Many companies are facing uphill battles to generate profit ranging from fierce industry competition to inflation and rising production and operational costs. To manage them, businesses must constantly look at cost-saving initiatives to see where they can spare some cash. 

One of the most popular areas to improve scalability and cut costs is IT. By eliminating in-house IT departments, companies can save on the salaries of multiple technicians and eliminate the need to purchase dedicated servers and systems. However, doing this comes at its own cost.

Here, we’ve listed the largest disadvantages of outsourcing IT and identified some of the best reasons to have an internal IT team for any instance where technology goes on the fritz. 

Reduced Control and Efficiency

One of the main savings when outsourcing IT is that it often moves a company into the cloud. This cloud server is commonly owned and managed by whichever service provider is chosen to provide IT services and can help save plenty of cash that would otherwise be spent on expensive server or software upgrades.

While this may have a short-term benefit, it significantly reduces a company’s control over its IT infrastructure. It also takes away the company’s decision-making power, as upgrades to servers or software are usually done by the consulting company and may occur without the company’s knowledge.

Although this drawback may not immediately impact business operations, other factors do. The greatest of these is a delay in response times due to IT technicians not being on-site or handling the infrastructure of multiple companies at once.

When this occurs, critical issues may take longer to fix than they should. Innovations and changes required by a company to its infrastructure could also be delayed, as the consulting IT firm will need to allocate time for them, which may take some time, depending on the workload.

Security and Privacy Concerns

Aside from having reduced control over the IT infrastructure, companies that outsource their IT also face the increased risk of security breaches. This is because their data is not stored internally and is accessible by various employees of the contracted IT firm. 

This increased vulnerability is often downplayed, with outsourced companies promoting safe practices. However, instances have been recorded where companies were breached through management agencies, resulting in the loss of data.

More than data being stolen, companies in many industries also need to comply with strict data storage and handling processes. One of the sectors this is most crucial for is the iGaming industry, which allows people to gamble online using any of the best casino sites according to casinos.com.

By outsourcing data management to external IT consultants, companies have no control over how the data is truly being handled or stored. If this is not done correctly, it could lead to further problems, such as privacy leaks or even the failure to comply with some regulations. 

Costs

As stated, outsourcing IT is most often done to save costs. However, doing so carries substantial expenses alongside hidden costs that may occur during the relationship’s term. These can quickly add up to what running an internal IT department would cost.

The first and most significant of these expenses is the initial negotiation related to the service level agreement and the move to an outsourced company. Should this require the movement of systems and servers, these costs can be substantial.

Other fees could include moving between service partners to ensure your access to the new servers is unobstructed, integrating outsourced service protocols with internal systems, and renewing licenses with the outsourced firm.

Dependency

The final major pitfall of outsourcing IT is developing a dependency on the IT firm chosen to manage the infrastructure. With a consultant in control of all IT aspects, should the firm suddenly fold due to operational or financial reasons, companies reliant on it may find themselves dead in the water.

When this occurs, switching to a new provider is often a complex process and could take extended periods and cost significantly. This also entails the renegotiation of contracts, which takes time away from management when they could be focused on more pressing issues. 

Advantages of Keeping Internal IT 

Retaining an internal IT department has many advantages, including mitigating the issues that could occur due to the above pitfalls.

Business Understanding 

The greatest of these is a clear understanding of how a company functions and what is needed from an IT perspective to ensure things run smoothly. When working closely with other departments, an internal IT department can better support a company and align practices that better suit business goals. 

Cost Efficiency

Contrary to popular belief, housing an internal IT department can have lower long-term cost ramifications. This is because there will be no hidden fees or markup on service delivery that could inflate costs. Additionally, while initial expenses to purchase servers and other infrastructure equipment may be high, these can provide long-term value and be used for years.

Innovation

An often-overlooked benefit of internal IT departments is the innovation they can bring to a company. Due to the department’s in-depth knowledge of a company, IT employees can often suggest innovative systems that address problems facing the company. They can also work to continuously improve existing systems and processes.

Final Words

Despite the common belief that outsourcing IT is beneficial, cost-effective, and more desirable for companies, contracting another firm to perform IT functions can have significant knock-on effects on an entity. These effects can range from minor (such as slightly delayed support response times) to major (such as data breaches).

As such, any company seeking to outsource IT should carefully consider the ramifications of doing so. This is best done by examining the company’s IT needs carefully and determining whether outsourcing will bring true benefits that outweigh the advantages of an internal IT department. Only if this is true should the move to external consultants be made.