What You Should Know About It Outsourcing Services
What Is IT Outsourcing
What is IT outsourcing? This is a very common question, and it’s not surprising given how complex the topic can be. In short, IT outsourcing is the process of hiring a third party to handle specific information technology (IT) functions for your business. This can include anything from software development to website design and maintenance. It’s important to note that when most people talk about “outsourcing,” they are referring to IT outsourcing.
Reasons To Outsource IT
Reducing Cost
One of the most common reasons businesses outsource their IT needs is to save money. When you outsource IT functions, you are essentially hiring someone to do a specific job for less money than it would cost to have that same job done in-house. This is because outsourcing allows you to tap into a global pool of talent, which means you can find someone willing to do the job for less money. In addition, outsourcing IT functions can help you save money on things like benefits and overhead costs.
To Accelerate The Process
Another common reason businesses outsource their IT needs is to accelerate the process. When you outsource IT functions, you are essentially hiring someone to do a specific job in a shorter amount of time than it would take to have that same job done in-house. This is because outsourcing allows you to tap into a global pool of talent, which means you can find someone who is already familiar with the process and can get the job done quickly.
To Focus On The Core Business
Another common reason businesses outsource their IT needs is to focus on the core business. When you outsource IT functions, you are essentially hiring someone to do a specific job so that you can focus on other aspects of the business.
Globalization
Globalization is another common reason businesses outsource their IT needs. When you outsource IT functions, you are essentially hiring someone to do a specific job in a different country.
Better Use Of Resources
Outsourcing IT functions can also help you make better use of your resources. When you outsource IT functions, you are essentially hiring someone to do a specific job with the resources you already have. This can help you save money on things like benefits and overhead costs.
Types Of IT Outsourcing
These types are mainly based on geographical location, but as you will see there are some differences regarding prices, time zones, etc. It is crucial to find the best employees for a project, so to achieve that it’s great to have a wide choice of them.
Onshore IT Outsourcing
Onshore outsourcing is the process of hiring a third party to handle specific information technology (IT) functions for your business within the same country. The benefits for this type are lower costs, better time zones, etc.
An example of onshore outsourcing is if a company based in New York will outsource some processes to IT experts in another part of the USA.
Offshore IT Outsourcing
Offshore outsourcing is the process of hiring a third party to handle specific information technology (IT) functions for your business in a different country that is far away from your country (on another continent). This type is preferable because of a greater pool of talent, lower costs, etc. Also, you can choose a country with better economic conditions for this particular service. The most common disadvantages of offshoring are different time zones and language barriers.
An example of offshore outsourcing would be if a company based in New York will outsource some processes to the IT experts in India.
Nearshore Outsourcing
Nearshore outsourcing is the process of hiring a third party to handle specific information technology (IT) functions for your business in a neighboring country. The main advantage of this type is the same or similar time zones, closer contact between employees and managers, etc.
An example of nearshore outsourcing would be if a company based in New York will outsource some processes to the IT experts in Canada.
Models Of IT Outsourcing
There are 3 main cooperation models for IT Outsourcing. They are defined to match some final goals, business processes, ways of hiring employees, etc. Surely, there are some benefits and disadvantages for each of them, so it’s quite important to choose the best option for a particular project.
Outstaff
This is a model when you are hiring only separate specialists that you need for a particular business. You can interview them, check their skills, and then add them to your team. This type of IT outsourcing is more suitable for short-term projects.
The main pros of outstaffing are: less money spend since you are hiring not the whole team, but only some employees. Also, this method is faster to close all the gaps you need. Finally, it is very flexible.
Cons are: the recruiting process requires more time and money. Also, you will spend more time onboarding your employees.
Project-Based IT Outsourcing
You can hire a team/employees to do the part of your project that is already defined. Full responsibility will be on the PM of the outsource team. This type will be suitable for a long-term project with some risks.
The main pros of this project-based model are: saving time for your core team, fast hiring process, no responsibility on your managers, clear timelines.
The cons of this outsourcing model are less control over the project and less flexibility. Also, there are some risks regarding the final results of the work, for example, results can poorly match the best practices of your company.
Dedicated Team
This one is all about one particular project. So, it’s quite predictable that the team you will hire will be more engaged, and you will have more control over the processes.
There are a lot of benefits for this model, for example, more flexibility. Also, as it was already mentioned, you will have more control over all development processes. You don’t need to waste your time on micromanagement because managers will be part of the outsource team. Also, one of the biggest pros is extra time for your core team.
Regarding disadvantages, it surely needs to be told that you will spend much more time hiring employees and also, there you will be more responsible regarding the results.
IT Outsourcing Cost: Types Of Contracts
Besides geographical differences and other types of cooperation, we should mention some differences in price-forming details. So, there are four main types of IT outsourcing contracts that we will review in the next paragraphs.
Fixed Price
This type of contract implies that you will pay a certain price for the whole project. It means that all risks are on the outsource company because they will have to deal with them. The client will pay only once, and it is not possible to change requirements through the project. Also, the time for the project is fixed.
The benefits are quite considerable: predictability (if your vision of result is clear and assigned to the team) and no extra expenses even if the deadline will be missed.
Worth mentioning disadvantages: foremost, it can be more expensive for the client. Why? Just because outsource teams will ask for more money to cover their time expenses if deadlines will be missed. Secondly, teams like that usually are working on multiple projects at 1 time. So, this is a risky one because it can negatively affect the results.
Time & Material
This type is usually used for long-term projects and means that you will pay only for the time that employees spend working on the project and for the materials they use. If there are some changes in requirements, it will not influence the price. It is the most popular type of cooperation in the world.
One big advantage of this cost type is flexibility. You are free to make some adjustments through the work time.
The disadvantage is that you can’t control all the working time, that’s why you can pay some extra money in the end. Especially in the case of “idle time” – you pay for the time that developers are spending without work.
Rate Card
This type is billed each month, and you are paying for different developers monthly. The manager can show you the rate for each of the employees , and you can hire each of them. Also, you need to consider that this way developers will work only on your project, which is a great benefit to consider. Finally, you don’t need to spend time for hiring and onboarding, everything is done by the vendor.
There are not a lot of disadvantages, but still, if you like to control the process – a middleman can be an issue regarding that.
Cost Plus
This pricing model includes payment for a vendor (office, taxes, workstations for employees, etc.) plus payments for each developer monthly. Vendor payment and salaries of employees are fixed.
Here you can choose between employees, so you get more control over the process if you need this. So, this is a great benefit. You just pay vendors for providing extra needs for developers, but everything else is up to you.
This total control is not only a benefit, but also is a disadvantage because it will take extra time from you. Also, it is a great responsibility, so if something went wrong – you can’t get your money back.
Common IT Outsourcing Services
Let’s find out what kind of services you can delegate to the outsourcing companies. If you have some of that processes on your mind – think about hiring some outsource software developers to save your time.
Hosting
This is a service that includes data storage, security, and backup. It is provided by the outsourcing company, and you can use it for your project.
Software Development
This is a service that implies the development of the project from scratch or some certain part of it.
QA & Testing
This is a service that implies the testing of the project before release. It is important to check the quality of the project and find all possible bugs.
Support & Maintenance
This is a service that implies the support of the project after release. It’s quite useful to win some extra time, avoiding support service and giving it to the other team.
Database management
This is a service that implies the storage and security of your data. It’s important to have a good database for the project to avoid some troubles in the future.
Web Development
This is a service that implies the development of the website from scratch or providing support for final versions of the website.
Best Regions For IT Outsourcing
Let’s discuss some actual places for the best IT outsourcing experience to choose. These places differ by cost per hour, professionalism, time zones, etc. So, let’s take a look.
IT Outsourcing In Asia
The most popular region for outsourcing is Asia. The reason is the cost of services – it’s really low if we compare it to the USA or Europe. Also, the time zones are different, so you can get the work done overnight. The most popular countries for outsourcing are India, China, and Pakistan. The disadvantage is the language barrier – not all the developers speak English fluently.
Eastern Europe
The second most popular region for outsourcing – is Eastern Europe. The reason is the cost of services – it’s lower than in Western Europe, but still higher than in Asia. The most popular countries for outsourcing are Ukraine, Hungary, Bulgaria, Poland, etc. The advantage of this region is the time zone – it’s close to the USA and Western Europe. The disadvantage is the language barrier as it was said about Asia, but still, the situation is not critical. Nowadays, almost all the employees from that region know English fluently, and they are eager to work hard, and the quality is high.
Africa
Africa is not a very popular region for outsourcing, but it’s still worth mentioning. The reason is the cost of services – it’s lower than in almost any other region. The most popular countries for outsourcing are Egypt, Kenya, Morocco, South Africa, etc. The language barrier and other big disadvantages keep this zone as not so popular, but anyway, time is running and all the things can change drastically.
Future And Trends Of Outsourcing Software Development
Outsourcing is not a new thing, it’s been around for ages, but only recently it has become so popular in the IT industry. The reason is globalization and the development of the internet. Nowadays, it’s so easy to connect with people from all over the world and delegate some tasks.
The future of outsourcing is quite uncertain. The reason is the current political situation in the world and other factors. For example, we can’t even imagine how the war in Ukraine will affect IT outsourcing companies there.
But still, there are some trends that we can observe now. The first one is the development of small outsourcing companies. The reason is the big demand for their services and the low cost. The second trend is the development of outsourcing in Africa and Asia. The reason is the same – the low cost of services.
We can only imagine what services will be added to the outsourcing pool. Maybe it will be HR, Accounting, etc.
Conclusion
Outsourcing is a great way to save money and time. But it’s important to choose the right company and service. In this article, we discussed the most popular services and regions for outsourcing. I hope this information was helpful for you, and now you can make an informed decision. Don’t forget to check out new blog posts.