Following the economic and budgetary challenges of the past two years, more and more local small and medium enterprises (SMEs) are moving to IT outsourcing.
So says Jed Hewson, director of telephony vendor, 1Stream, who explains that the economic downturn forced important changes in IT investment decisions, accelerating the trend towards greater accountability and transparency to compete and survive.
Gartner predicts that 20% of businesses will own no IT assets by 2012, largely due to the need for cost-efficiencies, flexibility, delivery and mobility.
Hewson notes two strong influencers forcing SMEs to look at moving away from in-house IT systems.
“One is the standardisation of IT systems, which means that IT can be delivered more easily by a third-party company and the second is the worldwide shortage of skills,” he says.
The second influence is that in SA, skills shortage is probably the stronger of the two drivers, as small companies find attracting and keeping good IT personnel more difficult.
Expensive IT skills
He believes that unless a company has specific IT requirements, having expensive specialist IT skills on the payroll does not make sense.
“A complete outsource of all of a company's IT may be a step too far for some companies, so selectively multi-sourcing where specific services such as e-mail or contact centre functionality is provided on a hosted model fits.”
He also explains IT outsourcing takes many forms, saying for a company such as a Web commerce business, IT may be a competitive advantage that it is not willing to outsource.
“For most companies, using hosted applications and outsourcing at least part of their IT makes sense. In the contact centre where applications such as outbound diallers or recording systems are expensive, SMEs may find it hard to justify the cost because they cannot achieve economy of scale.
“It makes complete sense for a company in this position to use a hosted contact service as they can get access to a better IT service for less money and they do not have to find and retain expensive specialised IT skills,” he says.
Flexible services
It is also Hewson's belief that besides saving costs, hosting technology also provides many benefits, including flexibility of service and the ability to try out new technologies without needing to justify a large capex outlay.
In many cases, he adds, hosted solutions are more robust and based on better technology than the in-house equivalent.
“Hosted companies also tend to keep specialist personnel who can provide advice and capability that most companies wouldn't be able to keep in-house. Hosting makes sense and is set to be the most significant shift in how IT is delivered in recent times,” he stresses.
Allan Dickson, consultant at Compass Management, says the need for IT outsourcing still exists in SA. However, he warns that taking the wrong approach can be fatal to any outsourcing initiative.
He says an example of a wrong approach is when a company is pressured to reduce costs and improve service quality through outsourcing, hastily using brief descriptions of the services to be delivered by vendors.
“Proper and detailed preparation at the start of the outsourcing process will deliver a faster, more cost-effective and better quality outsourcing relationship, whether an organisation is outsourcing for the first time, renewing an existing contract with the same vendor or going to market with existing outsourced services,” says Dickson.
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