IT outsourcing vs. in-house - What are the advantages & disadvantages?

Historians and modern scientists regard Alexander von Humboldt as humanity's last polymath. A genius of almost comprehensive education who himself inspired Johann Wolfgang von Goethe. Because wherever you touch, he — from Humboldt — is at home everywhere, the Prince of Poets is quoted as saying.

In modern business opposed Is a specialization usefully. This is because companies that outsource their customer service or IT services, among other things, can focus entirely on their core business and thus increase their sales.

How do I find a suitable IT consultant and implementation partner? In fact, it is IT outsourcing a wide field. There are generalists who offer an all-inclusive service for IT infrastructure. Others have specialized in special software solutions such as CRM systems. In this respect, it makes sense to play with search terms when looking for an IT service provider and implementation partner on the Internet. However, recommendations from friendly companies or business partners often lead to the appropriate external provider.

IT outsourcing vs in-house — a strategic decision

Especially when it comes to the IT department of a company, a strategic decision must be made sooner or later. Outsourcing is already an option for small or medium-sized companies.

This is because cyber attacks are on the rise, and many software solutions, such as customer management, are extremely complex today. External providers should therefore be considered, at least when implementing new software.

Conversely, many managing directors and board members expect lower costs from in-house IT. We will get to the bottom of this question here whether this is the case.

In fact, the right solution depends on various factors, as well as your own industry. Some companies benefit particularly from managed services and external consultants. For others, IT outsourcing does not necessarily have to be the optimal solution.

Above all, however, the success and efficiency of IT outsourcing depend on the right partner.

Do-it-yourself is out

The fact is that a do-it-yourself mentality is only suitable for individual entrepreneurs or micro-enterprises. Because as soon as customer numbers increase, cloud-based solutions and managed services become an indispensable tool for certain areas of activity, such as marketing and customer service.

This in turn means that investments must almost necessarily be made in experts as well as in the purchase and development of software. However, the selection and implementation of a CRM solution in particular is complex.

Even small and medium-sized companies therefore often invest in their own IT experts, which entails high costs. As a result, managed services providers and IT outsourcing companies that are only employed temporarily can be economically interesting.

The advantages and disadvantages of both solutions are discussed in detail below.

The benefits of the internal solution

The following are some of the reasons for in-house IT:

• Die complete control via your own IT infrastructure. Strategic decisions relating to the IT infrastructure can be implemented quickly without agreements and external partners.
• The Protecting the IT infrastructure is in your own hands. Because employees from their own company analyse risks and suggest solutions, a certain amount of confidence can generally be assumed that the measures considered are necessary.
• Short lines of communication result in errors and weak points being resolved quickly. Because everyone, IT experts as well as the rest of the workforce, is in the same boat.

What disadvantages must be considered when it comes to in-house IT?

However, internal solutions can also lead to problems. As risks and counterarguments, the following factors should be considered before making a final decision:

• that monthly salary Even a single IT consultant provides a not to be underestimated cost factor Dar. And that regardless of whether it is currently needed. For small companies in particular, an external service provider, which only acts just in case, can therefore be the better choice.
• The IT landscape is constantly changing, and Not every internal IT professional is equally familiar with all the tasks involved be. External IT consultants, on the other hand, usually have a dedicated team of developers and can guarantee high quality for every conceivable task.
• Business life is constantly in flux. Sometimes parts of a company are shut down or new business areas are added. Since this is invariably linked to effects on the IT department, employees must be fired or even rehired if necessary.

A first interim conclusion:

There are therefore reasons for as well as against in-house IT. Because anyone who outsources IT consulting loses control in a certain sense and makes themselves somewhat dependent on their partner company. Conversely, external service providers increase efficiency and can often act more flexibly than if their own IT experts are employed by a company.

Among other things, the Access to specialized expertise and expertise as the big A plus point when it comes to IT outsourcing be named.

What are the benefits of IT outsourcing already for small and medium-sized companies?

In fact, IT outsourcing is not only an option for large companies and global players. This is because certain advantages cannot be denied, even for SMEs or smaller companies.

These include:

• the cost savings: It is often cheaper, just Involve external IT consultants and implementation partners as needed, as if companies permanently employ their own IT department.
• high quality: As a result of digital transformations, software and the IT landscape are becoming ever more complex. For this reason, external IT consultants employ a A wide range of experts who are well trained for every conceivable task.
• which flexibility: External IT consultants can also react quickly to changes in a company's actual core business by installing new software solutions or offering further cloud-based solutions.

In fact, increased flexibility, excellent risk management and improved concentration on the core activities of one's own company must be considered among the decisive arguments for IT outsourcing.

The Disadvantages of Outsourcing

Although risk management and quality assurance at external providers are generally excellent, we also want to address potential weak points of the external solution in detail here. Because many companies fear:

• The dependency
• sharing internal data
• possible communication problems

In fact, everyone is external suppliers or service providers linked to a certain dependency. This is because control over processes and procedures is lost to a certain extent.

In addition, it may happen that a company's expectations are not met by the external service provider. Last but not least, particularly when IT outsourcing abroad takes place, Communication issues occur.

This in turn lead to delays and, in the worst case scenario, could trigger security risks. Companies should therefore take time when selecting external IT consultants and, if necessary, request references.

In which industries is IT outsourcing particularly popular?

As already described, the tendency to outsource certain tasks in the IT sector is increasing, depending on the sector in which companies operate. However, it should be noted that large and micro companies, across all industry borders, are now outsourcing services or even individual production steps.

In addition to logistics, accounting, marketing and SEO activities, parts of the IT infrastructure or even the entire IT landscape are particularly frequently outsourced.

This IT outsourcing in turn seems for retail and wholesale companies, particularly interesting for providers in the financial services sector, but also for app developers.

In the healthcare sector, too, many providers are increasingly outsourcing their IT activities to external providers. And with good reason. Because automated business processes and satisfied insured persons are of great importance, especially here, in healthcare.

At the same time, however, it concerns sensitive patient data, whose protection is a top priority.

Digitalization in healthcare is progressing

Nevertheless, digitization is making inexorable progress, especially in the healthcare sector. And that ranges from electronic medical records to the measurement of health data via an app.

Auch Communication platforms between Doctors and hospitals as well as online consultations require special software and must be supervised by an efficient and well-protected IT department.

After all, especially here, in the healthcare sector, with their very intimate knowledge of patients, cyber attacks would be extremely fatal. Even smaller communities of practice therefore often think about outsourcing certain areas of responsibility, particularly in the area of cybersecurity.

Last but not least, routine activities, such as the admission and discharge of patients in everyday hospital life, can be largely automated and improved through digitization. This in turn increases efficiency. Our own employees are relieved and, at the same time, patients are spared unnecessary waiting times.

High-performing IT departments are therefore an invaluable advantage in many industries, including the healthcare sector.

The financial industry also outsources many activities:

As described, financial service providers are also increasingly focusing on outsourcing. Estimated 95 percent of all financial and credit institutions are already stockpiling individual Processes and activities from. The trend is rising.

When asked about the reasons, in addition to cost savings and higher efficiency, the issue of competitiveness is also mentioned.

Only an efficient IT department guarantees an optimal positioning of companies on the market

In fact, globalization and the need to remain competitive on global markets also have a decisive influence on the outsourcing of certain production steps or services. Denn external service providers from the IT sector optimize work processes and marketing, but can also reduce the development costs of certain products.

Together with the appropriate software and competent IT experts, prototypes can be ready for series production much faster than would be the case without external expertise. For this reason, companies from the automotive sector or mechanical engineering also repeatedly rely on an external pool of experts.

Different forms of IT outsourcing

Anyone thinking about outsourcing the entire IT infrastructure or even just individual departments will inevitably be confronted with technical terms such as offshore outsourcing confronted. This means that the IT department is outsourced to a third-party provider who is geographically far from your own company.

India, for example, with its well-trained specialists, could be considered here. But even here, risks and challenges should be carefully considered. They would be:

• Language barriers can lead to misunderstandings
• different time zones make collaboration difficult
• Socio-cultural hurdles may lead to disappointment on both sides

For this reason, some companies interested in outsourcing choose to compromise. This is called nearshoring and in the context of German companies, generally concerns the outsourcing of the call center or IT department to Eastern Europe.

Both companies and external service providers therefore operate in the same or at least a similar time zone, and cultural differences are less significant.

Last but not least, external employees could work in their own company, i.e. in the client's offices and on the client's PCs. IT outsourcing therefore has many faces, and in the end, every company finds a solution that fits its own industry and budget.

Looking for a suitable partner

However, companies that want to outsource their IT landscape or even parts of it should take time to make their decision. After all, sensitive data is often involved and errors in the area of risk management can ruin entire companies.

At the same time, however, one falls It is often difficult to assess the expertise of the external provider. Especially when the IT consultant is based abroad, language barriers or even socio-cultural hurdles become aggravating.

Clear agreements and precisely defined time limits, for example when it comes to implementing new software, are therefore highly recommended. References from the external provider also make the decision easier.

The company, which wants to outsource parts of its IT or even the entire department, should also prepare itself for the discussion with the external service provider with a small checklist. That includes the question:

• What exactly is being outsourced — for how long?
• What are the goals of outsourcing?
• What budget is available?
• What are the time limits until the respective measure is implemented?
• Who makes the decisions regarding hardware and software that may have to be purchased?

Prepared in this way, board members or managing directors can approach the search for an external IT consultant and implementation partner in a completely relaxed manner.

IT outsourcing within Germany as the ideal solution

In order to minimize risks and the risk of misunderstandings, many experts see IT outsourcing within Germany is the best solution. Because in this way, communication difficulties and conceivable socio-cultural problems can be avoided right from the start. In addition, external IT consultants and implementation partners based in Germany can quickly be on site in the event of cyber attacks or other problems.

It would also be possible to have a A mix of internal solution and IT outsourcing, the per maximum flexibility cares. This is because companies have their own IT experts permanently on site. These can be reinforced by external service providers and their expertise whenever help is needed. This could be the case, for example, during business restructuring or the implementation of new software.

Even when new prototypes are ready for series production, an expert team of in-house employees and external service providers is quite common. This is how the expertise of various industries and companies is bundled, resulting in maximum safety and efficiency.

Die MDS Group offers for example offers both an all-inclusive solution for IT and the takeover of project-related activities. These include robust security concepts against cyber attacks, which are becoming increasingly important. This is because hacker attacks are increasing and cannot paralyze authorities and public institutions alone.

For this reason, the experts from the MDS Group identify potential security gaps using the latest technologies before the worst happens and proactively close them. Our own solutions have also been established in the area of cloud services. And with good reason. After all, more and more customers are disappointed by the major cloud providers.

Our conclusion:

There are therefore good reasons for external providers who provide companies with their specialist knowledge. However, as this will inevitably involve an exchange of sensitive data, the decision should be well thought out. This is because external IT consultants also differ in terms of their reliability and expertise.

In addition, implementation partners with a certain geographical proximity to the customer can be on site promptly in case of problems. The MDS Group team will be happy to advise you on the topics of cybersecurity, managed services and cloud-based solutions.

Get advice, get to know our business philosophy and then make your choice.

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