IT outsourcing is the practice of contracting an external company to handle functions such as web development, cybersecurity, IT support, cloud services, and more. Apart from expertise and costs, there are plenty of reasons companies choose to subcontract instead of hiring new people.
According to Superstaff, the annual global revenue from IT outsourcing is estimated to be around $66.5 billion. Moreover, to achieve various advantages, 80% of small enterprises plan to outsource their business tasks.
The statistics clearly show that it is a sustainable business model. Thus, the existence of IT outsourcing companies like Develux that specialize in IT services. For instance, Develux is a software company in Ukraine that offers offshore software development amongst other internet technology services to clients all across the world.
Read on to learn more about IT outsourcing and what it means for your organization.
Reasons to outsource
Companies primarily make the decision to subcontract to meet their individual business needs. Among the reasons are:
- Lower costs related to labor, taxes, and infrastructure in the subcontractor’s location.
- In-house expertise may be lacking. Thus, the need to subcontract to IT outsourcing companies.
- Utilize external businesses expertise to drive growth and transformation.
- Increased cybersecurity issues that are unresolved.
- Subcontracting allows a business to focus more on critical tasks. They achieve this by handing out repetitive or time-consuming tasks.
- Outsourcing allows businesses to tap into a wider pool of candidates. Thus, accessing skilled workers who may be inaccessible locally.
Subcontracting IT services to a third-party company has its benefits. These are among the advantages of doing so.
Outsourcing allows you to hire and integrate staff with existing projects almost immediately. The time and cost it would take to hire and train in-house staff are greatly minimized or done away with completely. The flexibility offered by staffing also allows you to add or reduce staff members as per each project’s specifications with ease.
The costs associated with maintaining an in-house IT team are significantly reduced. In addition, you save on setting up an IT infrastructure by relying on the outsourcing company’s virtualized services, i.e., cloud storage.
IT outsourcing companies allow businesses to focus on their primary goals by dealing with secondary tasks. These include tasks that may keep the in-house team from fully channeling their expertise towards more crucial tasks.
Attain Core Functions
Besides staffing, IT outsourcing services may include virtualized software. Basically, this means that you’re able to integrate certain services into your infrastructure, like security monitoring. It saves on costs and provides essential functions for your business. And it’s all handled externally by an IT outsourcing company.
Unfortunately, IT outsourcing comes with its drawbacks. Here are some hindrances you might face when subcontracting.
Poor Communication Flow
Time zones can bring about issues with communication flow. If you have more than 8 – 12 hrs between each other, it can cause a communication breakdown. Sending, receiving, and implementing instructions can experience delays or suffer from misunderstanding.
While IT outsourcing is meant to improve security, it may do the opposite instead. This may happen if the subcontractor’s system is compromised or if there are poor safety standards.
On the surface, a subcontractor might look like they tick all the boxes. When the contract is signed, things change. This can prove to be quite difficult for a business, especially in quality control. In some instances, getting the subcontractor to match a company’s standards might prove challenging for managers.
A common disadvantage to subcontracting overseas is the language barrier. While the skills and quality of work may be excellent, the differences in language often cause roadblocks.
Types of IT outsourcing
There are different types of IT outsourcing available. Depending on the status of your business and factors influencing your decision, you might opt for one over the other.
Subcontracting IT-related work to a company in a different country is known as offshoring. The main motivation for doing this is cost-related. Other factors may include searching for skilled labor that is unavailable locally and a more favorable economic climate.
Offshoring also works well for companies that can’t afford any downtime. Thus, requiring constant tech support.
Nearshoring involves subcontracting IT services to an external company within the same time zone or a nearby country. The benefits of doing so include better communication and minimal cultural differences. Travel is also much less tedious and can happen more often between the two companies if needed.
The act of engaging an IT service provider within your home country but in a different location from your business is known as onshoring. An example would be a company based in Oregon seeking software developers from New York.
Companies engage in onshoring due to skill shortages in their area. They could also be emploring cost-cutting measures.
Other Types of IT Outsourcing
This involves hiring an external IT company to provide network management functions for your business. These may include virtual private networks, managing firewalls, network monitoring, and installing communication software.
The act of subcontracting IT and other business functions in combination is known as multisourcing. As opposed to working with one company, this strategy involves working with different companies across varying fields.
For example, you can subcontract one company in Ukraine to handle your web development and another in the UK to handle your content marketing.
Common IT Outsourcing Services
Businesses routinely engage with IT outsourcing companies to fulfill a variety of needs. Here’s a list of some of the services that are commonly outsourced.
- Web development
- Disaster recovery (DRaaS)
- Software and application development
- Data storage
- Data center management
- Technical support/help desk
- Database development and management
Which Is Ideal For Your Business?
Choosing the right service for your company depends on several factors. First, the gap you’re trying to fill or the problem you’re trying to solve will inform the service you need. Second, your budget will determine what route to take. Finally, you’ll have to decide whether the advantages outweigh the drawbacks.
All in all, it’s best to look at all the factors that are unique to your situation. There’s no one size fits all solution when it comes to deciding which service is best for your business.
The future of work is changing. Gone are the days when it was standard to have in-house staff handle all business processes. Now, outsourcing companies are offering solutions that cater to businesses at each stage of their growth cycle. Furthermore, IT outsourcing companies are able to cater to businesses of all sizes, from startups to corporations.
The rise in skilled and affordable labor across the world continues to influence business leaders to outsource as a logical step in streamlining business operations. There are minimal barriers to subcontracting across borders. Plus, the capability for remote operations makes the practice regarded as common sense.
This shift in how business processes are handled makes it ideal for companies to lower costs and redirect funds towards core functions. It is apparent that companies will continue to outsource IT services for the foreseeable future as the industry continues to grow and the world becomes more interconnected.