September 12, 2020 Last updated September 12th, 2020 71 Reads share

Key Insights To Ensure Profitable IT Outsourcing

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According to a report published by Technavio, the global IT outsourcing sector is expected to grow from $85.6 billion in 2018 to 409$ billion by the end of 2022.

It indicates that the IT outsourcing industry will continue to grow at a steady pace in the coming years. Today, IT services are being outsourced to offshore agencies to boost operational efficiency, save time, leverage the latest technical skills and to make profits.

Outsourcing IT services is a tried and tested strategy for sustainable success. It has proven to be profitable even in the long-term.

Currently, about 37% of start-ups are outsourcing at least one IT function. According to competitive analysis, 24% of them chose outsourcing for increased productivity. In comparison, the remaining 18% said that their primary motive was to leverage global expertise.

Irrespective of the goal, IT outsourcing has become an integral aspect of every progressive business. It is exactly why most Western and European companies are collaborating with an offshore IT company for software partnership.

Earlier, outsourcing was simply profit-driven, but now the trend is shifting from profits to people and processes.

Competing Countries

When it comes to IT outsourcing, India has always been the number 1 choice. With similar services gaining momentum across the globe, Latin American and European companies will face tough competition from India in this sector.

Outsourcing software services opens up new avenues for companies, empowering them to expand their reach beyond geographical boundaries. It has become the magic bullet for fast-growing businesses that need experienced IT professionals for software development services.

Technology outsourcing can be classified into different types based on geography:

  • Onshore IT outsourcing means hiring staff outside your organization but from your own country
  • Nearshore IT outsourcing refers to hiring an IT vendor from a neighboring country
  • Offshore IT outsourcing is when an organization hires an agency that is at least four time zones apart. And, it essentially enables us to take advantage of lower cost for software development solutions

Business Benefits of Outsourcing IT Services

The benefits of technology outsourcing are many and vary according to the nature of operations, business objectives, the scope of IT services, available resources and finally, the budget. However, the main reasons for outsourcing information technology functions are as follows:

1. Cost-Effectiveness:

It is the most significant benefit of outsourcing IT services and developed companies save as much as 30% by outsourcing their software development services. When companies hire an in-house team, the business incurs additional overhead costs inclusive of infrastructure, salaries, leaves, taxes and office facilities.

IT outsourcing is highly beneficial for start-ups and growing companies that can save a lot of money and invest in the company’s future development. Even established brands like Alibaba and Telecom have successfully reduced their overhead costs by outsourcing IT functions.

2. Time-Efficient:

Mundane manuals tasks like software support and maintenance are laborious and time-consuming. Companies need to hire dedicated IT teams only to identify bottlenecks and address issues, which is both costly and painstaking.

Outsourcing software support and maintenance can save much ongoing effort and frees up valuable time, which can be invested in other essential processes. Moreover, due to the difference in time zones, business operations can remain up and running round the clock!

3. Easy Access To Global Talent:

There are times when a business needs a specialist for handling specific processes. When this unique talent is not available locally, outsourcing eliminates all the geographic barriers. It brings easy access to IT professionals from across the globe.

From machine learning experts to blockchain developers, companies can hire experts in every niche and achieve their business objectives, at their budget.

4. Optimized Business Processes:

Every business decision should be made with careful thought and thorough research. Outsourcing IT services enables companies to concentrate on their core competencies. It further allows employees to stay focused on optimizing internal business processes that match their proficiency levels.

With the optimum allocation of resources to the tasks that have a direct impact on a company’s productivity and performance, the bottom line gets a big boost.

5. Agility:

Outsourcing enables a company to be more responsive in a dynamic business environment. If tedious and time-consuming IT tasks are outsourced to a vendor who fails to perform, the company can immediately switch to another vendor. It is as opposed to looking for an employee with the required skill set.

The same rules apply to the adoption of new technologies wherein companies are often skeptical about rolling out innovative changes. It is simply because they are unable to find qualified candidates locally.

6. Problem-Solving Ability:

Outsourcing brings along with it, the ability to identify and address issues using a new angle. Your IT partner faces unique challenges daily and so, they are capable of offering the best solutions in the nick of time. It is so that your in-house employees may not be able to come up with.

7. The Freedom To Innovate:

The software development landscape is ever-evolving with new trends and technologies. Your in-house team of developers may not be able to stay updated with the latest tech trends and this is why outsourcing offers a competitive edge.

IT outsourcing is not only cost-effective but also empowers businesses to implement the latest and the best industry practices for better business outcomes.

8. Reduced Risk:

The best business leaders never put all their eggs in one basket. Accordingly, companies can have multiple IT vendors. They put them in a much better position to cope with the downsides of IT outsourcing.

By entrusting different tasks to different IT agencies, companies can do their due diligence in time and make informed business decisions. It dramatically helps reduce the risks and increase the possibility of achieving outcomes that match the client’s expectations.

9. Scalability:

A flexible solution for start-ups and SMEs; IT outsourcing brings insight, expertise, and infrastructure to scale up a robust workforce without having to commit to a high cost!

With a flexible arrangement that fits the budget, new businesses can immediately downsize operations when matters go out of hand, without inviting redundancies that often ruin company reputation.

10. Ongoing Support:

IT outsourcing comes with the assurance of prompt and professional support for ongoing business operations. And, when issues arise, companies have the expertise to keep their processes up and running.

Even when high-performing candidates who impact your business operations leave the organization, your IT partner may be able to fill that gap using their expertise. In many cases, outsourcing works to unite business operations and technology in a manner that produces the best results.

The benefits of IT outsourcing are many as they bring along a wealth of experience and expertise for managing daily operations that bolster a business’s capabilities and lay a solid foundation for future growth.

Downsides of Outsourcing IT

While the pros of IT outsourcing far outweigh the cons, it is essential to review the downsides so you can make informed business decisions:

1. Loss of Control Over Quality:

When businesses don’t have a complete grasp of the type of IT outsourcing they are committing to, it can lead to inconsistencies in certain IT functions, impacting the quality of outcomes.

It is why this is important to predetermine quality standards before entering into a software partnership or before outsourcing any IT function. Check for the vendor’s certifications and credibility to avoid costly complications down the line.

2. Turnaround Time Delays:

Depending on the type of IT processes that are outsourced, companies may experience turnaround time delays, specifically if the time zone of the IT vendor differs drastically.

It is important to consider deadlines and the implications of slow turnaround before outsourcing any crucial business process to an offshore vendor.

3. Communication Barriers:

It is worth noting that when a business is located overseas, companies must consider the possibility of language barriers and the constraints of working with people in a different time zone.

While these matters are trivial, they can certainly impact the quality of work and its outcome. So, research and due diligence are of utmost importance when entering into a software partnership with an offshore vendor.

4. Loss of Employee Morale:

Before outsourcing IT services, companies must have a plan to approach their in-house staff members and make them aware of the entire plan so they feel secure about their position and job role in the organization.

If IT outsourcing is done for cost-savings, the staff members may assume that the business is struggling financially and this may hamper their morale and create an environment of insecurity and mistrust.

5. Loss of Brand Reputation:

Outsourcing different business processes to a third-party vendor might adversely impact your brand reputation. Your clients can view IT outsourcing as a cost-cutting measure and this may influence their perception of your brand, resulting in loss of advocacy.

Tips for Choosing the Right Partner for IT Outsourcing

If you’ve decided to outsource your technical processes and are looking for the right fit for your business needs, follow these tips to ensure you’re investing in the best IT partner:

  • Technical Competency:
    Research your potential IT partners read through their case studies and go through the reviews of their clients for accurate insights into their IT proficiency and business knowledge.
  • Prompt Support:
    Do your due diligence to identify how well your chosen IT vendor communicates. Request them for a timeline of when you can expect software updates and reach out to other clients they’ve worked with previously so you know how prompt and professional your provider is.
  • Industry Experience:
    Study your chosen vendor’s track record to know how many similar projects they’ve handled and how their intervention could impact their client’s revenue. An experienced vendor with a diversified client portfolio and a successful track record of managing IT projects in your niche will be able to add real value to your business.
  • Business Continuity:
    Any IT vendor that you are partnering with should have the required infrastructure and manpower to handle your business processes and to overcome any issues that may arise in the business operations.

Find out everything you can about the IT vendor and have a one-on-one meeting at their office to get a complete idea of how they function and the resources they have at their disposal.

IT outsourcing is a profitable strategy that gives you the freedom to scale your business and frees-up valuable resources to capitalize on your core strengths. And, by avoiding the potential downsides of outsourcing, you will be able to concentrate on improving quality and productivity for increased profits – all starting with the right software partnership!

DepositPhotos – IT outsourcing

Ryan Williamson

Ryan Williamson

A professional and security-oriented programmer having more than 6 years of experience in designing, implementing, testing and supporting mobile apps developed. Being techno-geek, I love to read & share about the latest updates in technology including but not limited to IoTs, AI, application development, etc. In my free time, I like to play football, watch movies and explore new places.

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