Deciding to outsource a business function, such as IT, can be fraught with difficulties.
In the early years of the new century, hundreds of British companies, from small and medium enterprises to multinational brands, including banks and telecoms giants, outsourced operational business functions to India and other fast-growing developing economies. Saving money was one of the main motivating factors.
Sending jobs overseas is known as offshoring. Whereas, there are other ways to outsource business functions, including mid-shoring, when work takes place in countries with favourable rates of tax, such as Ireland, some European countries, Singapore or Hong Kong. Captive outsourcing is another way to offshore business functions, where a company owns the offshore service provider thereby making it easier to manage processes, quality and resources.
Some of the main functions that were sent offshore in the early years of the new century included IT support and customer service, with the telecoms and financial services sectors keen to reduce costs in those operational areas.
Public and Client Reactions
Sending operational functions abroad - either through offshoring or captive outsourcing (mid-shoring is less common) - did not prove a huge success with clients or customers. Operational costs were dramatically reduced. Businesses could invest money into other areas. Workers overseas were paid good rates, with foreign direct investment from the UK supporting growth.
However, the public - unhappy with hit and miss customer service - and business clients did not always get the service they expected. In the early days, offshoring could not deliver the same results consistently.
Some companies started to pull operational functions back to the UK or adopt a captive outsourced approach, to improve quality.
Within IT companies, some functions, such as 1st and 2nd line help desk functions are still managed abroad. In many cases, cheaper costs prevail. 3rd line is almost always in the UK. Over the years, service quality has improved, thanks to more training, upskilling and captive outsourcing. In other cases, IT companies mid-shore help desk functions, to receive tax benefits whilst maintaining UK response rates.
However, while improvements in the quality of service have made IT offshoring an option for some businesses, a buoyant UK IT outsourcing sector offers many reasons to keep IT functions at home.
Benefits of UK Outsourcing
Firstly, with HMRC taking an increasingly unfavourable view towards any company trying to dodge tax or use tax loopholes, now is not a good time to mid-shore business functions in tax havens.
Secondly, with the General Data Protection Regulation (GDPR) fast approaching; have you stopped to consider data protection implications of outsourcing a mission critical function to any country outside the EU? IT is responsible for protecting data, cyber security and communications. Businesses are still struggling to get ready on time in the UK.
Offshoring IT to any country with different data protection laws could put your customer data at serious risk. Risks most businesses cannot afford, not with fines set at 4% of turnover or €20 million - whichever is greater.
There are other benefits too, such as:
#1: Service Level Agreements implemented in the same time zone.
Some offshore providers will have staff work during the primary business hours in the UK, but that will cost more. Working with a UK-based IT provider ensures they are working when you are, so you can just pick up the phone as needed and have your problem solved according to your SLA.
#2: Complex problems solved quickly
Companies working with an offshore provider may find that they need to on-shore a particularly difficult problem. At least this way, you know if an issue does need escalation that the same provider is managing it and communication will be clear up and down the chain.
UK-based IT providers can also work with you on high priority projects, such as business transformation. Making it easier for your internal IT teams to focus on growth and customer-orientated projects.
#3: Cultural alignment
A key criticism of the offshoring model has been a mismatch between different cultures and issues with language and basic communications. While many offshore providers have addressed this in their recruitment strategies, this has had an impact on costs with more skilled and fluent staff costing more.
Offshore providers also find it difficult to embed themselves within a business to truly understand the company culture and key business objectives. While you may not think that this can affect IT support and other operational functions, it does. Understanding what a company’s priorities are, their approach to business, the brand reputation, and how they like to communicate with customers and staff is very important when dealing with incidents or prioritising support.
UK IT providers have much better opportunities to successfully on board their clients and really understand the business.
#4: All of the benefits, none of the headaches
Working with a UK-based IT provider means you can save money and free internal staff from front line support, whilst not being tied to expensive staffing contracts and other costs. Outsourcing in the UK gives you the same benefits as offshoring without headaches or extra stress.
Find out more about outsourcing IT and identifying the right providers for your business in this post - Finding An IT Service Provider: Questions To Ask