“Do what you do best and outsource the rest.”- Peter Drucker
Yes, outsourcing has indeed contributed to the success of many businesses. This trend is proliferating now due to its ability to help small and large companies alike enjoy the benefits of cost reduction while also increasing the quality of their products or services.
However, I am sure you must have several doubts regarding outsourcing IT projects. So, here I’ll try to clear all your doubts and share some nitty-gritty of this stream.
But, before that let me take you through some mind-boggling statistics about its increasing demand.
- In 2022, spending on IT solutions is supposed to reach around 1.2 trillion U.S. dollars globally, an increase of 9.8% from the last year, probably because of the economic influence of COVID-19.
- The worldwide IT outsourcing market was estimated at USD 333.7B in 2019, and it is anticipated to reach USD 397.6B by 2025, listing a CAGR of 4.5%, during the projection period (2020 – 2025).
- The IT Outsourcing market’s increasing demand is not limited to one region or country; it is worldwide.
Surprised by the figures? It is time to dig deeper and know every bit about IT outsourcing.
Table of Contents
What is Outsourcing?
Outsourcing is the contracting of a distinct business process to a third party. This practice allows companies that do not possess particular skills or resources required to complete part or all of their function to cooperate with another company that does have these capabilities. In other words, outsourcing is when an external service provider performs part of your internal work.
Why Do Companies Outsource?
Image Source: Deloitte
Well, the image clearly shows different reasons for outsourcing. Here are three core factors that make outsourcing the need of the hour.
1. Speed and efficiency
Usually, businesses require months or even years to set up an offshore team. And during that time, the business may be losing money. Companies can get started instantly when outsourcing software development teams without hiring their own employees.
2. Lower costs
Hiring your own engineers will cost you more than outsourcing, but typically, the savings for outsourced projects come from the time and cost associated with keeping them happy. While getting a team of software developers on your payroll is ongoing and doesn’t involve any high up-front costs, you’ll need to spend money on office space, furniture, salaries, and perks.
If you only have a vague idea of what you want your app to do, outsourcing can be a great way of getting it built right. The companies that staff offshore software development teams are experts in their fields and know exactly what they need to do. This doesn’t mean that if you’re more familiar with the project, you can’t handle it alone, but an outsourcing company can save you a lot of time and effort if you don’t have the expertise in-house.
How to Choose an IT Outsourcing Development Company?
You could outsource the mobile app development team or website development team, or any other team. However, make sure you follow the below-mentioned steps.
Step 1: Define Your Objectives
Every outsourcing engagement needs to begin with clear goals. For example, you might be looking for an offshore team because your internal staff cannot meet project deadlines or budgets. Or you may want to outsource select components of your project instead of the entire application development life cycle (ADLC). You must define these goals before you can choose the right partner.
Step 2: Analyze The Top Countries For Outsourcing
You may have an idea of the countries you’d like to target for your outsourcing needs, but it’s essential to look at what type of talent pool is available in those locations. For example, India and China are known for their lower-cost programmers and engineers. But if you need a team with specific expertise such as digital marketing or medical imaging, you might have a better chance of finding qualified individuals in Eastern Europe or Latin America.
Step 3: Search for the Trusted IT Outsourcing Development Companies In That Zone
Once you know the countries where you are likely to find talent, it’s time to research outsourcing companies. These are companies that do not develop software internally but instead hire resources from around the world.
Some have their own development centers, while others simply serve as a liaison between clients and offshore resources. The best way to find suitable partners is through references and reviews. See if any of your current partners or clients can recommend offshore companies in the regions you are targeting.
Step 4: Do Not Hire an Offshore Outsourcing Company Based On its Price
When you’ve narrowed down your list to a few potentials, it’s time to start comparing them based on cost. Nevertheless, price should not be the single factor you look at.
There are plenty of good outsourcing companies that offer competitive rates, but they may lack their competitors’ more advanced services and processes. If your application requires high security or complex functionality, it’s worth paying a little extra for a better offshore development company that can handle those needs.
Step 5: Reach Out to The Offshore Outsourcing Companies You Prefer
After you have shortlisted the top few outsourcing companies, it’s time to contact them and set up meetings. Be sure to ask plenty of questions:
- What is included in their service?
- Do they take care of organization and communication, or will you manage that aspect of the project yourself?
- What is their development process like?
- Do they use Agile or Kanban, for example?
- How much time do they take to conclude a typical project?
- What resources do they need from you before starting the engagement?
Step 6: Pick The Best Software Developer
After your meetings, you should know which outsourcing company will best meet your needs. Don’t be afraid to negotiate; this is a business contract.
If you feel like the offshore development company has not offered competitive rates or does not have the resources available in the region/time zone you need, do not hesitate to ask them for better terms. Just remember that you should never sign a contract with a company that is not willing to negotiate.
However, once you are assured of your preference, based on interviews and research you’ve performed, you should be ready to sign these documents-
SLA (Service Level Agreement)
Most offshore development companies will offer an SLA to their clients. This document specifies what you can expect from the outsourcing company regarding quality, timeliness, and cost.
SRS (Software Requirements and Specifications)
When you are planning to offshore software development, both parties must understand the project’s goal. A Software Requirements Specification (SRS) document specifies what needs to be built.
NDA (Non-disclosure Agreement)
You and the offshore software development company may have to sign a non-disclosure agreement (NDA). This document ensures that neither party will reveal the other’s trade secrets or intellectual property.
KPI (Key Performance Indicators)
Before the offshore development project begins, it’s a good idea to create KPIs (key performance indicators) together. These measures will help you determine whether the software meets your expectations and allow both parties to track progress over time.
When Should You Outsource Your IT Project?
Well, there are several scenarios where hiring an IT outsourcing development company becomes crucial. Some of them are-
- When you need to grow your team quickly: If you are a startup or fast-growing company, this is an ideal way to bring in talent without a long-term commitment.
- When you want to reduce costs significantly: This is perhaps the most common reason for outsourcing IT projects offshore. Many companies realize that by hiring offshore, they can save up to 75% of the cost.
- When you require an additional workforce: Many companies outsource IT projects to fill in for vacations, maternity leave, and attrition. This assures that there are zero delays in business continuity even when such events happen. It also helps organizations scale up their workforce quickly without having to go through a lengthy hiring process.
- When you are looking for expertise in new technology or platform: It is widespread for companies to look for additional skills that complement their existing workforce. This could be something as easy as adding a module to your current skillset or something more complex like learning how to support the development of an offshore team.
- When you lack in-house IT Talent: Today, many companies do not have an in-house IT department and outsource projects to manage their technology departments.
- When you need help with your global expansion: Many US-based companies choose the offshore option when entering new markets; this allows them to take advantage of outsourcing while keeping enough development resources close at hand.
Looking for a Perfect IT Outsourcing Partner for Your Next Project?
What Should Be Practiced for Best Outsourcing?
1. Be Ready with a Detailed Project Plan
Before you go ahead and hire a company to take up your project, you must think about what exactly needs to be done. In the initial stages of the project, you must create a detailed project plan. Doing this would help you build a strong foundation for your project and communicate the project’s requirements to the company that you hire.
2. Never Neglect the Importance of Communication
One of the essential aspects that you would need to pay attention to is communication. Since various people are involved in the project, these people need to communicate regularly. For a company to deliver a project successfully, constant and clear communication between them and the client should be maintained by both ends.
2. Pick the Right Projects for IT Outsourcing
Before you proceed and hire a company for your next project, you must consider the size and the type of work involved in this project. Both parties must make sure that there is synergy between each other and hence do not go ahead with projects where the functions of both parties are entirely different from each other.
3. Ensure that there is No Confusion over the details of the Contract
Both parties need to be well aware and go through all the clauses in the Contract before agreeing to it and signing it. Once done, ensure that you do not miss out on any details and that the company meets all your requirements and expectations.
4. Keep Tabs on Your Projects and Employees
Both parties need to make sure that all activities related to the project are carried out as planned and hence do keep updating yourselves about them regularly. This can be done either through regular meetings or by having a separate portal where both parties can post their reports and updates. This would help eliminate any confusion or problems that might come up later on.
5. Put in Effort to Maintain Long Term Relations with Your Vendor
Recently, it has become prevalent for companies to switch vendors now and then as they believe that this would be more effective for them. However, this is not the right way to go about things as it can create many problems in the future with either party unable to understand the other’s requirements. Subsequently, hiring another company would only increase the cost of the project without helping matters at all.
6. Remember that You Receive What You Pay For
In the initial stages of outsourcing, companies tend to go for those who charge them less as they believe that this would help them save a lot of money. However, both parties need to realize that no matter how low someone charges you for work, make sure that you do not compromise on the quality of work they deliver. This is where you would realize the importance of a thorough selection process before going ahead with a company.
What are the Best Countries to Outsource Software Development Projects?
Why Hire an IT Outsourcing Company in India?
- India has a rich and successful history of outsourcing, with hundreds of IT services companies that offer support for everything.
- The country has world-class education and technologically literate workers, as well as a highly advantageous time zone.
- The English language is widely spoken, labor costs are low (on average 20% less than the USA and 50% less than the UK) and cultural & business customs are similar to those in North America and Europe.
- The main advantage of outsourcing is access to talent, provided it’s managed correctly. By hiring an IT services company in India, companies gain access to the world’s best coders and programmers.
- The cost of hiring an outsource development team in India starts at $15/hr., which might seem like a lot, but when you consider that the average cost to hire a senior programmer is over $50/hr.
- The quality of Indian workers is also very high. Although there has been criticism that they lack creativity, coders in India tend to follow instructions and quickly meet deadlines. Many Indian developers work on several projects simultaneously,
Why Hire an IT Outsourcing Company in Ukraine?
- Ukraine has a rich and successful history of outsourcing. The country is abundant with highly talented programmers and coders, as well as a highly-educated workforce.
- Although the cost is higher than in India (typically about 40% more), it’s still relatively low compared to North America or Europe.
- The main advantage of outsourcing is access to talent. An IT outsourcing company in Ukraine provides a solution for companies that want to hire one or several experienced software developers instead of the entire team of coders and programmers.
- Ukraine has more than 100,000 software developers. A team of ten coders can be built for around $40,000/month, which is very affordable compared to the West.
Why Hire an IT Outsourcing Company in China?
- China is another great place to go for outsourcing. The nation has a successful and rich history of outsourcing with hundreds of IT services companies, and it boasts a vast and talented workforce.
- China also has emerged as a significant player in the top global markets such as clean energy, environmental protection, new communication technologies, alternative transportation, etc.
- The core advantage of outsourcing is access to talent. An IT outsourcing company in China provides a solution for companies that want to hire one or several experienced software developers instead of the entire team of coders and programmers.
- Outsourcing in China has been growing exponentially over the last decade. In fact, according to Hays, China is the fastest-growing destination for IT professionals.
What Parts of the Project Can You Outsource?
- Delivery Teams: These are the people who will actually implement the final solution. Depending on what is required to deliver that part of the project, these might be programmers, testers, or subject matter experts. A good delivery team should understand the broader project and collaborate with the client to determine what needs to be delivered.
- Staff Augmentation: This is when a company employs additional personnel for the project’s duration to support the deliverables. This may be some or all of the delivery team relying on what is required. A good staff augmentation team should have strong working relationships with the client and act as an extension of their own organization to produce effective results quickly.
- Project-Based Outsourcing: This is when a company does not simply provide staff for the duration of the project but also takes ownership of it. Typically, this means that they will do everything from identification and scoping to selection and management and delivery and support. A good project-based outsourcing organization should deliver outstanding results and manage what goes into providing those results so the client doesn’t have to.
So there you have it. This article should help you choose the best country for hiring an IT outsourcing company in 2022 and beyond! Before picking an outsourcing partner, make sure you are clear about your goals, budgets, and project. Besides, I would suggest software outsourcing companies in India. If you still have any doubts, mention them in the comment section below.
Frequently Asked Questions
Q1. Is outsourcing good or bad?
It depends. In some ways, it’s a good thing. For example, if you have a one-time project that requires specific expertise, there’s no reason to overpay your staff by having them learn new skills they may never use again. At other times, it can be bad – I’ve seen outsourcing replace local jobs with overseas work done by people with low skill levels and minimal training.
Q2. What are the risks of outsourcing?
The biggest risks associated with outsourcing are understanding exactly what you want from your provider and how they deliver. The advantage is that if you do it right, it should save you a lot of time while giving you a level of quality that might be unattainable otherwise. It’s not a risk-free method, but overall, a carefully selected and implemented outsourced solution should work to your benefit.
Q3. What are the two key benefits of outsourcing?
The two key benefits of outsourcing are reduced costs and speed market. However, that is not all; there are advantages too, like increased flexibility and scalability, enhanced security, and improved quality control.
Q3. How does an outsourcing company work?
An outsourcing company is an expert provider of high-level services who works with clients to do something better than they can do themselves. When you outsource an IT project, you’re essentially contracting a team of experienced professionals to help solve an issue or complete a specific task.
Q4. Questions to ask before outsourcing an IT company?
Before outsourcing any project, it is essential to ask all questions below.
- What kind of certifications do your developers have?
- Do you hold a proven history of service commitment?
- How do you plan to maintain my account?
- Who are your former clients, and how happy are they?
- Do you deliver quality projects?
- Does your team meet the deadlines?
Q5. What are the different kinds of IT outsourcing?
There are several sorts of IT outsourcing and some of them are mentioned below-
- Process outsourcing.
- IT outsourcing.
- Operational outsourcing.
- Professional outsourcing.
- Manufacturing outsourcing.
- Project outsourcing.