Insuring small IT businesses and tech contractors is our specialty at TechInsurance, but we're always looking to better understand our clients and the risks they face. That's why we're introducing the TechInsurance Market Index, or TIMI, a semi-annual report about IT businesses with an emphasis on risk management for small-business owners. (Download TIMI's report here.)
In TIMI, we research and compile data on…
- What the typical IT small business looks like (when it's founded, what the owner's background is, etc.).
- The biggest risks IT contractors face.
Why do we research small IT businesses and their risk? Well, when people talk about the tech industry, there's so much emphasis on the glamorous side of tech. People think of startups, revolutionary new products from companies like Apple, and startling innovations. But the reality is that much of tech work is done at a small-business level with IT contractors working "in the trenches" to support and build information technology for businesses of all sizes and shapes.
We wanted to research the kind of work that you do and help you better understand your risk exposure. Let's take a look at what we've discovered.
When and How Do Tech Professionals Start Their Own Business?
Most IT small-business owners have 15 years of tech experience before they start their own business and need IT insurance to cover their professional liabilities. Why is this significant? If you're anything like the typical IT professional, you have over a decade in tech skills, but probably lack a background in the day-to-day aspects of running a business.
Running a business can be stressful and exhilarating at the same time. Often, it feels like there aren't enough hours in the day to get everything done. But when you finish a big project or earn a new client's trust, the rewards are tremendous.
From a risk management perspective, this lack of experience running a business can create some problems for IT business owners. Let's review your three main risks.
3 Biggest Risks for IT Contractors
We encourage you to read TIMI's full IT contractor risk management report. To whet your appetite, here's an explanation of three of the biggest risks and a strategy to minimize each:
- Client disputes. One of the best ways to reduce the likelihood of client disputes is to use contracts for all your work. The good news is that over 80 percent of IT professionals use basic contracts. But the bad news is that over 50 percent don't have a client complaint resolution policy. These policies help ensure that you respond methodically to any client complaints.
- Data Breaches. 11 percent of IT professionals admit to storing or transmitting data without encrypting it. That number is simply too high. Clients and their IT contractor can both be guilty of underestimating their data breach risk. Read our full report, or check out articles on our IT risk management blog to learn more.
- Copyright and IP violations. Around half of IT companies don't have written procedures to avoid misuse of copyright by their employees. These disputes can also involve your code. Remember that using third-party code in your programs can lead to lawsuits. Unfortunately, business insurance policies won't cover known violations of copyright and IP. You'll have to make sure to prevent these violations before they lead to lawsuits.
Remember to check in with the TechInsurance blog and read TIMI's semi-annual report for updates on data breach laws, changing IT liabilities, and best practices for protecting your company.