How to Mitigate IT Outsourcing Risks: An Expert Guide

Are you considering IT outsourcing, but concerned about the potential risks? Maybe your organization is looking to: reduce costs, enhance reliability, improve service and support, or perhaps gain access to specialized technology skills and experience?

IT outsourcing is a great way to unlock potential if you can mitigate the risks. To help navigate the journey to successful IT outsourcing, read our expert guide to key risks and how to manage them.

In-house versus outsourcing potential

It is natural to be concerned about potential risks with IT outsourcing. Building trust and cooperation between organizations that have not previously conducted business has its’ challenges. Given the critical role that your IT systems play in your business, it is easy to understand why you would lean towards sourcing everything you need in-house.

The impact of the global pandemic on your business may have served to increase those concerns. As, for many businesses, it has highlighted areas without proper control structures, supply chain instability and insufficient risk management.

However, unless your business is technology, the effort and expense to rapidly acquire, or develop IT skills in-house can be both time consuming and a distraction from your main business and goals. Which in turn could slow time-to-market efforts.

In fact, choosing the right IT outsourcing partner could help to answer many concerns. Technology partners often have control and risk management methodologies already in place to mitigate risks and deliver results. But what are those potential risks?

Understanding the different risks

To ensure the success of any outsourcing IT project, or system support, there is a lot to plan for, from day-to-day security breaches to natural disasters, such as floods, fires, or even a pandemic!

These are the risk categories we recommend you plan for:

  • Operational

These include software and hardware failures, physical damage to assets, both internal and external fraud, process management mistakes, and market manipulation.

  • Data security

Data tampering, data theft, unauthorized access to sensitive information, eavesdropping, and password-related threats, all fall into this category.

  • Compliance

Violations of local or international laws, codes of conduct, and business standards, that damage the company’s financial, reputational, or organizational standing, are classified as compliance risks.

  • Business continuity

These include all types of natural disasters and other unpredictable events: floods, fires, epidemics, wars, power outages, cases of sabotage, IT infrastructure failures, and cyber-attacks.

  • Reputational damage

This category includes unethical business practices, safety violations, lack of innovation and sustainability, along with poor quality products or services.

COVID-19’s impact on IT outsourcing

In addition to the above risks, the current environment mandates that we include the impact of COVID-19. Although the full extent of its impact is not yet fully understood, there are some trends worth noting.

  • Attention to Supply Chain Management

As regional lockdowns affect companies’ operations on a global scale, C-suites are paying more attention to supply chain management than ever before.

  • Increased Use of Automation

Leveraging automation to replace labor-intensive activities is becoming more popular, decreasing the dependence on relatively expensive human resource, as well as releasing skilled resource for strategic initiatives.

  • Accelerated Adoption of Public Cloud Services

In addition, organizations are accelerating their use of public cloud services (IaaS & SaaS), because it provides the flexibility to remotely scale business processes up and down, whenever needed.

All these trends are accelerating demand for specialized technology support and a greater appetite for IT outsourcing. In fact, the IT outsourcing market is predicted to grow by 5% annually from 2021 to 2024. And, with the right partner and risk mitigation strategy in place, your organization may choose to benefit from the IT outsourcing trend.

Ten crucial steps to risk mitigation

So, how do you mitigate the risks? Clearly it makes sense to work with a technology solutions provider that has a proven track record of outsourcing engagements with its clients.

After 30 years of providing successful outsourcing services, Miratech knows that the strategies outlined below work. They were thoroughly tested and highly effective even throughout 2020, when organizations had to transition to a fully remote work model. Miratech was able to do this seamlessly in all our engagements, regardless of location.

What did our customers think of our performance? They agreed it was top class, giving Miratech an exceptional Net Promoter Score (NPS) of +64 points.

Step by step …

These are the strategies to ensure a successful outsourcing project. Organizations should:

1. Ensure Cultural and Work Ethic Alignment

Check all organizations, involved in a project, share a similar culture and values. Shared attitudes, levels of personal motivation, and work ethics help to reduce risks associated with the human factor.

2. Prioritize Project Management

According to the 2020 Project Management Institute (PMI) report, 67% of change initiatives fail because organizations undervalue project management. A strong Project Management Office (PMO) and experience make a significant difference to the success of global outsourcing.

3. Schedule Regular Status Updates

Frequent project status updates are essential to keep everyone on-track. It enables remedial actions to be taken to address issues and deliver results. A clear project reporting regime keeps stakeholders informed. It facilitates faster decision making, as well as reducing the risk of potential project defects, and project surprises.

4. ‘Scope In’ The Appropriate Amount of Scale, and Then Add More Incorporate scalability, to all aspects of the project, if you want to deliver cost-savings and support business agility in a changing market. Scalability provides cost-effective flexibility for future growth.

5. Understand Resource Skills, Availability and Potential Responsiveness

Scalability also means having access to a technology partner with a responsive, and versatile talent pool. This enables the business to rise to technical challenges, as well as deal with unplanned surprises, including a global pandemic!

6. Review Quality Assurance (QA) Methodologies

Robust QA methodologies minimize risk, at all stages of the development life cycle. Including both functional and non-functional testing. To manage risk and optimize control, mature technology companies, like Miratech, work with proprietary tools and methodologies, which provide a detailed roadmap to control every aspect of the project.

7. Work with Partners That Use Technology to Accelerate Project Timelines Real-time project management data availability helps project managers make more informed decisions, quickly. Using a digitalized software engineering process significantly cuts development costs, time and reduces risks. In fact, Miratech’s Agile Portfolio System (MAPS), a set of proprietary tools and methodologies, provides this capability. It enables quantitative, and qualitative project management methods to deliver more effectively, with the use of real-time data on our ‘Live Dashboard’.

8. View the IT Outsource Partner as an Extension of Their Team

Collaborative sessions with team members are vital for improving performance, maintaining motivation, and building better working relationships. Using reliable communication tools and staying connected with your workforce, as well as your clients helps increase trust and reduce business uncertainty.

9. Understand Outsourcing Partner’s Business Continuity Plans

If an unforeseen threat arises, an advanced IT infrastructure can help maintain business continuity. The COVID-19 pandemic has demonstrated the importance of a flexible operating model.

10. Ask for References

Any reputable outsourcing firm, that has been in business for any length of time, will be more than willing to share references. Most will have published use cases that can be reviewed as well.

In summary – choose reward not risk

The decision to outsource should not be taken lightly, nor should the evaluation process to select the right partner. However, given the rapid pace of technology adoption and the requirement to accelerate time to market capabilities, working with an outsourcer can be a viable means of accomplishing both goals.

It’s easier to mitigate risks when you are aware of them and can plan for them. After 30 years of performing outsourcing projects with a 99% success rate, we know what works and what doesn’t. This guide provides you with the strategies you need to properly evaluate and select an outsourcer for your project.

Of course, Miratech is here and ready to help you. Choosing to work with an experienced technology partner, like ourselves, offers many potential rewards, including significantly mitigating risks.

We know we do a great job because our customers tell us we do, managing risks with diligence, paying attention to detail, and having the determination to succeed together with our customers.

Interested in IT outsourcing with confidence? Choose more reward and less risk!

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Let Relentless Performance Work for You!