I have read somewhere – It is better to travel than to arrive. And the massive COVID hit has made us realize the significance of exploring new areas. Many businesses have started exploring streets which they could never think of before – Outsourcing!
Earlier, if somebody had an incredible software idea, he or she was supposed to look around a reputable software development company nearby. But not anymore, today choosing a custom software development company overseas is no big deal. But one has to ensure that it’s not any random pick.
I am pretty sure that by now you have been quite familiar with in-house software development and how it’s not one of the best choices for your growing business, let’s comprehend what outsourced development is? And why it’s best to choose outsourcing services over in-house for the best outcome, types of outsourcing models you get to choose from, and so forth.
Understanding the Outsourcing Model
Outsourcing means the strategic utilization of external resources and workforce to complete tasks that were traditionally handled in-house by the staff of a company. In simple terms, because not all jobs can be done in house, outsourcing makes it possible to delegate specific parts of a project or service offering to efficient service providers who are experts in that particular field.
In simple words, IT outsourcing is the practice of hiring resources outside of an organization to handle certain information technology functions. Companies often outsource data storage because it is cheaper to contract a third party than to buy and maintain their own data storage devices and facilities.
A recent survey revealed that 80% of firms in Europe and the US choose India over any other country for their outsourcing requirement.
Types of Outsourcing Providers
- Onshore – The Business outsources IT services to another organization or individual within their home country. For example, your company is based in Texas and you might outsource services to a provider in California or any other space. This is often the most convenient arrangement since there are no cultural barriers and minimal — if any — timezone discrepancies — but it’s usually the most expensive one as well.
- Nearshore – This kind of outsourcing vendor is said when a business outsources IT services to a provider in a nearby country. For instance, you have an organization in the United States and a software outsourcing provider in Latin America. This is often seen as the best of both worlds — the partners are culturally similar, in similar time zones, and the price is lower than that of an onshore arrangement.
- Offshore – Outsourcing to an offshore partner means working with a provider overseas. A company in the U.S. could outsource IT services to India or China, for instance. This is usually the least expensive arrangement, although there might be complications, such as communication and geographical barriers.
Understanding Outsourcing Models
Now choosing an outsourcing software development is not enough! You need to understand different types of outsourcing models. Although selecting the right pricing outsourcing model can be confusing and daunting at the same time but it is a must thing to do.
Luckily – or maybe not, considering your viewpoint – organizations have a number of pricing models to choose from when structuring their next outsourcing agreement. Let us explore what are these outsourcing models.
- Fixed price model – Fixed price outsourcing models can be extremely beneficial especially for organizations with a clearly defined scope and a stable set of requirements. This outsourcing contract put all of the risks associated with the project not being completed on the outsourcing partner by waiting to pay them until the work is completed, conveniently protecting your budget as well. If your project is long-term based then look no further than the Fixed price model. This incentivizes them to complete the work more efficiently and derives more value from the contract.
- Incentive-based Priced Model – Companies outsource keeping certain aspects in mind; it could be budget, contract period, working agreements, etc. This incentive-based model comprises bonus payments to the outsourced developer as a reward for meeting the performance goals above. This model can certainly make up for the limitations of the fixed-price model.
- Shared Risk-Reward Pricing Model – Are you looking for an outsourcing model with a bit of extra flair? Then Shared Risk-Reward Pricing Model is your choice. This software outsourcing model comprises a flat rate and holds additional payments until your partner achieves specific objectives. However, here, the client and service providers usually share funding for the development of new products, allowing your partner a share in the rewards for a defined period of time.
Why You Need IT Outsourcing Service Providers?
One of the major outsourcing benefits is that you get to concentrate well on your resources on the main business functions. This can save you a lot of time thinking through and organizing your IT infrastructure. Outsourcing allows you to transfer part of the responsibility to professionals and invest the time saved in the development of your brand and product modernization. You’ll have more time to work with your team and clients. In simple words, unlike an in-house team, a third party vendor can not just free your employees from non-core tasks but also save costs. Besides, you will gain access to many years of experience and working methods of a hired company, which will lead you to the modernization of your business.
Some core benefits of Outsourcing include
#1 Increased Efficiency
Outsourcing offers the opportunity to leverage several years of experience and IT operations. Their knowledge and understanding, coupled with the many years of experience they bring, ensure the job is done to a standard that can rival that of any other firm around the world. This invariably results in greater efficiency and greater productivity – and would definitely reflect in your company’s bottom line.
#2 Focus On Core Areas
Like I said before, outsourcing to third-party professionals frees up time and energies so you can channel them into building your brand, invest in research and development while ensuring that you offer your clients better value and services.
#3 Access to Skilled Resources and Technology
Gone are the days when you were asked to employ & train staff. This can be pretty tedious and expensive to expand your customer support. These firms handle all your customer support needs and keep your customers coming back for more. We employ world-class business practices which we have perfected over the years, as a result of catering to different clients from all over the world.
What kinds of services typically can be outsourced?
Further, I would like to mention some of the common IT functions and processes businesses most regularly outsource to third parties:
- Software Development
- Web Development and hosting
- Technical support both for internal teams and customers
- Application support and management
- Infrastructure and hardware
- Data storage and management
Tips for signing IT outsourcing Contracts
Are you ready to dive into subcontracting opportunities? Well, here I will be sharing with you some of the most interesting outsourcing tips and tricks to consider while you are plunging into your first digital transformation. Choose an outsourcing expert wisely!
In a world where technology and immediacy are the need of the hour, IT outsourcing is increasingly getting popular stead, especially for early-stage start-ups and small to mid-size businesses that operate with limited resources but aim to break into the tech industry in a big way. It’s an affordable, proven go-to strategy that provides enough cost savings and relief to companies seeking for long term contracts to harness the best of digital transformation concepts and deliver superb customer service.
Now without much further ado, let’s cut straight to the core: how to get it done in the best manner?
#1 Look around for recommendations
One of the obvious disadvantages of outsourcing services is that we don’t know how is the third party, what are their ideologies since you don’t know them well. Also, nearshore outsourcing providers are available in all shapes and sizes so identifying the right one means having access to the right information about potential candidates. Why not start from your network and contacts related to your project-based venture? You can start from your network of contacts and get references from people you know and trust, usually other entrepreneurs who have had experience with companies in this field.
#2 Don’t let communication be a barrier
Multiple vendors and businesses find it a bit hard when it comes to communication. After all, we are dealing overseas. So it is very crucial to communicate effectively. Technically, you have to ensure that there is no sign of a language barrier. For example, imagine you are a US-based information technology company and you’re trying to conduct marketing campaigns in the domestic market, then English competence for the outsourcing services is a must.
Apart from this, to ensure a good solution, you must carry a clear start of all your requirements and ensure there is a sound understanding of the service provider. Then, if any issue prompts during the process, the two parties should be notified as soon as possible. This can avoid any conflict or disagreement in the long run, and maintain a seamless workflow.
Do not forget to make the contract or any talk simple and clear for both parties to fully understand the requirements, terms, and conditions of the cooperation. Also, he must be willing to take full responsibility.
#3 Keep room for customization
Discuss exactly what your IT outsourcing service will include, what kind of new technology and tools and if there is any flexibility for customisation – depending on your company’s requirements (e.g. additional security solutions). Many managers have this misconception that IT outsourcing is not an all or nothing proposition. It doesn’t mean that you have an internal team in place does not mean you couldn’t benefit from the project-based IT outsourcing. Just as it doesn’t mean you have to get rid of your entire internal team. Evaluate your businesses strengths and which IT functions would be easier and outsource is more cost-effective to run in-house, and which would be better to outsource.
So this is it! Outsourcing is a very booming industry. To ensure successful outsourcing business processes, businesses must keep all the aforementioned aspects in mind. Make sure that you do extensive planning and research to ensure that you land the right service provider for your outsourcing needs. It doesn’t matter whether you are doing this for seamless remote work or to cut costs, make sure you outsource your operations to the right service provider.