LAST UPDATED : MARCH 2021
In today’s digital era, one of the resources that enterprises cannot easily create on their own is IT expertise. Developing IT infrastructure, strategizing IT operations, operating, controlling, securing and managing IT services — all of this requires multifaceted talent and expertise.
So how can an enterprise balance the modern world of digital transformation with legacy applications and technologies? How can the enterprise transform itself while ensuring focus on customer and employee experience?
IT outsourcing offers the perfect solution for this.
Definition Of IT Outsourcing
The primary benefit of IT outsourcing is cost-savings. However, there are several benefits that IT outsourcing brings to the table that enable quick scaling up of the enterprise in the long-term.
- Easy to scale resources
- Assured core competencies
- Access to global talent
- Organized functioning
- Timely deliveries
- Tighter quality control
- Risk management
- Zero to minimum infrastructure cost
Types of IT outsourcing
There are four types of outsourcing services:
- Nearshore outsourcing
- Offshore outsourcing
- Onshore outsourcing
- Cloud computing
In nearshore outsourcing, you outsource your technology-related projects to a vendor who resides in the same or nearby country, usually in the same time zone. The physical proximity helps if the project has heavy IT hardware dependencies.
In offshore outsourcing, a technology vendor is chosen based on their cost savings, availability of talent and several other benefits. In most cases, offshore outsourcing picks vendors in a country that is far away from the organization and might even be working in a different time zone. This is the most popular form of outsourcing as it gives several other benefits in addition to tangible cost savings.
Onshore outsourcing engages vendors who are in the same region or country as the organization. This is typically useful if the project requires hardware intervention and assembly which cannot be easily setup, managed, or even moved to another location or country.
SaaS, IaaS, UCaaS, CcaaS — these are some of the cloud-based services that are often given to outsourcing vendors. The services are subscribed to by the organization. The service remains active throughout the period of the subscription. It is governed by the plan or the package that the organization chooses and pays for.
Top 8 Benefits of IT Outsourcing
1. Easy to Scale Resources
The leap from being a small business to becoming a large-scale one is not easy. It needs an ample amount of resources — both material and personnel – to scale operations. However, such ramping up of resources is difficult, especially when you are working with a tight budget and have ambitious targets to achieve. The challenge becomes more intense when you are facing stiff competition in terms of pricing and demand.
IT outsourcing cannot solve all these problems, but it can give the resources that can help solve these problems. To begin with, IT outsourcing makes it easier to ramp up manpower for technical projects. Be it for developing a new program or extending its features, or for extending the Quality Assurance team for more quality checks, IT outsourcing can help.
One of the under-rated benefits of IT outsourcing is that it takes care of the biggest challenge of assembling an A-star team of experts. It solves the people problem which solves most of the other challenges in upscaling operations.
2. Assured Core Competencies
IT outsourcing providers hold the necessary certifications, industry accreditations, and similar recognitions that leads to specific competencies necessary for delivering quality IT outsourcing services. Also, outsourcing ensures that you are able to outsource and delegate to external vendor competencies that you may not be able to develop in-house. These IT outsourcing companies own these competencies as their core offerings, enabling them to do a better job than what your organization could be doing on its own.
IT outsourcing ensures that you do not have to burn expensive resources in building additional competencies that may not fit into the long-term growth plan of your organization. It helps prioritize the core competencies that you want to build and let third-party experts take care of the rest.
3. Access to Global Talent
Outsourcing gives enterprises the ability to scout for talent in neighboring countries as well as in far-flung countries where talent is available in abundance. For example, Asian countries are counted as the biggest source for programming and support services after the Silicon Valley in the United States.
Small enterprises who cannot compete with bigger enterprises for hiring premium talent can assemble a team of professionals with the same credentials and expertise from across the globe. In fact, studies have proven that countries like the Philippines and India are excellent destinations for IT outsourcing services (Open Access BPO).
Apart from cost benefits, there is also another benefit in outsourcing IT services to these regions. These regions are home to a young generation of professionals who are well-versed in digital technologies and communicate clearly. This makes outsourcing a surefire strategy that will enable your enterprise to scale faster.
4. Organized Functioning
One of the highlights of an IT outsourcing company is that they have a clear hierarchy of personnel whose responsibilities are mapped to individual roles within the organization. Most often, there are separate teams for projects and accounts to ensure smooth functioning of the team.
The team is usually led by a project manager who works closely with the account manager to deliver on the client’s requirements. The project manager is equipped with a team of developers, QA professionals, and other personnel to develop, test, and launch the project successfully.
Furthermore, as the client, you are also introduced to an escalation matrix which details the personnel to be alerted in the event of any issue related to deliverables. It could be a missed deadline, defective work, quality issues, etc. which the account manager or the project manager may not be able to solve. This form of organized functioning ensures that you always have a hassle-free way of completing the project irrespective of its complexity and volume.
5. Timely Deliveries
One of the biggest downsides in IT project management is missed deadlines. It takes mammoth effort both from the development and the PM team to stay on track of deliverables. An internal IT team will have to fight its own battles to complete work on time. Whereas, with an outsourcing partner, timely delivery of work is non-negotiable.
This is primarily because IT outsourcing companies use failproof project management methodologies like Agile or Waterfall methodologies. These methodologies ensure that all possible challenges are proactively planned for and prepared for. The end result is timely achievement of milestones. Also, after each milestone there is a sign-off with the client which ensures that the cumulative quality of work is not compromised at any level. In fact, the timely deliveries will ultimately help you achieve a faster time-to-market.
6. Tighter Quality Control
Quality management outsourcing has also become extremely popular in recent years. There are several reasons why outsourcing quality management has become popular and a default choice for many enterprises.
To begin with, outsourcing ensures that the work is reviewed by a fresh pair of eyes. It is possible to spot logical errors and gaps that otherwise may have slipped in at the development phase. Also, it is possible to outsource the quality assurance function of a big project. QA outsourcing can save a lot of time while ensuring that the project passes quality benchmarks.
QA can be done for the whole project, or a smaller piece. Also, it gives the option to choose from automated or manual testing to meet the objectives of the project. This kind of flexibility is difficult to build internally as it demands setting up separate teams for manual and automated testing which will inflate the costs.
7. Risk Management
Any IT project will have its own share of inherent risks. However, IT outsourcing companies are in a better position to mitigate them compared to organizations that try to manage risks internally.
Due to the diverse range of projects and services that they handle on a regular basis, IT outsourcing companies are capable of foreseeing risk scenarios and take preemptive measures that will ensure the smooth handling of the project. From identification to assessment and avoidance, IT outsourcing companies take care of all the three levels of risk management.
Some IT vendors also have backup plans for cybersecurity and disaster recovery to ensure smooth functioning of the entire process. The disaster recovery plan ensures that in a worst-case scenario, all the data is protected, retrieved, and an attempt to restore normalcy is made – as quickly as possible..
8. Zero Infrastructure Cost
Assembling a team, giving them dedicated workspace, providing them with IT infrastructure for productive working — these are the basics of managing an in-house IT team. Needless to say it is an expensive affair. Also, there are several labor laws and statutes that specify how employees should be treated and taken care of. Violating those statutes could cause severe damage to a company’s reputation.
In IT outsourcing, the entire personnel and infrastructure management tasks are handled by the third-party partner itself.
Also, IT infrastructure is prone to become obsolete if they are not replaced within reasonable timeframes. IT outsourcing ensures that your organization does not have to worry about maintaining the infrastructure updates and upgrades. This certainly leads to huge cost-savings. However, the bigger benefit is that you will have an IT infrastructure that is geared to keep updating as technology changes.
Conclusion — Outsourcing Benefits That Go Beyond Cost-savings
Outsourcing is one of the efficient ways to achieve an organizational goal that is difficult to be managed internally. Globalization, spurt in digital technologies for communication and collaboration, and remote working has made it possible for enterprises to scout for talent and fill their gaps without letting physical proximity become a hindrance.
Cost-savings is one of the alluring reasons that draws enterprises to outsourcing. However, outsourcing has benefits that go beyond cost-savings.
To begin with, IT outsourcing provides quick scalability of resources. An enterprise must have access to personnel and technical resources as and when needed. It helps tap into the market demand and beat competition ahead of time.
IT outsourcing also facilitates access to technologies that might otherwise be difficult to master within the organization. These are benefits that will help the enterprise become a well-rounded player in its space in the long-term.