IT outsourcing is the process of hiring resources from outside of the organization to handle the workload. Most of the time, large firms hire comparatively smaller IT firms to outsource their work. It is because these IT companies find it cheaper to complete the work through some third party without using their own time and resource. IT outsourcing has become an integral part of many popular IT companies all over the world.
Not only the biggest IT brands outsource their work, but also some small IT companies outsource their work to manage the workload and accept new challenges. It is especially good for small-size companies or start-ups as they get access to various types of expertise. Many large organizations from the USA, Canada, Netherlands, and many other European countries outsource their IT work to Indian companies to get it done at comparatively low prices.
In this article, you will find details on:
- Definition of IT Outsourcing.
- What are the types of IT Outsourcing?
- Why do companies outsource their IT work?
- What are the popular IT Outsourcing services?
- What are the risks of IT Outsourcing?
- How to cope up with the risks of IT Outsourcing?
- What are the benefits of IT Outsourcing?
- Conclusion on IT Outsourcing
Definition of IT Outsourcing
IT Outsourcing is the process of using third parties or external resources to manage the workload and complete the work. Many businesses outsource their work to lessen the burden on them. Outsourcing work includes software development, infrastructure, running service desk, maintenance, and other functions. IT Outsourcing can include complete IT service or a few parts of a particular service.
Some companies outsource the whole IT project while other companies outsource a few parts of a particular project. Some companies split complete work among multiple providers.
Types of IT Outsourcing
There are several types of outsourcing. While most of the companies do IT Outsourcing, each company has a different kind of outsourcing process. Three major outsourcing types are given below:
Overseas Outsourcing
Many companies use this type of outsourcing. This outsourcing process is mainly done to take advantage of a different economic climate or get the work done at a low cost.
Nearshoring
In this outsourcing process, the whole work or part of a work is outsourced to a nearby country often the time that shares border it.
Homeshoring
This type of outsourcing is also called onshoring. In this process, the company allows its employees to work from home without being present in a physical office.
Reason for IT Outsourcing
IT Outsourcing is a hotly debated topic. It has a direct impact on an organization's top and bottom line. Many successful IT firms run their outsourcing nicely. The top ten reasons for outsourcing IT-related work are given below:
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Outsourcing lowers the cost of operations and employees. Outsourcing helps in the company's revenue recognition and saving a significant amount for an organization.
- Many companies choose to work on their expertise only. So, they prefer outsourcing other works to expert agencies. It helps those organizations to maintain their focus and save time.
- Outsourcing and offshoring can help companies to gain a global knowledge base. It is because they get access to world-class capabilities.
- Large companies save their internet resources by outsourcing their IT work to third party companies. It is one of the major benefits of outsourcing IT work to third party organizations.
- Many companies do not have the required internet resources. As a result, they outsource their work to gain access to global resources that they do not have.
- Outsourcing saves a lot of money. It provides a buffer capital fund to third parties that are leveraged in a profitable manner.
- Companies outsource their work to third parties to keep themselves free from the responsibilities that are difficult to manage. However, these companies still enjoy the benefits.
- Outsourcing helps companies to mitigate risk. It is one of the primary benefits of outsourcing IT-related work to third parties.
- Outsourcing helps companies to realize the benefits of revise, reengineering, and up-gradation of projects as per the client's requirements.
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Some companies outsource their IT work to get more work and expand globally.
Popular IT Outsourcing Services
Some companies outsource the whole IT project while a few companies outsource a part of a project. However, you will know some top-level outsourcing IT work from the below-mentioned list.
Mobile Application Development
There are a lot of IT companies that outsource mobile application development work to third parties. It is because they find it effective. They sometimes set up an offshore development centre of the mobile application and website developers for the fine functioning of their business processes.
The cost of IT-related work in Western countries like the USA, Canada, Australia, and others is higher than in Asian countries. It is because of the low value of the currency in most of the Asian countries. As a result, many countries from the West outsource their IT related work to Asian or African countries.
Some other IT related work that is outsourced to third parties are website development, digital marketing, staff augmentation, website designing, operational outsourcing, and quality check.
Risks of IT Outsourcing
If you have never outsourced your IT work to third party companies before, you may have the fear of remote cooperation. The fear is natural and you should know about the risks of IT outsourcing before taking the final decision.
Broken Promises
Most of the companies advertise their top-notch talent and vast experience. However, it is not possible to understand without using their service. A software company may not work just like you or stop their operations in the middle of the development.
Compromise with the Quality
Most of the companies who have stopped outsourcing are concerned about the quality of work. These companies wanted to save money. So, they have chosen the cheapest offers. So, they faced inexperienced staff and poor communication issues. Finally, they got a mess of work which cost their savings.
Lack of Domain Knowledge
If the third-party company does not have any experience in a particular niche, they have to spend more time analyzing the requirement. Although most of the solutions are generic, the lack of knowledge in the domain can cause various issues during the development.
Unexpected Expenses
It is natural to worry about the unexpected costs during development if you are outsourcing for the first time. Though many costs are easily understandable, some costs are hidden as well.
Loss of Control
You may fear losing control over the project manager. You know your employees and when they need supervision. But if you outsource your work to third parties, you have known about the developers well.
Miscommunication
Communication is the key to successful IT outsourcing. The language barrier, different time zones, black of physical meetings, and cultural differences can affect the project outcome. If you outsource a small work, third parties will get issues to learn about your needs.
Inexperience with Remote Work Culture
If it's your first time, you may face issues to manage a remote team. You will get problems to know about their talent.
Intellectual Property Issues
When you work with a third party, you have to expose your important documents and credentials to them. It is natural to feel insecure to share your sensitive data.
How to Manage the Risks of IT Outsourcing?
- Check the third party's website, previous works, case studies, reviews, and social media presence.
- Ask for references of their previous clients, meet them physically, and have a strong agreement.
- Check out the vendor's quality of work and resources.
- Try to learn about the third party's domain knowledge and have a workshop before starting the development.
- Clearly explain your requirement before starting the work and have a Service Level Agreement.
- Write a detailed management plan and set up proper communication channels.
- Learn how to work efficiently with remote workers.
Benefits of IT Outsourcing
- Hiring short-term employees can be very expensive. Outsourcing can save your money on Human Resources.
- You can get certified professionals through third parties.
- Start-ups companies can outsource their work to experienced third-party companies because experience does matter.
- You can save a lot of resources and money related to it by outsourcing your IT work to third party companies.
- You can outsource your work to experts who can start working on the projects right away.
- You can focus on your expertise and outsource other work to third-party companies while making a profit.
- Risks like competition, financial condition, government regulations, technology change are managed by third-party companies.
- Small companies can take the advantage of well-maintained support services of large third party companies.
- It can save your cost related to Human Resources, security, and maintenance.
Conclusion
IT outsourcing is the new buzzword of the 21st century. The benefits of outsourcing outweigh the risks and challenges of it. As a result, a large number of companies outsource their IT related work to third party companies to gain the benefits of it.
