It helps clients develop the right sourcing strategy and vision, choose the best IT service providers, create the best contracts, and manage deals to ensure sustainable, win-win relationships.
Outsourcing allows enterprises to cut costs, improve time to market and benefit from external assets, expertise and intellectual property.
What is Outsourcing?
Outsourcing is the act of purchasing goods and services from an overseas supplier. Outsourcing is commonly used by industries that have a labor shortage or high labor costs.
Over the past decade, outsourcing has grown in popularity as companies have grown and become more specific with their needs.
This means that it is harder to find qualified candidates on the local market for certain positions. With the growth of the startup ecosystem, outsourcing is a great way for entrepreneurs and founders to hire top international tech talent to build their company or to enhance their current team.
Three Types Of It Outsourcing
- Onshore: Hiring professionals in your city is the process. This is a great way to control everything at a reasonable price.
- Nearshore: Nearshore is outsourcing to countries that share the same time zone. This option makes it easier to communicate with the remote developers, but is not always profitable.
- Offshore: Outsourcing to another country is offshore. You can save the most money by outsourcing.
Benefits of Outsourcing IT
Outsourcing IT Services has many benefits.
Get Essential Functions
When you think about outsourcing, you probably think of people. Third-party providers can also provide essential services, such as data storage and security monitoring.
You may want to use virtualized software, but you lack the capital. Outsourcing - depending on your provider - can allow you to integrate these services in your infrastructure.
The Scaling Staff
skillThe cost and time of hiring new IT staff is a major challenge. Outsourcing services allows IT professionals to be integrated into projects and critical tasks instantly.
The number of employees can be scaled up or down, so an organization can hire as many as they need. You can reduce the number of employees when projects are completed. This flexibility allows for unprecedented control of project management, without having to dedicate time and resources to hiring and training new employees.
Improved Security
Outsourcing allows enterprises to gain access to additional security services, such as data protection, monitoring, and backup.
The providers can flag and monitor unusual network activity and update essential software such as anti-virus. They also maintain good cybersecurity practices. This is advantageous, since not all businesses can afford to invest in cybersecurity infrastructure.
This creates dangerous gaps in coverage. These gaps can lead to intrusions and downtime, as well as other problems.
Cost Reduction
Outsourcing IT has many benefits, including cost savings. Outsourcing IT reduces capital requirements because businesses dont need to hire or train long-term staff.
A MSP also provides IT infrastructure via virtualized services, or something similar, rather than an enterprise having to set up said infrastructure themselves.
Along with other indirect benefits, such as increased efficiency and improved security, these can help boost a companys bottom-line and enable it to stay competitive in the IT field, even if they dont have local resources.
Improved Focus
It doesnt matter if an organization outsources, they still have IT. Outsourcing can be done to fix weak areas in an organization or help with large projects.
This allows the on-site team to concentrate on their areas of expertise and prioritize goals. If a company decides to outsource IT in order to deal with customer service issues, its own staff can focus on larger tasks, such as cybersecurity monitoring or network improvements.
Disadvantages to IT Outsourcing
Outsourcing IT has many benefits but also some drawbacks.
Less Control
Control loss is a factor that often hinders outsourcing investments. Third-party services allow an organization to delegate core services.
Some people are not comfortable with a second business handling their essential or security functions. Its also possible that a secondary MSP wont manage tasks according to the same standards as a company.
Low Quality
Quality can vary depending on who and where you outsource. Some IT providers may offer a solid infrastructure and experienced staff while others might only provide less qualified individuals that can impact the quality of service.
The provider and the tasks that are outsourced will determine how this varies.
Communication
Communication can be seriously affected by the service provider. The longer the time between an inquiry and a conversation, the greater the impact on services.
Communication is crucial when dealing with security issues. In this case, if you have outsourced your cybersecurity services to a third-party, communication lapses will hinder the efficiency of your business and cause other problems such as downtime.
Security Risk
As security increases, so do the risks. It is because the company entrusts its data to a third party, in part or in whole.
Your information may be compromised if the company does not have the same security standards, or if it is compromised in any way. Third parties have traditionally taken appropriate measures to protect your information. However, this is not the case for all managed service providers.
What happens, for example, if a datacenter is used to perform BDR and the datacenter loses data due to downtime or cyber security issues? This scenario has actually increased the risk, not decreased it.
Morale
Depending on the extent, outsourcing may also affect your employees. Nobody wants to believe that their job could be at risk, especially when it comes to essential services such as cybersecurity and IT infrastructure.
Morale can be a factor depending on the extent to which a company uses third-party services. Staff who are discouraged may be less productive or frustrated by their work environment. This can lead to quality loss and, in some cases, turnover.
Features of Outsourcing
Outsourcing Is Contracting Out
Outsourcing is the process of sourcing goods and services from an outside source rather than doing it internally or within the organization.
In order to maintain cleanliness and neatness in their business facilities, most businesses hire their own employees. This means that all housekeeping and sanitation duties are carried out within the company.
Many corporations, however, have begun to outsource their tasks. This means that they have contracted with other agencies to perform these tasks on their behalf.
Outsourcing Is Generally Used For Non-Core Activities
Sanitation and cleaning are not a priority for most organizations. These tasks are vital to the business of municipalities and sanitation services providers.
The main activity of a hotel is housekeeping. Other words, depending on what business a company is in, certain operations are critical to the primary purpose of that firm.
Some actions are secondary to the primary goal.
The goal of an educational institution is, for example, to develop or educate children through academic and co-curricular programs.
These actions clearly clearly the main activities. The primary school activity is not to run a canteen/café or a bookshop.
When organizations first start to experiment with outsourced activities, they may only outsource non-core functions.
As they become more adept at managing their interdependencies, organizations may start to outsource even basic functions.
A school, for example, may partner with a computer-training facility to offer computer education to students.
Want More Information About Our Services? Talk to Our Consultants!
Processes May Be Outsourced To An Internal Unit Or Third Party
The company can choose to outsource a part of their activities to third-party and captive service providers. Multinational corporations deal with a wide range of markets and products.
Outsourcing is possible for a variety of processes, such as requirements, selection and training. By avoiding duplicate work, it will help to reduce operational costs.
Outsourcing: Scope
Outsource Financial Services
Fund managers, bankers, and investment firms are looking at middle and block offices to gain a competitive advantage in todays market.
It is difficult to find innovative ways to cut costs, improve flexibility and increase processing efficiency, while still maintaining control. Outsourcing financial services requires a provider who has subject expertise and experience that sets you apart from your competition.
Outsource Technological Services
It is difficult to keep up with the rapid changes in technology. Stakeholders may be using a new language as a result of recent innovations.
If documents contain outdated terms and information, it could indicate that the technology used is old. To stay on top of the latest technology, one must rely upon professionals who keep up with the latest developments.
Writers Services
You can outsource writing in two different ways: copywriting and proofreading.
The company may not be able to afford to hire a professional writer but still wants their marketing and advertising content to be engaging and appealing.
They outsource their work to freelancers who are hired to perform specific tasks.
Customer Service
The customers require a variety of information. Marketing and sales require interaction with clients.
1) Marketing: Marketing activities include telemarketing, surveys, marketing campaign management, etc.
2) Customer Analytics: This includes profitability analysis, reporting and complaint analyses.
Sales: Inbound and outbound, as well co-browsing.
Support: This includes activating accounts, registering new customers satisfaction, and monitoring complaints.
IT Outsourcing Best Practices
Find the Right Project
Outsourcing is not suitable for all projects. When your project is unique or unrelated to the core business, its best to outsource.
Many companies host their websites using cloud services such as Google Cloud or Amazon Web Services. It may be that the company excels at building web application development but lacks the resources necessary to manage hosting environments.
They hire cloud service providers instead to maintain and provide the infrastructure. The cloud service provider provides a professional environment at a fraction of the cost.
Outsourcing partner allows your team to concentrate on their strengths, and also helps you deliver projects faster.
Read More: Guide to Software Development Outsourcing
Plan Your Day
Set clear and realistic goals with clearly defined timelines. You will have more control of your project. Vendors can also create realistic and well-defined proposals.
It is easier to estimate project size and costs when you have more information. By creating a plan from the beginning, you will always have a reference point if your project goes off track.
Select A Service Provider That You Can Trust
Outsourcing is an extension of the company. If you dont choose someone with whom you are comfortable sharing your business and trade secrets, the project will not progress.
Choose a provider who understands your business. The provider should be fully aligned to your business objectives and culture.
The better they understand your requirements, the more smoothly the project will run.
Consider launching a smaller test project if you are still unsure. You can work together on a small project without risking your main project.
Get A Dedicated Team
Dedicated resources are important for large-scale, long-term projects.
Many providers use the Time & Material Model. T&M has the problem that providers can move developers to different tasks depending on their availability.
The provider benefits, but the team changes constantly. It is expensive and time-consuming to constantly train new developers.
You can count on a dedicated team to be there for the duration of your project. Initially more expensive, but you will save on training and onboarding.
The developers only need to learn about the efficient project one time. This will result in a team who understands your project right from the start.
Go Agile
Agile Methodology is the most popular method for software development projects. Agile projects are 28% successful and 71% of organizations have adopted it.
Agile development involves multiple, short iterations.
Each iteration lasts only a few weeks and includes creating, testing and releasing new versions. This is in contrast to the traditional approach of development where a release can take months.
Agile software development allows you to implement changes faster and with more flexibility. Microsoft and other large companies have used agile to great success in all kinds of projects, from small ones to enterprise projects.
Many vendors still offer agile for a fixed price, despite its flexibility.
Dont Base Your Decision Just On Price
Outsourcing is a popular way for companies to reduce costs. Although outsourcing is cheaper, you shouldnt use it as your only metric.
Its important to choose a vendor who is less expensive but still offers the same expertise and service as an internal team.
It can be difficult to strike the right balance, but you always get what you pay.
Many experienced outsourcing professionals recommend making a list and then eliminating the lowest-priced bid and the highest-priced bid.
Choose from the options left based on your budget, expectations, and requirements.
Outsource R&D
In order to retain ownership of their intellectual property, many companies conduct research and development internally.
R&D can be difficult, and companies may spend more money and time on R&D than on the actual product.
Outsourced R&D gives companies the technologies and expertise they need to reach the market faster.
Captive Units are a popular choice. Captive Units consist of dedicated R&D centers, complete with employees, managers, and facilities.
Ukraine is one the top providers of Captive Units, with a $3 billion market.
Document Everything
Document all stages of your outsourcing project, including revisions, updates, and changes to the plan. It is important to keep track of your progress.
This will allow you to continue the project even after the contract has ended.
Documentation can take many forms. Documentation can include emails, meeting minutes, manuals and bug tracker entries.
It is important to keep a record of the work done and when.
Communication Clearly
Communication is key to the success of a collaboration. Communication keeps the parties involved and informed about updates on the project.
Outsourcing can make it difficult, especially when both teams are located in different countries. Communication is affected by language, culture and time differences.
The success of the project depends on communication. If roadblocks, problems with development, or requirement changes are not communicated clearly and quickly, they can have devastating consequences on a project.
Theres no excuse for teams not to communicate with the tools and technology stack available today. You can use web-based messaging tools, chat rooms, email, or a telephone call if you cannot schedule a meeting.
Keep collaborating, no matter what.
Own your Project
This is still your project, even if another company is involved. As if you were doing it in-house, treat it that way.
Follow your team constantly. Track changes, updates, goals, and comments using tools such as Trello, Slack, JIRA and JIRA.
Dont be afraid to reach out to the vendor if you have any concerns.
The Top Ten Problems with Outsourcing
We have compiled a list based on our extensive experience of the 10 most common problems you may encounter when outsourcing projects, and weve provided solutions to help you avoid or overcome these issues.
Problem #1: Insufficient Experience with Outsourcing
It can be intimidating to start working with someone, or something new. Youre not familiar with the best practices, concepts and workflow.
It is difficult to convey your vision, especially to someone with whom you have not worked before.
Choose An Experienced Vendor
A vendor with experience will guide you through the entire process, helping you to avoid bottlenecks and minimize possible risks.
They can help you to define your requirements, navigate the discovery phase, and identify the right people for the task. It is important to keep in mind that outsourcing can be risky. If youre willing to take the risk, you will have the support of the right provider.
Problem #2: The lack of expertise in the Outsourced Task
A lack of expertise is another problem with outsourcing. If you dont have the expertise to delegate JavaScript software development process, or Big Data analytics to a third party service, it is unlikely that you will be able to assess their results adequately.
You run the risk of making a mistake in hiring or judging if you dont have a good understanding of how technologies and solutions differ.
Fill the Knowledge Gaps
To avoid this pitfall, it is important to set clear performance standards. It may be better to hire an employee who can define the requirements of tasks and monitor vendor work.
You may not be able to afford to hire another employee, so you should find a vendor that is knowledgeable and trustworthy to assist you in understanding the workflow and results.
Problem #3: Poor Cost Estimate
We did mention that outsourcing can save a significant amount of money, but it could go wrong if you dont plan well.
You cant accurately estimate costs without knowing the exact requirements, timelines and resources. We now come to the biggest challenge with outsourcing vendors: calculating an accurate estimate of costs.
Solution: Set Clear Project Requirements
Find a freelancer or a firm with experience to help you define the requirements of the project. To avoid any unexpected charges, ask as many questions you can to understand the pricing model.
To avoid future misunderstandings, explain your budget restrictions to the vendor.
Problem #4: How to Choose the Right Vendor
You may also have difficulty finding a vendor that is the right size. You will have no room to grow if you choose a small company.
It will be difficult for them to scale up or down. A large outsourcing company might charge too much and take a less personalized approach.
Find the Middle Ground
Assess your business strategy objectively: size, employees, growth potentials, revenue, brand recognition, etc. If youre still in the early stages of your business goals, dont hire a large outsourcer.
You could pay for an in-house expert with the money you spend. Choose the most expensive vendor, but be careful not to get poor results.
Problem #5: A Lack of Cultural Context
You might not be aware of the importance of the cultural context or the differences in nationalities if you havent worked with a team that is culturally diverse.
Diversity is proven to be a catalyst for innovation and financial success in the long run, but in the early stages, it can lead to miscommunications. You will also have to adjust to different time zones, as you are reaching out to a global market.
Solution: Dont Undervalue The Importance Of Cultural Differences
You can use this solution in two ways. First, you can organize diversity training programs for staff and secondly, you can communicate your values and standards to freelancers.
Ensure that you create clear communication channels, and schedule regular calls in order to get everyone on the same wavelength.
Problem #6: Legal and Contractual Processes
The outsourcing legal process differs from the hiring process in-house. It is less standardized and heavily depends on the location of the vendor.
You may need to sign additional documents that arent part of the legal process in your country. Outsourcing issues start after contracts are signed and work begins. Small misunderstandings can lead to major outcomes and damage the relationship between you and your vendor.
Solution: Be Scrupulous In Your Legalese
Prepare an NDA that the outsourcing company will sign, as well as any other regulatory documents you may need.
Do not forget about security concerns. Discuss all aspects of the process including the situations in which your vendor does not perform as expected or makes a mistake.
Include clauses that cover compensation, working conditions and freelancers responsibilities. Also, include ownership information.
Problem #7: Lack of Knowledge Transfer
The problem of poor knowledge transfer is a two-fold one: first, it is the vendors perspective. Second, it is your perspective.
After the vendors relationship has ended, you may experience negative results when dealing with project results.
You might not understand some scripts or features if they didnt keep clear documentation. If the vendor inherits a project that you are working on, but there is no clear knowledge transfer process, they may not meet your expectations.
Solution: Keep Extensive And Clear Documentation
Create a plan for knowledge transfer that is detailed: features, technologies, and code logic. You should be able for your vendor to understand the project by simply reading through your regulations.
It is also a good idea to arrange calls or meetings with your DevOps specialist, QA Automation engineers and developers in order to uncover hidden pitfalls.
Problem #8: Poor Team Management And Communication
Communication is key to success. It may sound repetitive, but its true. It may seem that your message is being received as you intended, but everyone has a different background, education, and experience.
They will also have their own interpretations. Here are some solutions for outsourcing jobs if you dont want to be misunderstood and believe that a good communication level can smooth out many rough edges.
Solution: implement continuous communication.
Integrate calls, feedback loops and other communication methods into your projects schedule. You can also meet in person to increase empathy and better understand each other.
Problem #9: Finding an Honest Vendor
Partnering up with a bad agency is one of the main reasons why outsourcing goes wrong. We have stressed the importance of finding a reliable vendor several times.
What does it mean in reality? How can you tell the difference?
Solution: Do Your Due Diligence
You may find that the information on websites is inconsistent. One website might have only positive comments, while another has a lot of negative ones.
Visit the homepages of vendors to learn about their experiences and read reviews.
Problem #10: Selecting an Appropriate Approach to Outsourcing
Three common outsourcing models are:
- Model of time and materials
- Fixed-price contracts;
- Devoted development teams
You can choose one of these models based on your goals and requirements. How do you decide?
- As a client you must provide a full scope of the project and the deadline & budget. Due to inflexibility, some outsourcing teams have to sacrifice certain features in order to meet deadlines. It could also go the other way and youll have to pay more for your developers work due to unexpected changes.
- This model allows for quick changes and is better suited to long-term relationships. This model allows you to pay only for features that are actually added, avoiding extra costs and bad results.
- Dedicated development teams fill in knowledge gaps by adding extra people to your team. You will be in control of your project and still have additional short-term experts working with you.
Want More Information About Our Services? Talk to Our Consultants!
The conclusion of the article is:
You will probably face challenges if outsourcing is a new concept for you. This is why you need to select an agency you can trust.
A reliable vendor will have a lot of cases to prove their expertise and positive feedback from clients. They should also have a dedicated team that is there to guide you through every step.
