody else to provide the services. It is also far easier to add extra hours into the contract or to hire extra consultants as and when the resources are needed.

The issue of leave

Leave can impact not only the total cost of ownership of an employee, but also the time taken to deliver projects. Leave depends on the seniority of staff, and typically falls between 15 and 30 days per annum. This adds up to almost one month where a business is paying an employee and is not realising any benefit from this.

Leave is also intrusive, as HR generally has a 'use it or lose it' policy that forces people into taking their leave, sometimes in the middle of the implementation of a critical project. This can then jeopardise the entire delivery of said project, because key staff may be away and others are unable to handle the processes.

Outsourcing is generally of a service, not a particular person, and another individual can be placed to handle the work if one is on leave. Leave can also be worked around the agreed hours with the outsource provider, so that projects are not disrupted and downtime is kept to a minimum.

Added benefits of outsourcing

Flexibility is a major bonus of contracting specialised services to an outsourcer. Additional services can easily be requested and hours can be increased as needed.

Financially, the ROI is potentially much higher if outsourcing is correctly implemented, especially on mission-critical systems. Downtime can have a crippling effect on these systems, and typically outsourcers can help to minimise or even eliminate this downtime, leading to significant savings. In fact, outsourcers can even end up paying for themselves, as the savings from reduced downtime can cover the cost of the consultants.

Specialised skills are in short supply in South Africa, and outsourcing enables an organisation to have a bigger pool of resources to pick from and get these scarce skills on board. These resources can also be extremely expensive to bring in-house, and outsourcing gives more organisations access to these skills.

The cons

As with anything, outsourcing is by no means a silver bullet. The argument of a loss of control has its merits, as this often does happen when organisations think that outsourcing a skill or process means they can simply forget about it.

However, if the contract has been set up correctly, and expectations are managed, this problem can be avoided. Businesses making use of outsourcers need to be aware that they still need to manage the process and be proactive to make sure that work is done according to specifications.

Above all, the right outsource provider to suit a company's need must be selected. A loss of control should not occur if managers and others involved have done their homework.

In conclusion

Outsourcing of specialised services means that organisations do not need to carry the cost of a fulltime employee, and make it easier to harness a variety of different skills for the same outlay as hiring one fulltime staffer.

This model can be highly successful if implemented correctly with the right outsource provider to partner with the needs of an organisation. While one needs to bear in mind that outsourcing is not a magical solution to all problems, it can provide a host of significant benefits in terms of access to skills, reduction of red tape, and perhaps most importantly, cost savings.


RDB Consulting

Established in 1995, RDB Consulting is an outsource and consulting company that specialises in six areas: relational databases, operating systems, business intelligence/performance management, enterprise resource planning, security managed services and network managed services. The organisation also offers project management, solutions architecture, ongoing maintenance and support and more. Our services are designed to provide businesses access to expert technical resources whether fulltime, part-time, co-managed or via remote administration. This allows companies to focus on their 'core' business and leave their ICT issues to the experts.

Editorial contacts

Mark Robinson
RDB Consulting
(011) 807 7663