Pros and Cons of IT Outsourcing

In the race for the leading role in the market, entrepreneurs and business owners are constantly looking for new ways to achieve results, and at the same time, they want to get quick and profitable results. Outsourcing of services, which allows not only to save time and money but also to concentrate on things important for business, occupies an important place in this race.
Pros and Cons of IT Outsourcing
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IntexSoft

In the race for the leading role in the market, entrepreneurs and business owners are constantly looking for new ways to achieve results, and at the same time, they want to get quick and profitable results. Outsourcing of services, which allows not only to save time and money but also to concentrate on things important for business, occupies an important place in this race.

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In this article, we will examine what IT outsourcing is, what advantages it has and what benefits it can bring.

Briefly about IT outsourcing

Outsourcing in itself is the use of external resources. In international business practice, outsourcing is a set of actions aimed at transferring certain functions to an external company - an executor or a service provider.

IT outsourcing or software outsourcing refers to engineering services. It includes the implementation of software development projects, their support, testing, and maintenance, carried out by a special team. For successful project management, a company providing this type of outsourcing must have:

  • well-defined (working) approach
  • customer communication transparency
  • steady teams consisting of highly qualified IT specialists
  • long-term cooperation tendency
  • the ability to expand its project teams
  • readiness for quick start of projects

In general, IT outsourcing is a wide range of workloads that covers both small projects and long-term multi-year contracts.

Benefits of IT outsourcing

Cost savings

The first and the most important advantage of IT outsourcing is the reduction of time and money costs for the development and implementation of software products.

A well-known businessman and lecturer at MIT Sloan School of Management, Joseph G. Hadzima, conducted a study to identify the average cost per employee per year. Based on this study, the costs per employee consist of several components: recruiting expenses, basic salary, employment taxes, additional costs for organizing a workplace, additional equipment, vacation / sick leave, etc.

By hiring an external development team, or outsourcing the whole project, business owners save up to 80% of the product development costs compared to the costs of keeping an internal team.

In addition, assembling a development team is a rather laborious and lengthy process. This factor is especially important when project development must be completed in a short time. In this case, outsourcing helps to save time and start according to a plan.

Pros and Cons of IT Outsourcing

Great experience

Entrepreneurs may face a situation where the development and implementation of a project require more experience and skills than the internal it-team has.

As a rule, companies providing IT outsourcing services have a large staff of experienced and qualified employees. In this case, the work of such companies is aimed at forming the development team that will help fulfill the task in accordance with all requirements. This outsourcing model is called outstaffing.

Flexibility

This paragraph follows from the previous one. Since the IT services provider has a large number of employees of various qualifications, outsourcing (or in this case outstaffing) gives an opportunity to hire specific specialists needed to deploy a specific project. This saves entrepreneurs from a number of unnecessary moves such as hiring specialists of certain specialization, their further training, and wages.

Focused Strategy

An in-house development team often deals with more than one project at a time. This may affect the terms and the project outcome itself. Outsourcing a project, you get a team of professionals fully focused on this project. Due to that fact, the work will be done efficiently and according to the delivered deadlines.

Advanced technologies

Any self-respecting outsourcing company constantly improves the skills of its employees. Therefore, such companies are able to work with the latest programming languages, development environments, and tools. This allows entrepreneurs to get a high-tech product as well as eliminates the need to spend tens of thousands of dollars on internal training.

Worldwide access

Finding, hiring and forming a team of professionals within the limits your location, is not always possible.

In this case, outsourcing opens up all the boundaries for you and significantly expands the range of choices. You can hire a team of specialists anywhere in the world while saving your money. Indeed, outsourcing employees from Eastern Europe will be cheaper than hiring the same employees, for example, in America.

Full package of services

It happens that a business owner comes up with a project idea, but does not know where to start and how to put it into practice. In such situations, the customer can contact the outsourcing company and request a full package of services, which includes advisory services, business analysis, analysis of requirements and capabilities, as well as the further implementation of the full Software Development Life Cycle.

Risk Mitigation

Choosing a company that has a proven management system, as well as a high-quality and time-proven application development process, you reduce the risk of getting a low-quality product in the end.

Possible Risks

In general, outsourcing is always risky. Some of them are described below, as well as ways to avoid them.

Lack of control

Outsourcing is the type of cooperation in which personal communication between the parties is minimized. As a result, business owners cannot fully and completely control the entire process. However, the degree of trust always depends on the provider. Before starting development, it is necessary to discuss in advance how, when and where the communication and monitoring of the intermediate results of the project will be carried out.

Communication problems

In order to avoid communication problems, it is worth paying attention to the following aspects: English proficiency and time zone.

If the employees of the outsourcing company do not speak and/or do not understand English well, the project will hardly be successful. Although most companies do not have any problems with English nowadays, you should pay attention to this aspect when choosing an outsourcing company.

The location of the company is also important: if time zones differ by more than 3-4 hours, discussing current issues and project progress will be problematic for both the customer and the service provider.

Information leak

When outsourcing a project, you share ideas, innovations, and data with third-party suppliers. In addition, if you are not lucky to choose an unscrupulous company, its employees can “borrow” your ideas or use them at their discretion. To avoid such problems, you need to choose the IT provider carefully and sign a non-disclosure agreement.

How to Choose the Right Company?

Pros and Cons of IT Outsourcing

First, you need to determine the specific goal of the planned project, analyze your capabilities and resources. Therefore, you will understand what service you need and what company you need to look for.

The next and the most important step in outsourcing is the right choice of the company that you will cooperate with. In order to be sure that the company suits you, you should evaluate it according to several criteria:

  • company size
  • services provided
  • portfolio
  • expertise
  • customer reviews
  • terms of development and its efficiency
  • English proficiency, etc.

All these criteria indicate the company's experience and its level in the market of IT providers.

Also, do not forget about the cross-cultural aspect: it does not matter if you are a small or large business that wants to hire a development team, Eastern Europe and places like Belarus may suit you.

For more information on how to choose the appropriate It-provider, you can follow the link: How To Find The Right Software Outsourcing Vendor.

In addition, here you can find detailed information on how to build a productive workflow with an outsourcing company: 6 Tips To Build A Great Partnership With an IT Outsourcing Company.

Conclusion

In the era of continuous information technology development, software development outsourcing is a common practice in the business sphere. In addition, in order to get all the benefits described above, entrepreneurs need to determine their goals correctly and take a responsible approach in choosing an outsourcing company.


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