IT Project: Outsource or In-House?

Option 1: Outsourcing the project

Advantages:

Reduce and control operating costs: When opting for outsourcing, hiring costs are slashed. These include management, training, taxes and insurances.

Access to the latest technology: In this industry, technology becomes rapidly obsolete and a small IT department will not going to keep up with everything. Outsourcing will provide you sound advice, as it’s the core competence of the company.

Flexibility: When outsourcing the third party company will have various resources available to them unlike to a small IT department startup.

Disadvantages:

Hidden costs: When outsourcing and therefore signing a contract, the services mentioned in the contract will be covered. Anything not covered in the contract will be up to you to pay those additional charges.

Confidentiality: When choosing to outsource some confidential information will be communicated to the outsourcing company. This would be problematic if that specific company decides to share the information with others.

Quality complications: The outsourcing company will have only one goal; to make profit. Most of the time the outsourcing company tries to slash expenses as long as they meet the requirements of the contract.

Risks:

Losing control: The outsourcing company, most of the time, will not be effective as a full-time employee which is managed by the same people who manage others in the same company. This can result in losing control of the IT project.

Limited flexibility: If the outsourcing company doesn’t document their work well on the network and system, or proprietary products are purchased from them then you may feel like you’re cornered and can’t go with anyone else.

Expenses:

Selecting a vendor: There is an expense of approximately 5% in addition to the agreed cost of the deal. These expenses include costs of documenting requirements, distribution of RFPs, evaluating all the responses and finally negotiating the contract.

Transition expenses: These expenses include third party consultants, resources to write, manage facilitate communications, legal fees and technical costs.

Option 2: Build everything in-house

Advantages:

Control: When building everything in-house you will have more control in the long run, resources and results of the work. This is because you will have your own IT employees that will work the projects in-house and communication can be made quickly. Also, you can monitor their work and gain more insight into the company’s operations.

Reduce costs: With in-sourcing there will be no additional recruitment costs and out-sourcing costs will be slashed.

Quality: When building everything in-house you will increase the quality of your work as there will be less unproductive time and the employees will be familiar of the internal system practices.

Disadvantages:

Experience: In-house employees may have lack of experience and knowledge of the company’s needs. They may also have less knowledge and experience in terms of market intelligence.

High investment: Going for everything in-house will require a high investment because of the additional expenses such as personals and equipment.

Supply chain integration: Because you’re hiring new employees, they will be new to the outside system practices and there may be some problems with the supply chain integration.

Risks:

Knowledge: There may be knowledge gaps in the in-house employees in which will affect the new resources required for the University’s project and the processes’ efficiency.

Resource flexing: Unlike out-sourcing, in-sourcing may have difficulties when obtaining resources for the IT project.

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