According to IT outsourcing statistics, 13.6% of total IT budgets was spent on outsourcing in 2020/2021, which translates into a 0.9% year on year when compared to 12.7% in 2019. In fact, this is the fastest rate at which companies are outsourcing IT services in the last decade. The IT outsourcing industry will continue to grow with almost one-third (31%) of clients looking to outsource even more while only 15% planning to outsource less in the future.
Software development, IT security and network operations are three of the most common outsourced functions. Disaster recovery, application management and database administration are three functions which have the best cost to success ratio. With soaring inflation and ballooning IT costs, businesses are finding it difficult to outsource IT services as they used to in the past.
According to a survey conducted by Everest Group, 48% of respondents said that their outsourcing costs have gone up by 10% or less. 39% of respondents said that their outsourcing costs have increased by more than 10% compared to last year.
The ever widening talent shortfall coupled with changing economic situation and great resignation is making life difficult for businesses. Finding and retaining the best IT talent have become a chore for enterprises. How can you outsource IT services without bearing the brunt of inflation? That is exactly what we will discuss in this article.
In this article, you will learn about how you can minimize the impact of inflation when outsourcing IT services.
Here are five ways in which businesses can minimize the impact from rampant inflation when outsourcing IT services and products.
There are many ways to contract IT services. You can either go for an outcome based model when you only pay for outcomes or opt for a more proven method of paying by time and materials. The best way to decide which method to choose when it is to access your needs.
For instance, it is highly recommended that you outsource stable processes to a managed service provider. On the contrary, you can take care of processes which are not mature enough. Use a combination of different methods depending on your situation. This will not only help you choose the right method for the situation but also help you strike a perfect balance between quality and costs.
If you are already working with an IT service provider, you can get even cheaper rates if you outsource some of your IT services to them. This is because you already have a business relationship with them and IT service providers tend to value that more. The added context can also work in your favor.
With growing inflation, FTE costs are growing at a rapid pace. FTE costs are basically the sum of all the out of pocket expenses and other expenses related to employees providing applicable services. That is why it is even more important for businesses to conduct cost benefit analysis of not only your future IT projects but also for your current IT initiatives.
Compare the cost of your IT initiatives against the industry standard or benchmarks This will give you a better idea about how much you should actually pay for outsourcing an IT service. Instead of looking at the rate your IT service provider is quoting you, make sure to factor in the total cost of ownership as well.
Read outsourcing contracts carefully as they might contain things like cost of living adjustment as these tend to increase with increase in inflation rates. With inflation comes demand for higher wages, this gives IT service providers an excuse to raise rates for their services. Even if they are increasing the wages of their employees, the increase in the prices of services they are offering should not be more than half of the wage increase.
You might be wondering what your workforce strategy has to do with increasing outsourcing costs due to inflation. This is important because businesses should have a clear understanding of how different parts of the workforce work together. In a high inflationary and recessionary environment, more and more businesses will look towards contingency staffing and outsourcing clook as it will help them meet their short term goals.
IT leaders should work closely with the human resource department in order to develop a comprehensive workplace strategy to deal with such a situation. The strategy must be developed by putting business needs, external forces impacting business and resource supply and demand. Constantly monitor the situation and make changes to your strategy when needed.
Increasing IT operational costs is worrisome for businesses but that does not mean that you should only focus on a one point agenda, cost savings. You need to look beyond the cost savings and focus more on business value especially, when evaluating future IT initiatives such as investing in VPS Singapore.
There are other elements such as risk management, availability and innovation that IT leaders should take into account when making decisions like buying New York dedicated servers. Instead of relying only on numbers, you should also look at qualitative metrics There are many intangible benefits that usually ignored by IT leaders because they are only focused on hard numbers
The growing demand for IT talent and limited supply is worsening the talent shortfall issue. IT professionals have more choices than ever before and can easily switch jobs. The crippling shortage means that companies are willing to pay top dollar to hire the best IT talent.
To overcome this issue, you should look to outsource services beyond the borders of your country. Even though the talent shortfall is a global issue, its impact varies from region to region. Tapping into regions which are not as badly impacted by this talent shortfall could give you access to more affordable IT products and services such as cheap dedicated hosting.
How are you reducing the impact of inflation when outsourcing IT services or buying IT products? Let us know in the comments section below.