Outsourcing IT is popular because more companies are increasingly becoming aware of the benefits that come from it. You should know why companies outsource if you plan to outsource IT services.
Some IT outsourcing benefits are access to a global talent pool, faster time to market, use of the latest tools and technologies, increased focus on business, cost saving and flexible hiring.
This article will consider the top ten reasons why companies outsource IT. Also, it explains the various outsourcing models and where to outsource.
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- When outsourcing IT services, a company will hire a qualified external software development agency to build or maintain its software.
- Companies outsource IT because they don't want to go through the laborious process of hiring permanent software developers. Also, they outsource to cut costs, reduce time to market and focus on core business activities.
- IT outsourcing models can be grouped under the location-based and relationship-based models. The location-based model focuses on the distance between you and the team, while the relationship-based model focuses on how you work with the team.
- Your project requirements, pricing model and how you intend to engage with the outsourced team determine which IT outsourcing model to choose.
What Is IT Outsourcing?
Outsourcing is an arrangement in which a company hires an external vendor or software development agency to do all the tasks related to developing software.
In IT outsourcing, a business will engage an external team that is qualified and capable of doing things that could be done with an in-house team.
The process can involve outsourcing specific tasks within the IT project or assigning the whole project to the team.
10 Reasons Companies Outsource IT
Here are some of the reasons to outsource your IT project.
As a business grows, it will experience situations where its internal team cannot complete tasks vital to the company. In this case, the business may hire new in-house talent or look elsewhere.
Outsourcing is the fastest way to get experienced IT professionals. Often, the outsourced tasks are too time-consuming and need more attention than your in-house team can give.
When you outsource to an external team, your internal employees will have the time to focus on your core business activities. This will lead to improved business efficiency and time management.
Focus on Core Expertise
There are parts of your business that your in-house team must handle. These tasks need the most focus and care.
When you outsource IT, you reduce time-consuming tasks, and your internal team will have the opportunity to carry out core business activities.
Production will likely increase, and your team will have the time to collaborate on larger projects, ensuring they meet company expectations.
An e-commerce company that sells cloth will not derive much gain if it decides to focus on hiring a large internal team to develop and manage its web and mobile applications.
Much attention will be given to software development, which might affect other parts of the business.
But if the e-commerce business outsources IT professionals from an external team, it will have more time to focus on its core activity, which is selling more clothes.
Outsourcing IT helps businesses to remain competitive. Big businesses have the budget, human resources and technologies to forge ahead in a highly competitive market.
Small businesses with less budget, human resources and technologies will find it hard to compete with industry players and might eventually fall out.
Outsourcing IT services allows small businesses to augment a global pool of human capital. This will make them compete directly with the biggest players in their niche and win.
To Reduce Expenses
Another reason companies outsource IT is to cut costs. Software development and other IT services, if not planned for, can consume lots of cash that could have been invested in other parts of the business.
For example, a business may outsource IT from an offshore location with cheaper economies and workforces. This will save money on salaries since devs in low-income countries will not charge as much as those in high-income countries.
Aside from that, companies outsource IT because they don't want to spend much on recruiting, especially training new devs. The recruitment process takes time and resources.
You have to post job advertisements; if it takes more time to get the right skills, you post more, spending more money.
Outsourcing IT reduces expenses by not having to set up more office space, buy tech tools and pay for benefits and vacation.
Reduce Time to Market
How fast do you want to launch your product? If you must go through the laborious process of hiring permanent employees, you will spend weeks or months.
Most businesses will post advertisements on job portals and screen and interview IT professionals before onboarding them to their teams. These processes will take months to complete.
But if you outsource IT to a software development company, you can hire devs in less than two weeks. This means you can build your software within the shortest time possible, launch your product, reduce time to market and remain competitive.
Access to a New Market
Outsourcing IT services can give you access to a new market. Since your team is located overseas, you may have the chance to expand your services to a new audience geographically closer to the team.
What is better than hiring IT professionals based in a country or region you want to expand? They will be able to create a user-friendly product for your prospective customers since they are familiar with the market.
Access to Global Talents
What happens if you cannot find the right skill within your location? If you insist on hiring in-house devs, you will not have a team to develop your IT project. The easier way to get around that is by outsourcing IT services.
Companies outsource IT because it gives them access to a large talent pool of expert developers. Businesses can find IT professionals in any country of their choice. You can choose to hire offshore programmers in Ukraine or Poland if you are in the United States, or you can hire nearshore devs in Mexico.
Aside from that, it makes building a dev squad of different experts easy. Also, you can find devs with rare skills when you outsource.
Work with a Managed Team
Management is a huge part of IT outsourcing. If hiring developers from an external team is your goal, managing them if you don't have the right experience will be a problem.
Hiring the right project manager for an in-house team will be one of the most difficult things, but you don't have to worry about that if you outsource.
Most IT outsourcing companies like Deazy don't just outsource expert programmers; they will assign a delivery manager to monitor your project at every stage.
Assigning a delivery manager to oversee your project takes the weight away from you, giving you more time to focus on your business while the expert handles your project.
A high-quality product is what businesses want when working with an IT outsourcing company.
That is why the agency will strive to form a long-term partnership with you when you outsource. And to do that, they will invest in ensuring your project succeeds.
From the specification stage to the final testing and deployment stages, the company will continually ask questions, offer solutions and identify the best ways of working with you.
Also, the outsourced team will keep your end users in mind and tailor their approach to fit your requirements.
Outsourcing your IT project provides flexibility. Your permanent staff can focus on the day-to-day running of your business without being overwhelmed by more tasks.
Once you know the specific skills you need to add to your team, you will benefit from only paying for the expertise you need. For instance, if you have a designer and developer but need a software tester, you can flexibly fill the skill gap from an external team.
Aside from that, most IT outsourcing companies have flexible outsourcing models that allow you to hire devs based on your project requirements. Furthermore, you can easily scale your team as your project grows.
What Are the Different IT Outsourcing Models?
There are two main IT outsourcing models. They are the location and relationship-based models. Knowing the different models will help you choose the right one that suits your business needs.
Location-Based IT Outsourcing
In location-based IT outsourcing, the deciding factor is how far the outsourced team is from you. It is further divided into:
In onsite outsourcing, you hire an external team that will work from your office. The difference between the outsourced squad and your permanent staff is that the external agency is responsible for hiring and vetting the developers.
The advantage of onsite outsourcing is that the devs will get familiar with your business process quickly and are in a position to build a software product that meets your business needs.
Onshore outsourcing is when a business hires an external team of developers from the same country. The programmers may reside in another region of your country or another state.
There won't be any noticeable difference in the time zones between you and the developers in onshore outsourcing. This means your team can communicate with the onshore team in real-time. Also, there won't be any cultural or language barrier.
Nearshoring or nearshore outsourcing is when a company outsources a dev team from a neighbouring country. Businesses nearshore for reasons including access to devs that understand their business language and are located in a similar time zone.
Little time zone differences make it easy for the company and the team to collaborate in real-time without waiting hours to reply to urgent messages.
Aside from that, companies nearshore because they want devs that understand their business language and share a similar work culture. When you hire from a neighbouring country, there is a high chance you will find programmers that speak your language and share a similar work culture.
Most businesses prefer to hire a development team in a faraway country. This is called offshoring or offshore software development. One advantage of offshore outsourcing is that you can hire devs at cheaper hourly rates than when you hire onshore or nearshore.
But the setback of offshoring is that you are far from the development team, making it difficult to collaborate in real-time.
Aside from that, when you hire from a faraway country, there is a high chance that the devs may not understand your business language and share the same work culture.
Relationship-Based IT Outsourcing
This IT outsourcing model focuses on how the client and the external software development provider will work together. It is further divided into:
In staff augmentation, a company can easily extend its staff with expert developers from an external team.
Suppose you need a professional with skills to work on a complex project. Since it is a one-time requirement, you don't have to go through the time-consuming process of hiring a dev temporarily.
You can simply contact the outsourcing agency, which will assign an expert for your required service. The expert will work remotely as part of your team. This type of outsourcing is called the staff augmentation model.
In this model, you hire an entire dev squad through an outsourcing company. The squad will work on tasks you don't want to assign to your internal team.
Although the outsourced team will work on independent projects without collaborating with your in-house team, they stay connected to you through a project manager.
In this type of outsourcing, you won't be involved in the project development except during delivery. Project-based outsourcing is the most popular type of outsourcing and is effective for businesses with a one-time project.
The downside of the project-based model is that you won't be able to provide feedback about the project until after it has been completed, which can affect the quality of the product.
Which IT Outsourcing Model Is Right for Your Company?
While no one can answer that question, we can guide you to the right answer. Let's consider some factors that determine the outsourcing model you choose.
- Project requirements. Before choosing an outsourcing company, you must understand your project requirements. What do you want to accomplish with your project? What are the main features you want in your software? Have you set any project milestones? What are the project deadlines you have in mind? Once you have a clear picture of the requirements, you can choose the outsourcing model that works for you. Also, it will help you avoid confusion when the team starts working on it.
- Pricing model. You need to set your budget first and consider the pricing model you want for the outsourcing services you need. Do you want a fixed-price project that requires paying a specific amount? If your project is large and you don't know how much work the devs will do, the fixed-price model won't work for you. In that case, the time and materials model is the right option. You can pay the programmers or IT professionals for hours spent on your project.
- Relationship. Do you want to hire an outsourced team for a one-time project? The project-based model is the right option for companies with a single project. Aside from that, it is right for anyone who doesn't plan to monitor the development process. The dedicated team model is the right option if you want a development team that will work exclusively to build your software.
- Collaboration. Collaborating with the dev team is crucial if you want quality development. Do you intend to work closely with the outsourced team? Then offshore outsourcing is out of the options. You can outsource to a nearshore team or hire onshore devs.
Outsource IT Services to Deazy
At Deazy, we make software development easy; that is why we provide companies with different options when they outsource devs from our ecosystem.
We only work with stellar developers and ensure each programmer matches the skills, communication and culture you need. You can hire devs flexibly, turning them on and off as needed.
And if you worry about managing your software development project, our delivery managers have got you covered.
They will manage your project at every stage, from specifications to delivery, ensuring quality development. Are you ready to outsource software development?
Companies outsource IT services to take advantage of the global talent pool and hire expert devs to work with their team or on a project basis.
Outsourcing IT is the right option if you plan to cut costs while working with the best developers who use the latest technologies. The different outsourcing models make it easy for companies to choose what works.
While it is difficult to tell which outsourcing model is the best, your project requirements, pricing model and level of engagement will help determine which model is the best for you.
Frequently Asked Questions
Why outsource IT services?
Companies outsource IT functions mainly to reduce expenses, expand the talent pool, reduce time to market and free up some resources.
When should companies outsource IT?
If you don't have the right skills in your company, outsourcing is the best way to cover skill gaps and get your development project done quickly. Also, if there is a skill shortage in your location, outsourcing makes hiring from the global talent pool easy.
What are the common types of IT outsourcing?
The common IT outsourcing models are staff augmentation, dedicated team, project base, nearshore, onshore and offshore development.