What Is the Return on Investment (ROI) of Outsourcing IT Services?
Many small and medium-sized businesses struggle with handling the snowballing IT tasks. As business needs grow, new technology develops, and cybercriminals gain new skills, companies need more and more IT support.
To ensure all-encompassing IT services, each company has to hire a sizable IT department. That can be a serious problem for the budget. That’s where outsourced partners come in. Outsourcing IT services can have a substantial ROI. Here is how.
Why ROI for Outsourcing IT Services Matters
ROI quantifies the financial benefits of opting for managed IT support. By evaluating ROI, you can make an informed decision about the allocation of the company’s resources. What may seem obvious when evaluating the pros and cons of outsourcing might bring surprises when you deal with numbers.
Outsourcing can often reduce operational expenses because it involves using the expertise and tools of an external IT support company. When calculating the ROI, you can determine whether these cost savings justify the investment.
ROI also provides insight into productivity gains. Outsourcing IT services can streamline operations and enhance the quality of service delivery. Your team can focus on its core competencies while leaving technical tasks to experts. Analyzing the ROI helps to quantify the result in productivity and demonstrate the tangible benefits of outsourcing.
If you haven’t made a final decision about outsourcing, you need to invest some time in evaluating the ROI. It will provide a comprehensive picture and give you more data to work with.
How Outsourcing IT Services Provides a Positive ROI
In the majority of cases, outsourcing IT services comes with a positive ROI. That’s the main reason why the market size of managed IT services exceeds $270B. Here is how outsourcing IT offers a positive ROI:
Cost Savings
Outsourcing IT services often results in substantial cost savings. Companies reduce operational expenses by delegating such responsibilities as:
- Infrastructure maintenance
- Software updates (crucial for cybersecurity)
- Technical support to external providers
External providers offer scalable solutions, which allow businesses to pay only for the services they need. This flexibility helps avoid the high costs associated with hiring in-house staff, purchasing equipment, and maintaining IT systems.
Higher Productivity
When you outsource IT services, you contribute to higher productivity in the workplace. It happens because your internal team gains valuable time to focus on other money-generating activities. You can rely on the experience of external experts while letting your team members use their skills where they are applicable the most.
When your internal team has to juggle IT responsibilities, they are more likely to experience burnout. Today, 59% of U.S. workers feel burned out at their jobs. This contributes to lower productivity and higher churn rates.
Besides feeling less occupied, your internal team can turn to the external service provider for support. This includes a round-the-clock (in some cases) help desk that can deal with problems the moment they occur.
Compliance
Maintaining compliance with industry regulations and standards can be resource-intensive. When businesses don’t have enough time to handle this internally, they end up facing fines and reputational issues. For example, just one HIPAA violation can result in a $50,000 fine.
Outsourcing IT services helps you handle compliance more effectively. The managed IT service provider stays up-to-date with the latest compliance requirements and implements necessary measures.
You don’t just avoid fines and take the burden off your internal team. You get an opportunity to gain insights about compliance developments. This allows your company to react quickly to the changes and avoid reputational challenges.
Competitive Advantage
When you partner with a reliable managed IT service provider, you gain access to cutting-edge technologies and innovative solutions. Since providers continuously invest in the latest advancements, the collaboration can help you stay ahead of the technological curve.
When you leverage the newest tools and technologies, you take your company to a new level. This can help you get new market share without making significant financial investments.
Factors that Affect the ROI of Outsourcing IT Services
The ROI of outsourcing IT tasks isn’t always the same. The key elements that affect it include:
Initial Investment
The initial investment includes such costs such as:
- Setup fees
- Transition expenses
- Initial training (required for the outsourcing provider to understand the business’s needs)
A higher initial investment often makes business owners wary of the collaboration. However, it usually leads to greater long-term benefits through enhanced service quality and efficiency. Meanwhile, a lower initial investment, while appealing, might result in subpar service delivery. This can lower the overall ROI.
That’s why an educated decision about outsourcing depends on the evaluation of initial costs together with their potential long-term benefits.
Service Level Agreement (SLA)
The service level agreement (SLA) directly affects the ROI of outsourcing IT services. An SLA outlines the expectations and responsibilities of both parties. It includes metrics for service quality, response times, and performance benchmarks.
A well-defined SLA ensures that the outsourcing provider meets the business’s standards and delivers consistent value. If the SLA lacks clarity or fails to set high standards, the quality of service may suffer. This leads to lower productivity and higher collaboration costs.
Paying sufficient attention to the SLA and all of its elements is integral to achieving the desired ROI.
Business Needs and Goals
Each business has its own requirements and strategic objectives. To get a higher ROI, the outsourcing arrangement must support these effectively.
Before entering this partnership, you have to define your company’s goals clearly. Whether it’s reducing costs, enhancing service quality, or gaining access to advanced technologies, each one requires a special approach.
When the outsourcing provider understands these objectives, they can tailor their services to meet your goals. Misunderstandings in this area can lead to inefficiencies and missed opportunities.
Calculating the ROI of Outsourcing IT Services
The ROI of outsourcing IT services to an external provider is different for each business. To understand how it will work for you, you have to evaluate your goals, budget, and internal resources.
For the majority of companies, working with a reliable managed IT service provider results in a high return on investment.
