IT Outsourcing Guide for SMEs — When to Outsource What
Outsource when the skill is not core to your business or when the cost of in-house exceeds the value. Common outsourced functions: hosting, website development, SEO, app development, IT support.
Outsource IT functions that are specialised, non-core, or cheaper to buy than build. Hosting, website development, SEO, digital marketing, app development and helpdesk support are the most common and successful candidates. Keep in-house anything that differentiates your business or involves sensitive data you cannot share. Start with a small trial engagement before committing to a large contract.
What to outsource vs keep in-house
The decision to outsource or keep in-house comes down to two questions: is this function core to our business differentiation, and can we get it done cheaper or better outside? Here is a framework for the most common IT functions:
| Function | Recommendation | Rationale |
|---|---|---|
| Web hosting & infrastructure | Outsource | Commodity service, specialised expertise required |
| Website development | Outsource | Project-based, needs specialised skills |
| SEO & digital marketing | Outsource | Rapidly changing, needs dedicated specialists |
| App development | Outsource | Large upfront effort, not ongoing for most SMEs |
| IT support / helpdesk | Outsource | Cost-effective, scales with business size |
| Product / business strategy | In-house | Core to business direction and differentiation |
| Customer relationship management | In-house | Requires deep customer knowledge and trust |
These are guidelines, not rules. If your business is a digital agency, website development is core and should be in-house. If you are a restaurant, it is not core and should be outsourced.
Outsourcing models explained
There are three main outsourcing models. Fixed-price projects work when the scope is well defined — you pay a set price for a set deliverable. Time and materials work for ongoing work where requirements will evolve. Dedicated team works when you need a consistent team for a long period but do not want to hire full-time employees. Each model suits a different situation. For a detailed comparison, see our article on dedicated team vs fixed-price.
Finding and vetting providers
Start with referrals from other business owners. Check case studies and client references. Ask about the provider's experience with businesses of your size and in your industry. Request a small test project before committing to a large engagement. For more detail on what to look for, see our guide to choosing a software development partner and the pros and cons of offshore development.
Managing remote teams
Set clear expectations from day one. Use a project management tool (Asana, Jira, Trello) that both sides access. Define deliverables, deadlines and communication channels. Schedule a weekly check-in call. The most common failure in outsourcing is poor communication, not poor technical skill. Over-communicate in the first month, then adjust to a sustainable rhythm.
Red flags to watch for
Be wary of providers who promise everything but cannot show specific examples. Avoid fixed-price contracts for projects where the scope is unclear. Watch for poor communication during the sales process — it will not improve after you sign. And if a provider cannot explain their process clearly, they probably do not have one. Trust your instincts: if something feels off during the vetting, it will feel worse during the project.
Frequently asked questions
Hosting and infrastructure, website development, SEO, digital marketing, app development, and IT support are the most commonly and successfully outsourced functions. These are specialised skills that few SMEs need in-house full time.
Keep in-house anything that is core to your business differentiation, requires deep domain knowledge, or involves sensitive customer data that you cannot legally share. For most SMEs, this means business strategy, product management and customer relationships.
Local partners cost more but offer easier communication, same time zones, and the option of in-person meetings. Offshore partners cost less but require more management overhead. A hybrid approach — local for strategy and offshore for execution — often works well.
Fixed-price works for well-defined, small projects. Time and materials works for ongoing work or projects where requirements will change. Dedicated team works for long-term development. Avoid fixed-price for projects where the scope is unclear.
Have a single point of contact on each side, use a project management tool that both teams can access, set clear deliverables with deadlines, schedule regular check-ins, and start with a small trial engagement before committing to a large contract.