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Everything You Need to Know About IT Outsourcing

Everything You Need to Know About IT Outsourcing
This article is equipped with everything you need to know about IT outsourcing
but before going deeper into the technicalities, we should first understand what is IT outsourcing in business.

Meaning of Outsourcing

In simple terms we can say that inclusion of a third party, organization or individual outside of your organization, either locally or internationally, to deal with certain activities related to your business is known as outsourcing of business. This common business practice allows corporations of all sizes to build as and when they need it, without significant risk or investment.

Now, what exactly does outsourcing in the tech industry mean?

In the IT industry, the practice of handling several information technology functions by hiring resources outside your organization is termed as IT outsourcing and it is chiefly done for data storage as it is less expensive than to buy and maintain it by yourself.
Apart from this, there are various other commonly outsourced IT functions such as:

  • Hosting
  • Web development
  • Website and Application maintenance
  • Telecommunications
  • Technical support
  • Infrastructure
  • Database development and management
  • Software and application development

From the above explanation, we have come to the point where we will discuss the reasons and benefits of outsourcing.

Why do firms- big or small take up outsourcing?

There are multiple reasons and outsourcing advantages available to support as to why your business needs to be outsourced and here are the top 6 listed down for you:

Cost reduction

The difference between getting the work done in your country and outsourcing it to a country with lower production cost varies to up to 60%. This is possible because of the lower labour costs, economical tax system, and cheaper infrastructure in the outsourcing area.

The global pool of talent

Outsourcing helps you to access skills that are unavailable locally by allowing you to reach and connect with professionals all over the globe.

A higher standard of work output

As previously discussed in the point above your global connections with experts and professionals will help you deliver your best as they hold vast experience in their respective fields, thus automatically enabling the higher standards of work output.

Risk Management

Technical issues, natural calamities or market fluctuations are all unforeseen problems which a company may face anytime. This can lead to a huge loss to the business, therefore to deal with this, offshore outsourcing partners assist you to get back on track without any delay.

Time zone benefits

Outsourcing let you work round the clock. Time zone differences between your country and the outsourced one cater you to assign work and relax and when you wake up the next morning your task will be done. Therefore, the work will be going on even if you are asleep or enjoying your time.

Cost-cutting on recruitment and training

The hiring of skilled labour and then training them can cost a fortune to a company, that too without having any guarantee that the employee will remain in the company in future. Because of this expert outsourcing has become common as they provide you with quality work with less investment in human capital.

After knowing all the benefits you must be thinking to move further and choosing the right outsourcing model, but first, let us get familiar with the different types and models of outsourcing available.

Types of Outsourcing

types of outsourcing

The word outsourcing is an umbrella term that comprises of more specific definitions. Usually, when you search for the word outsourcing, another term appears to be reflected i.e. offshoring. Although both the terms a technically different from one another, they are often used as a synonym. So, to start with we are going to understand what is offshoring?

Offshoring

Offshore outsourcing or Offshoring implies outsourcing IT services to a far-off location to benefit from lower labour costs, time zones, a larger talent pool or favourable economic conditions. This time difference that varies from at least 5 or 6 hours comes in handy for businesses in providing uninterrupted customer or tech support and maintaining work and updates. An outsourcing example of this can be a US-based Marketing Agency outsourcing web development to an Indian company.

Onshoring

Also known as homeshoring, it refers to the activities related to the business which are being assigned to a distinct location within the home-country. Normally, the labour and operational costs are much lower in this part of the country.

Nearshoring

Nearshoring or nearshore outsourcing means, outsourcing IT functions to a place situated much closer to your business – usually within a couple of hours away or in the same time zone. It enables smooth communication as the countries are located closely and share cultural crossovers.

Models of IT Outsourcing

models of it outsourcing

Apart from distinguishing the outsourcing types based on its location of the outsourcing company, there are also some other outsourcing features or models which defines the relationship between the IT outsourcing vendor and the clientele.

Project outsourcing

If your business lacks in-house expertise in non-core functions then project outsourcing model is one of the best options for you. This model provides the companies exclusive expertise in the fields where you lag behind your competitors.
Example: an Australia-based food delivery service partners with an app development company in India to have their app developed. The food delivery service provides the requirements but doesn’t manage the development process directly.

Staff augmentation

Likewise known as workforce augmentation is one of the outsourcing strategies for businesses which allows them to hire top-level specialists for a shorter or longer period according to their project needs. This model helps enterprises in cutting costs by avoiding hiring new full-time workers.
Example: a Canadian Social Media Management Platform lands a project that requires more developers than they currently have. They experience a lack of local tech talent, so they decide to outsource software development to a staff augmentation company in India, who provide them with JavaScript and PHP developers for the duration of the project. These employees remain on the staff augmentation company’s payroll but still, function as full-time employees of the Canadian company.

DDC Model

Dedicated development centre model comes into place when the business requires a larger pool of talent but also want to enjoy tax benefits with lower labour cost while maintaining full control over the work process.
One can open a dedicated development centre by themselves but it’s worthwhile only when you are thinking of hiring at least 40 new recruitments.
Example: a company partners with an outsourcing vendor that recruits and hires a software development team for the client. The developers work directly with their business company while being on the vendor’s payroll.

FAQs

There are some common outsourcing questions which are asked by many and in this section, we are going to answer them in brief.

  • What is the cost of outsourcing?

The complexities of your business needs will determine the cost of outsourcing. Some offer hours, offer packages and some simply offer the completion of a single service. This investment should give you the time to make more money so you can outsource more.

  • How do I find someone (person or an agency) to outsource my business needs?

There are a number of ways both traditional and contemporary. Traditional includes sources like flyers through your letterbox, newspaper ads or picking up a business card from a pin-board in a local shop. You can also outsource by getting recommendations from friends and family online. LinkedIn and Facebook Group to guarantee you to reach out to people who offer those services or know someone who does. They should have testimonials available or at least people they can put you in touch with for references.

  • Does remote outsourcing work?

There is no issue in making things work remotely as long as you can communicate efficiently and that they deliver on time.

  • At what stage of business should I start to outsource?

There is no specific stage or perfect timing to outsource the business but why wait. You should invest more to make more. Further, to be successful in outsourcing you do need to know: what your mission is, what your goals and brand values are, who you are targeting and what you need to do to increase business your visibility.

  • What should I outsource?

In today’s scenario, it’s possible to outsource ANYTHING. For example, my VA (Virtual Assistant) helps me to write and edit blog posts, source images for my social media channels, welcome new members to my Facebook group, test software, make changes to my website and more. You should outsource tasks that are vital but can be done by someone else.

  • How will I know if the hired person understands me and my business well?

A good service provider will take the time to deeply understand what you’re about, why do you want to outsource and what is expected of them. The best way to talk about this is in-person or via a call. It’s important to give them a chance to learn about you and your business and for you to be confident telling them about it.

  • How can I make sure it works this time if it didn’t work last time?

Reflect on what didn’t work out last time, but don’t dwell on this. Use the fact that it didn’t work out to create a plan to ensure it does this time – what didn’t work? What can be done differently? Who was to blame? Sometimes it’s hard to admit that it’s us who was the problem, but accepting that can help you to act on it to build a great relationship this time.

  • Can I outsource despite being an agency or a person to whom people/ businesses outsource to?

Yes. Be upfront with your clients if you plan to outsource – you can even include this in your contract. Clients usually have no problem with you outsourcing further as long as the work is delivered and that they know who is liable.

  • What knowledge should I have before hiring someone?

Before hiring anyone, always thoroughly read the contract. You need to know things like who is liable, how your data will be stored, who you’ll be communicating with + how and when you can do so. It should also include the scope of work, payment terms, details about work ownership (if things like blog content are being produced), confidentiality information, termination and severability details. Ask questions about their experience, references, processes etc.

  • When results should I expect when outsourcing?

Expectations are a collaborative effort between the service provider and the client. Right at the beginning, find out what can and cannot be done (i.e. what is within their scope of work/capabilities). It’s better to find out now rather than later when you’ve entered into a contract. Results come down to defining clear goals and expectations.

Conclusion

At last, since each element and characteristics of outsourcing models differ from one another by having both advantages and disadvantages, the choice you make will depend on a number of key factors.
As for the final thoughts, it is never too late for choosing to outsource for your business growth. Although maintaining all these by yourself is truly big trouble, therefore, with our years of expertise, we are here to provide you with our #1 services.

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