Have you ever wondered what is IT outsourcing? As an entrepreneur, you have probably more than likely come across the term outsourcing by now. IT outsourcing. Isn’t that a bit of a perplexing term? But what is IT outsourcing and why is it a trending solution?
IT outsourcing has transformed itself into an advanced global market. No matter how traditional a business approach is, most businesses have outsourced one or more layers of their IT functions. Competitive organizations have realized that outsourcing is now a permanent feature of the business life cycle. As companies search for cheaper and more efficient ways of working, handling non-core functions to lower-cost specialists can be effective.
Many big names like Google, Facebook, and Apple also use this approach to access specialists in some parts of their work. Outsourcing a part or all of a company’s non-core functions is proven to be an effective endeavor that businesses take to leverage high-value local talent. In this article, we will share our thoughts on what is IT outsourcing, and everything you need to know about IT projects outsourcing. So, let’s get started.
What is IT Outsourcing Exactly?
IT outsourcing involves delegating one or more business processes, related to software development and consultancy, to an external provider, who then owns, manages, and administers the selected processes to an agreed standard. In simple terms, it’s a practice to outsource a part of software development outside of the in-house team to save time and cost.
Many organizations outsource to help them in some part of the software-related work while providing the ability to focus on core competencies. It lets businesses focus on important responsibilities while leaving other duties to their hired partners. Certainly, IT projects outsourcing gives a great solution to big organizations and young startups.
No doubt, it’s a great opportunity for businesses to work with multifunctional experts and grow their operations. But how to know if we need to outsource or not? Don’t worry, below we have stated some points when you should consider outsourcing.
You need IT projects outsourcing when you:
- Have a startup at an initial stage
- Need technical support
- Have a lack of time and employees to complete a team
- Want to involve expert guidance in a specific project
The practice of outsourcing was a subject of considerable controversy in many countries. Those opposed argued that it has caused the loss of domestic jobs. On the other hand, supporters say it creates an incentive for businesses and companies to allocate resources where they are most effective.
Furthermore, the benefits of outsourcing help to maintain the nature of free-market economies on a global scale. Due to advances in technology, businesses of any size can benefit from technical expertise that they might not have in-house.
Most importantly, companies can implement their IT projects outsourcing outside and within the nation. IT just opens up a wide pool of options for the business to rely on effectively. Conclusively, we can say that IT projects outsourcing gives companies the fastest growing valuable solution to lead to greater competitive advantage while cutting costs.
Some Amazing Stats on IT Outsourcing
IT Outsourcing became an integral part of industry economics throughout the 1990s. Since then the benefits of outsourcing have become so much popular among businesses. A report from Statista highlighted the global market share of IT outsourcing amounts to $92.5 billion. Hence, indicating the unbelievable popularity of the benefits of outsourcing.
Moreover, a report by Techavio predicts the market share of IT outsourcing to reach $97.51 billion by 2024. The revenue in IT outsourcing is projected to show a yearly growth rate (CAGR 2021-2026) of 8.93% from 2021. Especially, in the case of startup founders, IT outsourcing offers a magical key to expanding their business faster and saving more money than they could with a small team of full-time employees. Around 57% of organizations outsource their function to increase project productivity.
According to a study conducted by Clutch, 8 out of 10 businesses plan to outsource important operations in 2021. This is because it helps businesses to reduce costs by up to 60% and grow without a major risk of investment. In the end, all these points indicate the future is in favor of IT outsourcing. Conclusively, the above-stated stats prove the trend of IT collaboration to be in favor of outsourcing.
Types of IT Outsourcing
The types of outsourcing depend on the location of the client and the service provider. The prime types of IT outsourcing are classified as follows:
The IT outsourcing process where a business decides to hire IT experts within the same city or nearby place is called Onshore outsourcing. This method offers a convenient solution when you have a strict budget but also want everything to be under control.
Nearshore IT outsourcing includes collaborating with IT professionals from neighbouring countries sharing the same time zone. This way companies get to choose from international talents without the barrier of the time difference in communication.
In offshore outsourcing, businesses get to hire talents from other countries. This method of IT projects outsourcing helps companies to save up the most. In addition, it enables businesses to utilize international tools in the considered project.
Basic IT Outsourcing Models
Indeed, IT outsourcing proves to be a great help to businesses. However, before signing a contract there’s one more thing that you should look for and i.e. the IT outsourcing models. Now you must be wondering what is IT outsourcing models. Don’t worry, we have covered almost everything for your convenience.
Well, the types of IT outsourcing models define the way businesses actually collaborate while outlining the end goals of such integration. Basically, it covers the types of IT outsourcing based on the relationship between the client and the service provider. Below we have highlighted the 4 common types of IT outsourcing models you need to know.
1. Project-based IT outsourcing model
First on the list of types of IT outsourcing models includes Project based models. Here, the business can collaborate with an expert team to get perfection in part of already planned work. And by planned work, we mean that the framework for the project is already designed and the hired team just needs to follow the pattern utilizing their skills.
In simple terms, it means the outsourced team works on the development process from the start to the end. Moreover, in a project-based IT outsourcing model, a project manager from the outsourced team takes full responsibility for the quality and performance of the work.
Some advantages of outsourcing a Project-based Model
- Helps to achieve the deadlined in time
- Reduces workload from the in-house teams
- No need to put special attention to managing an outsourced team
- Quick hiring of experts
2. Dedicated team IT outsourcing model
In the Dedicated team IT outsourcing model you collaborate with a team that will develop and manage that project for you. Here, the outsourced team will be more engaged in that project as compared to the project-based or other IT outsourcing models.
For instance, the hired experts are free to suggest their innovative ideas in this type of IT outsourcing model. In simple terms, the collaborated experts help you with all the technical aspects while becoming the product advisor too.
Some advantages of outsourcing a Dedicated Team Model
- Give access to more control to the team
- More flexibility
- No need for micromanagement
- Enables you to focus on the other important tasks
3. Outstaff IT Outsourcing Model
The Outstaff model includes one of the majorly used types of IT outsourcing models. In this type of IT outsourcing model, companies don’t need to hire a full-fledged specialist team. In some cases, the project requires only some amount of professional guidance to complete the process. Hence, you can simply hire a few workers to cover your work with the best solutions. Unlike other IT outsourcing models, this one works best for short-term projects.
Some advantages of outsourcing Outstaff IT model
- No need to hire a full team
- Flexibility to outsource as many professionals
- Help to complete the process quickly
4. Workforce Augmentation IT Outsourcing Model
Also known as the staff augmentation model, it offers organizations a contract hiring solution. In simple terms, here the organization plans to cover the skill gap on a contract basis. In most cases, these temporary employees are allowed to work remotely. Also, as the employment is on a contractual basis, businesses don’t need to pay additionally for their benefits.
Some advantages of outsourcing Workforce Augmentation Model
- Scaling is quicker
- Puts you in control of the project
- Unbiased opinions
What are the Best Regions for IT Outsourcing?
One of the major benefits of outsourcing includes that it enables businesses to hire experts from different regions. We know that the hourly rates vary differently in different regions. And most companies prefer to outsource experts from the region with lower service costs.
For instance, Asia continues to become a widely popular alternative due to its highly skilled workers and low taxation policy. Also, we cannot avoid the government support provided to the IT sector in this region. Organizations can just not deny the ultimate package of low hourly price with high quality of services provided. So let’s check out the most desired regions to consider outsourcing from:
|Best Regions for IT Outsourcing
Although price isn’t the only criterion to consider when choosing the types of IT outsourcing region. We advise you to also compare the time zones, communication efficiency, technology adopted, and proficiency levels.
Top IT Outsourcing Providers
CronJ helps organizations to augment their team with dedicated IT professionals in the circle. The team of dedicated developers from the heartland of IT development focuses on providing full-cycle development based on advanced technologies like AI, Blockchain, and IoT as well as IT Staff Augmentation.
With its prominent services, CronJ claims to be 100% engaged in your project from concept validation to product release. Hence, aiming to promote your organization in this digital era of software development. With the best-in-class technology stack and tools in the market, experienced experts have gained quite a name in the market.
Netguru offers a software development service focussing on machine learning and product designing services both for early-stage startups and corporations. The company has been in the market since 2008. It comes with wide-ranging expertise in cloud solutions, product development, and data science.
SquadStack combines the power of technology and human expertise to help clients scale with better results. Delivering the entire portfolio of product-related services, it aims to leverage your ecosystem effectively. It focuses on providing high-value solutions to its customers.
What IT Services are Majorly Outsourced?
Certainly, outsourcing IT services includes a huge division of technology offerings and services. In IT projects outsourcing, the typically outsourced functions include infrastructure such as
- Hardware, servers, and network systems
- Cloud hosting for instant access to information from anywhere
- Data backup and management
- Cyber security to protect your business data.
We can say that it involves a large number of functions inclusive of some unexplored services that organizations need to outsource. Some of the majorly outsourced services include
- Software Development: This service includes the management of different types of complex software during the entire life cycle of IT development services.
- IT Consultancy Needs: This one includes continuous guidance over specific IT management needs.
- IT Security Services: This offers security services from vulnerable viruses, spam, other online threats, and more.
- Datacenter Activities: Activities related to data fetching, data processing, data storage, and more.
- IT Infrastructure Services: This one includes all types of different software and hardware installation. Also, other technical infrastructure services come in this part only.
- Data Backup and Disaster Recovery: It involves all the functions related to safeguarding the data crucial to run the project.
- Strategic Planning and Association: This service covers everything from ideation to implementing strategic planning.
Major Benefits of Outsourcing
Now that you are familiar with what is IT outsourcing, the types of IT outsourcing, and basic IT outsourcing models. Now it’s time to understand the benefits of outsourcing. Of course, you would like to know the reason why you should use IT projects outsourcing and if you need it. Certainly, the benefits include too many to mention, including cost reduction and improved performance. Let’s discuss them in detail below.
Reduced IT Outsourcing Model Cost
One of the major reasons that attract companies to adopt IT projects outsourcing includes cost reduction. Certainly, utilizing outside resources allows you to reduce expenses such as headcount, overhead, office space, software licenses, and other costs. Moreover, it also benefits avoiding the expense of training, insurance, employment taxes, and more incurred with full-time employment.
It helps organizations to turn fixed expenses into variable costs. Hence, you need to only pay for the time you are actually using the resource. No doubt, considering all these additional expenses seems a more appealing alternative to you. Around 70 % of organizations prefer to outsource their soft development needs for cost-effective solutions.
If an organization doesn’t have a large in-house IT team, outsourcing some more for the project helps them to start implementing the project more quickly. On the other hand, if you decide to hire full-time employees, it would definitely take months or even years to fill the gap suitably. This way you can allow someone else to handle tasks simultaneously that would take you twice as long to finish.
Improved Focus and IT Management
Outsourcing IT development has already improved the focus and management of various companies. Organizations have already a lot of complicated processes to focus on. Focusing on the IT issues that are not even your expertise would be the last thing you want to worry about.
Hence, outsourcing the right team to manage those issues with their skills so that you can focus on the other important aspects. In addition, it also improves efficiency as experts can get the job done faster while focusing more on the core strengths and income-generating processes.
Access to a wider pool of talents
Clearly, one of the major advantages of outsourcing includes the reach of a wider pool of experts. It encourages the in-house team to gain expert knowledge from subject matter professionals. The needed skills and resources not available locally can be accessed from somewhere else.
Also, the right IT outsourcing provider offers the company suitable resources and tools used to start working on the project immediately. It enables organizations to hire a specialist for any sort of project from basic to complex. In addition, as the hiring process only takes a few days, you can add as many people as you want for that particular project.
Many organizations can’t afford to match the large in-house teams to compete with their competitors in the market. Therefore, an IT service provider can give you an affordable way to cover the requirement that can give you a competitive advantage.
In times of ebbs and flows, you can adjust production without adjusting internal resources. So the organization can quickly scale up or down based on the present working scenario.
Innovative approach with specialists
One of the most profound benefits of outsourcing includes having access to expert knowledge and experience. In simple terms, it’s an opportunity for free training for your present employees to work with recent techniques.
The involvement of experts in each stage of development offers an innovative approach to the process. This way the in-house team members also learn to work under different conditions and enhance their skills.
Last in the list of benefits of outsourcing includes the broad technology set. The outsourcing process enables organizations to include up-to-date technologies including the rare ones in their region. And clearly, the right set of resources improves the efficiency of the focused project. On the other hand, incorporating the right tools and resources in the in-house team requires a lot of time in training the current employees about how to use them.
Disadvantages of Outsourcing and Measures to Avoid Them
Clearly, outsourcing work can deliver us a number of advantages. However, you should also be familiar with the disadvantages of outsourcing and the risk involved in the process. Below we have talked about some basic disadvantages of outsourcing processes that organizations might face. In addition, this part also highlights some convenient measures to mitigate such disadvantages of outsourcing.
Language Barrier & Time Zone Differences
When you plan to outsource a team or a specialist for a project, the benefits of outsourcing from the other popular region will surely attract you. However, collaborating your software development solutions from other countries also comes with some serious disadvantages of outsourcing i.e. the language barrier.
Despite the lower per-hour price and other advantages of outsourcing, the time distance might also act as a big challenge in the way of effective communication. To overcome this issue, you can consider scheduling the meeting beforehand in the calendar. You should stick to the planned schedule in such cases to enhance the communication between you and the outsourced team.
Also, the language spoken might affect the message being clearly translated. To avoid the language barrier, you can talk to the agency representative about it and can have a video call to check if this can work with them or not.
Choosing the right provider
Finding the right staffing solution includes a tricky and complex process. You need to make sure that the provider you decide to collaborate with is trustworthy enough to meet your goals effectively. Presently, we have a bunch of service providers to choose from. How can you make sure that the companies will prove to be the right choice and not turn into a nightmare?
Clearly, it’s one of the biggest disadvantages of outsourcing. However, every problem has a solution, and surely, this one does too. All you need to do is invest some time in investigating and navigating the provider’s website.
Checking out the reviews and portfolio can also help a lot in getting an idea about their services and willingness to cooperate. In addition, you can also consider their earlier clients, the number of employees, and years of experience, which helps you to trust the firm better.
At CronJ, we offer our clients a wide range of IT staffing agency services focusing on providing extraordinary results with cooperation. We have had the pleasure of working with companies of Fortune 500 fame and also catering to some of the fastest-growing SMEs. Book your call for some exciting services for every industry and their requirements.
One of the severe disadvantages of outsourcing includes trusting a third party with your private data. Of course, to allow them to help you, you have to present the data in front of them. And not to forget that even a small data breach can cost way more than you have invested in your IT outsourcing to save money. Now, how can you ensure you are secure with such issues?
Unless you don’t put the right screening time to outsource the perfect IT staffing agency, the IT service quality might decrease adversely. Also, if your outsourced team shares a different time zone, this distance can majorly result in separating you from them.
To avoid such challenges, it’s important to monitor every stage of the development process. Establishing frequent check-ins helps you to stay updated with the status and keep the track of your desired goals. It’s equally important for you to show the same interest in the project to accomplish the desired results.
Important Points to Consider Before IT Projects Outsourcing: Do’s and Don’ts
After we are done with analyzing the incorporated benefits of outsourcing and disadvantages of outsourcing, let us now understand some tricks to implement the process effectively.
Let’s begin with important DO’S & DON’TS to consider in IT outsourcing.
Tips to avoid possible pitfalls while IT outsourcing:
- Research and apply a reliable method based on your outsourcing needs that easily cooperates with the organization’s agendas.
- It’s important to know and understand the project requirements and goals in detail before you plan to apply to outsource.
- Design an understandable framework for achieving the desired goal. You need to be precise about the end product you desire from the third-party provider.
- As mentioned earlier also, research the outsourced organization deeply. It adversely affects the end goals of the project.
- Be clear with any specifications or additional demands in advance. For instance, if you want the temporary employees to be proficient in English, plan and communicate with them via a video conference before you decide to hire them.
- Monitor the work after regular intervals of time. Timely feedback results in saving a lot of time and improves the quality of work.
- Sign in an outsourcing agreement to avoid any security issues.
- Outsource the right functions. Do not outsource functions you are already good at.
- Engage fully with the outsourced team. Treat them as part of your on-shore members.
- Don’t forget to communicate about your service provider’s security policies.
- Understand if you really need to outsource.
- Don’t prioritize cost over value when you plan to outsource a service provider.
To Outsource or Not to Outsource: Why should you do IT Outsourcing in 2023?
No doubt, IT outsourcing offers a strategic decision to companies to reduce costs and increase efficiency by hiring another individual to handle operations or services. In this modern era, businesses are run by software development in almost every stage of their growth. When considering IT projects outsourcing for your business ask yourself:
- Are we working at the optimum cost?
- Are our resources being utilized effectively?
- Is there a quicker, more effective IT outsourcing model to handle this?
Not only these considerations but also the right staffing solution plays a crucial role to ensure a seamless process for organizations. Hence, it becomes imperative for all businesses to collaborate with IT staffing solutions to pave a successful path ahead.
In addition, this way they also get a competitive advantage against their rivals to enhance their in-house performance. In the end, in this article, we have covered everything you need to get started with IT outsourcing. If you have any queries related to the topic feel free to contact us.