Evolution of IT outsourcing

1. * Evolution of IT outsourcing Mindfire Solutions is a 20+ years old, 650+ people software development and testing services company with a global clientele. We offer custom web and mobile solutions for companies across all major industries.

2. Outsourcing became an emerging trend in the late 1980s/early 1990s. In the subsequent 30 years, it became a strategic business imperative for businesses in the USA and Europe. In the 1990s, outsourcing consisted of hardware and networking- related work. However, in the internet era of the late 90s and heavy digitalization of industries in the early 2000s, outsourcing started taking a more evident shape. Business process outsourcing, software development, and full-fledged IT function outsourcing gained rapid pace during this period. The business of outsourcing became more client-oriented and just not an internal business process anymore. In 2014, it became vital to keep the IT functions in-house. As the volume of work for IT specialists increased, businesses felt the need to retain IT services. During this time, IT outsourcing, despite its continued growth, was not seen as a strategic choice anymore. IT outsourcing revenues fell to an estimated $88bn in 2014 from $103bn in 2013. However, with the advent of cloud computing, higher penetration of mobile technology,

3. Artificial Intelligence, IT outsourcing again became a strategic option for organizations worldwide. In the post-pandemic world of 2022 and beyond and with looming geopolitical uncertainties, IT outsourcing is a pivotal strategic decision for most organizations, irrespective of their size and industry. Among the predominant trends of 2022 in the IT outsourcing sector, the notable one is remote work demand. When comparing the last decade with the ongoing decade, the demand for remote work has gone up by at least 159 percent. The establishment and further expansion of cloud infrastructure and IT solutions have led to the adoption of remote work environments by employees and organizations alike. Another trend in 2022 that overlaps with the remote work scenario for IT outsourcing is cloud computing solutions. For example, more than 77 percent of present-day companies use cloud computing services to host their business apps. From medium to small businesses, nearly every type of business works with cloud computing services. The use of cloud computing services helps in better management of outsourcing with flexibility, agility, and data security. The IT outsourcing industry is also inclining towards the use of AI in its processes. AI usage has improved the IT industry processes and helped in the speedy delivery of outcomes. Companies are now investing a high amount of money in AI technology and its applications in the outsourcing sector. The IT industry is investing so much in the AI sector that the AI technology sector will reach a valuation of more than 50 billion USD in the next few years. There is a possibility that many IT companies will depend on external companies that specialize in AI solutions and technologies instead of creating their strategies and products based on AI. This trend will drive the majority of the outsourcing processes in the IT sector.

4. The IT outsourcing industry is also inclining towards the use of AI in its processes. AI usage has improved the IT industry processes and helped in the speedy delivery of outcomes. Companies are now investing a high amount of money in AI technology and its applications in the outsourcing sector. The IT industry is investing so much in the AI sector that the AI technology sector will reach a valuation of more than 50 billion USD in the next few years. There is a possibility that many IT companies will depend on external companies that specialize in AI solutions and technologies instead of creating their strategies and products based on AI. This trend will drive the majority of the outsourcing processes in the IT sector. When it comes to outsourcing roles and responsibilities inside the IT industry, the demand for cyber security specialists will go further up. Cybersecurity is a very necessary element in today’s IT and data management sector.

5. From organizations to users, everyone wants to use IT solutions with the backing of cybersecurity strategies. While there is a rise in the connected devices under the internet of things, there is also a chance of high vulnerability to cyberthreats and cyberattacks. In such an imminent situation, the demand for cybersecurity professionals and third-party cybersecurity firms for outsourcing in the IT industry. Organizations to move into the new era, need to have serious digital capability. In the highly uncertain and dynamic market, especially in countries like US and EU region hiring, training, updating, and maintaining in-house IT teams is expensive, tedious, and poses a business risk. Considering the need to digitalize and strategic reasoning, IT outsourcing is likely to continue to grow in the next decade as well. IT Outsourcing as a strategic advantage Business uncertainties of post COVID world have made organizations more conscious about lean and focused strategy and having a digital identity more than ever.

6. The rapidly changing technology landscape has made it very difficult for organizations to hire and train IT specialists to keep pace with it. Hence, IT outsourcing provides certain clear advantages: Advantages of Outsourcing as a strategy 1. Lean and Focused Organization: Focusing on their core function helps organizations to keep the bottom line healthy while improving their market offering. Leaner organizations are better placed to handle crises 2. Cost saving: IT outsourcing has proven to be a cost saver. Hidden costs of training and infrastructure in addition to the higher cost of employment in developed economies act are offset significantly by outsourcing IT functions. Outsourcing also saves on the currency of time in bringing in-house talent up to speed.

7. 3. Continuously updating knowledge of technology: IT outsourcing firms are always keeping up to date with the latest technology and providing new solutions. Outsourcing enables organizations to leverage this knowledge base of IT outsourcing firms 4. Access to proven talent pool: Outsourcing, especially offshore outsourcing allows organizations to access a rich global pool of talent in the latest technologies However, Outsourcing is not without its disadvantages as well, primarily of the 2 following kinds: 1. Loss of control: Fear of organizations have been losing control over the outcome ofOutsourced tasks or processes. An outsourcing firm will have its focus on its bottom line, which may not be completely aligned to the client and shift according to times and other clients. The modern IT professional today expects their workplace to be flexible and allow the option of working from anywhere to be viable.

8. While most companies have made space for remote work strategies after the effect of COVID 19, now, most companies are trying to adopt a hybrid model to exercise a bit more control on work processes and employee culture. Many companies have truly shifted to the work from anywhere model. While this has enabled the employees to find better work-life balance and maintain productivity, companies are also using fewer resources than before. However, there is also a possibility that the management feels a loss of control over how employees work. 2. Security risks in a Work From Anywhere world: In the post- COVID-19 pandemic world, the new normal to have emerged is the Work From Anywhere paradigm. The data security risks, which were already high in the pre-pandemic era, have only multiplied in the post-pandemic world. Here we try to address security risks and how IT provides the risks of outsourcing data security risks.

9. A solution to Loss of Control due to Outsourcing- In the changing outsourcing landscape, there is a hybrid of solutions and service providers emerging. As a result, the focus has shifted from IT outsourcing just for software development to service and solutions outsourcing. This helps in both the bottom-line alignment of the client and IT outsourcing firm and increased engagement of solution providers to the client’s strategic goals. Solutions can be for organizations as a whole or of modular nature for solving particular issues. The emerging outsourcing model is more strategic in comparison to the conventional model. While there is a chance that team dynamics will be affected by remote work, the use of virtual technologies for communication and coordination can keep team dynamics intact and establish them for a recruit. The clarity of communication with the help of virtual technologies specially made for team collaboration improves team dynamics. Although the bonding between employees and team members may be affected negatively, cross-learning and skill enhancement with the help of team members is still possible through virtual technologies.

10. Moreover, the remote work environment can help enhance the individuality of each employee and improve their problem- solving skills as they move from a physical workspace to a remote one. Here are the most effective solutions for loss of control risk on an outsourced team. · Pick a transparent vendor- One of the major ways of increasing control and transparency in the IT outsourcing process is to hire a transparent vendor who offers you information on the outsourced tasks. An IT company should check whether the vendor has control loss risk mitigation strategies in place and how far they are implemented in the work process. A transparent vendor offers a flexible and clear approach to outsourcing partnerships, reducing the risk of loss of control.

11. Keep the team informed- When the company starts outsourcing, the process will take time to be fully implemented. The team working on the project in-house has to know about the outsourcing remote team and be informed about the many processes entailed with outsourcing. This will keep the team involved and reduce the chances of loss of control and coordination between the in-house team and remote professional team. The lack of information can otherwise portray the whole process as a power shift where the remote team faces hostility and vice versa. When there is enough information, the remote team integrates well into the existing team to create a hybrid model of work structure. Use advanced communication channels- communication channels are crucial to establishing control and coordination channels with the outsourced team. Not just information, created communication channels are necessary to maintain a steady flow of information, data, and reports between the existing and outsourced teams.

12. Moving from traditional methods of professional communication like email, to other advanced communications like calls, video conferences, digital memos, reminders, and team collaboration interfaces can help create a balance in the dispersed form of the IT organization. · Manage the team from time to time- there will be issues arising between the existing team and outsourced team and even inside the outsourced team. However, proper management of the teams without taking away their freedom of working flexibly can help mitigate the risk around the loss of control on the outsourced team. This management can be done by improving communication and enhancing the pace of communication between the teammates. When communication is fast and constant, managing the entire team is easy and there is minimal loss of control. The key to finding solutions for outsourcing risks like loss of control is to find a balance between control and flexibility. While this balance can be precarious to strike, the use of technology and leadership skills can help reduce the risk.

13. Whether it's recruiting or outsourcing, loss of control can be replaced with flexibility that improves productivity and outcomes with the right digital transformation and outsourcing strategy. Most organizations that are successful in digital transformation have adopted a very strategic view of outsourcing and which modules to outsource. The primary areas have emerged as primary areas of outsourcing in recent times: a) Migration of legacy setupsinto cloud technology is a perfect example and a process almost every organization now faces. Decision-makers have learned from early mistakes that the “lift and shift” approach to migration fails to fully leverage the value of the cloud. Clients also leverage from best practices of outsourcing firms b) Software development which also includes web and app development c) IT project management d) Complete solutions for IT process outsourcing e)Testing and Quality Assurance Solutions to data security in a post-COVID-19 world

14. During the COVID-induced lockdown phase in 2020, organizations rushed in to ensure work continues amidst uncertainty. As a result, Work From Home became a ubiquitous phenomenon. However, organizations were not fully prepared for the security risks that emerged as a result. In the post-pandemic period organizations have started developing a new hybrid model of office and work from home. The cost savings and lean infrastructure management have prompted these changes, as demonstrated during the lockdown period. However, working from different locations has brought forward its own set of challenges. Clients are going to increasingly look at data and privacy security as a strategic threat and invariably IT outsourcing firms guaranteeing better security are going to be preferred in awarding contracts. The lack of traditional security systems like firewalls, network protocols, etc in work from home makes it very difficult to protect sensitive data. Some of the best solutions to solve remote working problems are as follows:

15. a) Home device identification: In a conventional network, devices are identified and assigned to the network. However, in- home VPN devices are not assigned to the network and would be difficult to monitor instead. This does pose a network security threat. However, device tagging and identification protocols have been developed and have to be in place for each user to prevent network breaches. b) Local disk security and encryption: Disk encryption prevents users from downloading and distributing users' sensitive processes and client data. c) Remote Desktop: Remote desktop services have gained significant traction in the past 2 years. They go a long way in mitigating security risks and improving accountability. Improved, interface and networking have also enabled users to access a remote desktop seamlessly. Remote desktops are controlled better by the network security team and prevent local disk security issues as well.

16. d) Virtual Private Network (VPN): Homes and business networks can be secured using a secured Virtual Network. Application data over such a network is encrypted. The network is also encrypted, making network breaches difficult. e) Biometric Identification: Next-generation identification tools like biometrics have enabled higher user security and work tracking. Biometric identification prevents any unauthorized access to the system. f) Protection against Malware: Home networks are open to malware attacks. Outsourcing organizations have identified software firewalls and malware software as part of common user requirements

17. In Conclusion The unpredictable nature of the COVID-19 crisis threw the whole world into a new normal. However, during this period certain business realities like being strategically lean, survival of the digitalized, and new models of business became crystal clear. As discussed above, the advantages of IT outsourcing outweigh the disadvantages. However, it has posed its own set of problems with work-from-home security – both local and on cloud networks. However, the industry is well prepared to handle such risks. Even though it is early years, IT security is a clear strategic area of focus for IT outsourcing firms and may prove to be a unique advantage for firms to keep up the growth trajectory.

18. * Content Source: Quora Contented by: Mindfire Solutions