Sometimes it really is only one or two reasons..and sometimes it is a combination of 5 o 6 reasons which in aggregation compels the company to consider an outsourcing provider.
What makes it interesting is that not every company has the same priorities...but they never the less share most of the same considerations. What is important for one company might be less significant as a reason to outsource for another.
The following reasons / considerations are usually part of the decision making process to decide upon executing an outsourcing strategy:
Consideration # 1 Expenses
Always one of the main reasons (if not the main one). CIOs are expected to cut costs while maintaining service levels. CIO's have to keep their existing, classic IT landscape running (slow tier) while at the same time developing the fast tier (Social Media, Cloud and SaaS). All of that has to happen while KPI's are maintained and preferably improved. New technology needs have to be addressed and incorporated all the while CEO's expect the value being added at a lower price point, Outsourcing can address all of the above at a lower price point.
Consideration # 2 Forming a Partnership
Contractual obligations are one thing in IT outsourcing – trust is another. Before corporations outsource IT, decision-makers contemplate if their potential outsourcing partner is trustworthy. Some of the questions which needs to be addressed are: Has the outsourcer related industry experience ? Does the offered service seem reliable and at the needed quality level ? Is the outsourcer up to deal with the rapidly changing technology environment ? Does he meet the operational and legal requirements for the security of the entrusted Intellectual Property? Are the existing customers happy ?
Consideration # 3 Expertise
The Cloud and Web 3.0 is forcing companies to change existing business processes and/or establish new ones. Specific departments have requirements and expect the IT department to implement them as quickly as possible. Additionally the IT organization is now looked upon as a revenue creator...it has to innovate and offer new services itself in an attempt to outperform competitors in the digital marketplace. An outsourcing provider needs to be aware and proficient in strategies incorporating those requirements.
Consideration # 4 Cyber Security
Cyber Security if front and center now for IT executives. Data security, data privacy and protection are key drivers of any decision making process. Cyber attacks are getting progressively more sophisticated and IT departments are caught in an arms race they try to fight with limited resources. A top level outsourcer with significant experience in cyber security can alleviate a lot of the pain points for companies trying to harden their network and infrastructure.
Consideration # 5 Customer Focus
According to IDG, onshoring is the most popular sourcing strategy. The advantages are that the service provider can be contacted quickly and directly. Often times onshoring delivers its services through a combination of onshore, nearshore and offshore activities. A heavy emphasis on customer service without compromising service quality is what corporations are looking for. Of course, the price point at which the desired level of service is delivered is always key and center for corporations.
Consideration # 6 Innovation
Companies feel the constant need to innovate. Innovation is what keeps them ahead of the competition. The problem is how to innovate without spending human resources (and capital) in a non productive manner. A good outsourcing partner might very well be solution to the innovation dilemma. The outsourcing provider will stay up to date on the latest technologies without the company having to needlessly spend human capital. (and its associated costs)
Consideration # 7 Scarcity of Talent
A recent Bullhorn (2016) study showed that 77 % of respondents in the technology filed reported a skill shortage they have trouble filling in the labor market. Besides the scarcity of talent the price and premium to be paid to address the skill shortage are the main problems identified. Corporations which employ a sourcing strategy involving outsourcing are able to fill the skill gap while maintaining a lid on personnel expenses.
Consideration # 8 Quality of Final Work Product
Perhaps the biggest challenge IT departments have been facing over the past 10 years is the need to change. Digital Services, Cloud and SaaS as well as Social Media have forced companies to innovate at a faster pace then any other time during the past 30 years. IOT and AI (Web 3.0) are the next challenge which need to be addressed by a lot or corporations. IT departments face tremendous pressures to get it right on the first try. As such the pressure is on for Outsourcing providers. The quality of the work product has to be right. There is not a lot of time available for trial and error releases which are fixed post release.
Of course, the above list is not all inclusive. There might be other consideration an individual company might contemplate. However, in my experience the list provided above is rather comprehensive.
Corporations which start the process can use the 8 points listed above as a check mark list to see where they are standing and what is important to them.