Risks of IT Outsourcing and How to Deal with Them

How can we do to reduce risks of outsourcing IT? There are four common risks of outsourcing you should know how to deal with them

By Nga Vu
Published on: Tuesday, April 4, 2017 - 5:50pm ET

IT outsourcing

Do you know that over 500,000 open computing jobs appear on the market while about 40,000 people majoring in computer science graduate each year? It causes the huge shortage of demand. To solve that problem, outsourcing is an effective tool. Outsourcing helps reduce the cost, improve the efficiency of business’s assignments and deal with other complicated issues. This tool sounds good but it still has the downsides and risks.

Managing the risks of using third-party outsourcing providers is not only your concern but also other’s need. I know not only you but also many entrepreneurs find the decision for outsourcing is more risky and complicating. There are a lot of party outsourcing service providers with different size and scope and in different geographical locations. Many businesses look for multiple external outsourcing service providers, for example, third-, fourth-, fifth parties. Available outsourcing services can increase the choices of your business. However, it also results in the increased likelihood of something go wrong. What should you do if the outsourcing deals are out of your control?

The risks of outsourcing IT include risks related to transactions and operations, business continuity, the confidentiality of information, and regulatory compliance. It sounds risky, right? But some strategies can help you deal with them.

1. Risks of outsourcing related to transactions and operations

It is important for you to understand the process of transactions and operations deeply. How does it flow? Which steps does it have? Do any steps need outsourcing? By doing the best with resources we have, we can reduce risks of outsourcing.

2. Risks of outsourcing related to business continuity 

We may worry about geopolitical upheaval, a natural disease, the issues of the electrical grid, etc. because we cannot continue our operation. It is impossible for you to believe in any verbal assurances of the outsourcing vendors. You do not want to lose your money, customers, or deal with a compliance issue, right? The best solution is to evaluate the business continuity plans of your outsourcing providers before starting outsourcing services. Make sure that they have the good quality facilities and skilled professional staffs to carry out the process efficiently and quickly

3. Risks of outsourcing related to confidential of information

If you are CIOs and concern about outsourcing services, it is important for you to know for sure how the outsourcing service providers transmit or store confidential information. Ask them about the type and the volume of data they handle, along with the frequency they handle. I suggest CIOs should conduct occasional visits at providers to reduce the risks related to confidential of information.

4. Compliance risks of outsourcing

Three risks I mention above may result in the fourth risk about compliance. For example, you have to submit a report to the target source within a set period of time. If you rely on your outsourcing provider while its systems go down for several days, it ruins your plan and achievement as a result. The report is not transferred on time. Who is responsible for that fault?

To sum up, I think it is important to scout the best outsourcing service if you want to make everything done well.