Detailed Guide on IT Outsourcing Strategy: Types & Benefits

Blog Summary: Today, tech entrepreneurs and CEOs are rigorously planning to extend their business capabilities. To do so, an IT outsourcing strategy is one of the result-driven solutions. It determines which projects you will perform in-house and which you will outsource. Outsourcing IT services is rewarding in the long run. Eager to know more about it! Explore the detailed guide on IT outsourcing strategy covering what, when, and why outsourcing is necessary for business growth. 

In the current era, technology has almost faded the boundaries among nations. Connecting with friends and collaborating with outside businesses is easy. Numerous companies have focused on outsourcing business services as well. Well, the pandemic has given a high bounce to outsourcing services. Specifically, IT outsourcing solutions have an upward graph year over year. 

A recent study has even shown that the IT outsourcing market revenue is estimated to surpass USD 512.50 bn in 2024. Thus, the total demand for IT services and outsourcing will remain at its peak. CEOs and CTOs should surely make the most of it. By outsourcing IT services, the benefits of target accomplishment and cost-effectiveness also increased. 

The article is a detailed guide on IT outsourcing and strategies to make it favorable. So, keep reading and know how it’s essential for your business’s overall growth.

What is IT Outsourcing? [Layman Definition]

IT outsourcing is a complete procedure of using IT service from a reliable exterior service provider. The IT service provider delivers IT-related business solutions from applications to software development. You can also refer to delegating your business operations to third-party agencies or companies. 

Various reasons show importance on how to outsource IT and development services to other organizations. For instance, you are a startup firm and need to build your business app. Instead of making it from your resources, outsource it to an app development company. It will save you cost, time, and effort. Hence, whether the company possesses that particular expertise or not, outsourcing makes the process streamlined.

In the highly competitive online marketplace, it’s critical to plan your IT outsourcing strategy. To get the targeted results, you need to fabricate world-class strategies.  

However, before discussing the strategies of IT outsourcing you have to know the types of IT outsourcing. It gives you a detailed understanding of which type suits your strategy optimally.

What are the three types of IT outsourcing?

With the accelerating demand for IT outsourcing, it has been witnessing immense acceptance. Let’s learn three major types of IT outsourcing.

• Nearshore Outsourcing

This outsourcing type implies choosing a nearby country for your IT project. The outsourced country must be a neighboring country with lower labor rates within the same time zone. So, nearshore outsourcing will be a convenient approach. Because the countries share slightly similar cultural and geographical closeness. 

Also, it will be cost-effective and meet the time frame of your project. E.g., When a US-located CEO hires web app developers from either Canada or Mexico. However, for newbies who find it difficult to get developers overseas, refer to our guide on how to hire dedicated developers.  

• Onshore Outsourcing

Secondly, there is onshore outsourcing which is also a widely used type. It refers to recruiting IT experts from outside the company but within the same country. It is also termed domestic outsourcing. 

The major reason for choosing onshore outsourcing is to decentralize responsibility to attain better outcomes. However, it also assists in focusing on another bigger-picture aspect of business. 

• Offshore Outsourcing

Last but not least is offshore outsourcing. It has also become quite a commonly picked type in recent times. Any company outsources IT projects to third-party service providers in a different country. 

Basically, the vendor company is situated in different time zones and other continents. E.g., When an American company hires a dedicated developers team from India. Because the development cost to outsource a software engineer in India is way lower than in other countries.

Accordingly, you need to figure out which type will be workable for your project. Your IT outsourcing type will impact other internal factors. So, be double sure about your decision. It will help in knowing which IT services your business needs to outsource.

Which are the most prevalent IT Outsourcing Services?

Many founders still wonder why outsourcing. The reason is outsourcing has some of the most impactful business outcomes for various industry horizons. However, there are some of the major IT services which need to be outsourced. Let’s dive into those services list;

• Cloud computing
• Custom Software development
• IT Consulting Services
• Web application development
• Mobile App Development
• Disaster Recovery
• Software Testing & Maintenance
• Data security and cloud storage
• Database management

The aforementioned different types of software development and IT-related solutions are majorly outsourced these days. No matter what IT services you need to outsource, just ensure you have a robust strategy for outsourcing. 

Having said that, let’s get a closer look at what IT outsourcing strategies are and how to develop them for your business.

What are IT Outsourcing Strategies?

The proven and well-planned strategy to decide on tasks or projects to perform by recruiting external tech experts. Usually, it is a long-duration plan to evaluate balancing the delivery of in-house and outsourced tasks. Having clear strategies defines how to control development costs and save turnaround time on specific work. 

However, the significant strategies of IT outsourcing are classified in the below-mentioned groups.

Professional Outsourcing: This is the strategy used for outsourcing talent from other companies instead of in-house hiring to meet business needs.

Multi-Sourcing Strategy: It implies outsourcing to multiple IT service providers.

Comprehensive Outsourcing Strategy: The strategy denotes outsourcing all-inclusive IT services and business needs to third parties. 

Project Outsourcing Strategy: This strategy will work when you get some advanced project and your staff lacks the potential to perform it.

Process-Specific Outsourcing Strategy:  When you need to outsource services for a specific process only, this strategy will do wonders. 

How to create the Best IT Outsourcing Strategy for business growth? 

For building your leading IT outsourcing strategies, you have to make a plan and perform some significant steps. These steps will bring clarity of vision and make a better strategy.  

• Determine your ultimate aim for outsourcing
• Evaluate the task you need to outsource
• Plan your budget and timeframe
• Search for the right IT service company
• Communicate your project requirements
• Keep constant track of the process

If you follow the steps properly you will get the right IT outsourcing partner. However, it will have some of the compelling benefits given further. 

Must-Known Benefits of IT Outsourcing Strategy

• Access Global IT Talents

IT outsourcing becomes a sheer blessing for organizations to gain domain expertise. Companies can hire dedicated developers within or outside of the country. It opens the doors for international collaboration. The service provider has a team of experienced professionals with stunning portfolios. So, IT outsourcing gives access to work with proficient software engineers.

• Cost-Saving Mechanism

Secondly, the most favorite benefit of the IT outsourcing strategy is its cost-saving nature. It has been noticeable that outsourcing IT-enabled services requires considerably less budget. In some scenarios, it is about 50-60% less than in-house hiring. 

Consequently, the IT outsourcing guide makes complete sense for small and startup firms. You can get highly functional products with a structured development process. Thus, you can leverage better results at reduced software development costs.

• Enhanced Productivity

Outsourcing software development services to a third party passes on the responsibility of completing tasks during a defined time. The external service provider has a team of skilled developers. Hence, outsourcing IT services benefits the faster development process. 

Also, it prevents the in-house team from focusing on other business operations. So, you can set priorities that ultimately raise the organization’s productivity. 

• Optimal Flexibility 

The flexibility of choosing and paying for specific services only. It is a sort of fair-price deal that gives you the privilege to mold your needs freely. Instead of using static internal staff with limited time access, the outsourcing team works based on a predetermined time.  Thus, outsourcing allows you to manage a remote development team.

• Decreased Risk Factor

The risk and uncertainty of data loss or security branches are quite low in outsourcing. You need to strategically select a company with the potential to manage risk-free processes. Thus, your IT project gets the utmost efficiency of risk management from the external provider.  

• High-Quality Work

Mostly the outsourcing companies are certified and experienced. They have a team of developers and quality testers which increases their quality of work. Moreover, your product will gain optimum functionality and required features. Getting work without any compromise and quality within your budget is a win-win already. 

Although, the IT outsourcing strategy is advantageous to border intent. You should also understand the appropriate time for opting for outsourcing. It’s important to have an idea when you need IT outsourcing services. 

When should a business select IT Outsourcing Services? 

This is a very common question we receive from entrepreneurs. Because they actually can’t analyze the right time to outsource services. To make it straightforward for them, IT outsourcing is essential when you have;

Limited Budget

One of the most probable reasons for outsourcing. The IT outsourcing strategy is meant to reduce the expenses of the organization. So, it is beneficial to outsource IT services for projects with a limited budget. Accordingly, it is the best alternative for small companies and startups. 

Security Constraints

As mentioned earlier, security risks are usual when you work on projects without relevant knowledge. So, experienced developers with the potential to manage data security are a great resource. It fills the gap and maintains your project development cycle. 

Tight Deadlines

The importance of IT outsourcing strategies lies in implementing them at the right time. Accordingly, having projects with tight deadlines requires outsourced services. Thus, it becomes easy to manage and satisfy the client’s needs beforehand.

Lack of Skilled Staff 

Organizations with insufficient internal staff or expertise for projects should definitely pick IT outsourcing solutions. The demand for outsourcing also rises when your in-house team is overloaded with a range of projects. Thus, outsourcing IT Services allows for exploring and building long-term relationships with organizations. 

Do you know? There are plenty of huge companies in today’s era that have started their business by outsourcing services to third parties. Such companies are perfect role models to plan and execute your IT outsourcing strategy efficiently. 

Popular Companies Created with Outsourcing IT Services

Google

Initially, Google started as a search engine and today it is ruling the market. Over the past few years, it has been outsourcing various IT services. Even if Google has a powerhouse of tech resources, managing everything from itself is difficult. It has offshoring teams and resources to control a multitude of tasks. Thus, it is set as the best and biggest example of the success of IT outsourcing strategy.

Alibaba

Alibaba even though having its base in China which has reasonable IT solutions has opted to outsource. However, their main intent is to use high-end talents which had access from the USA. To compete with other big brands, Alibaba decided to outsource IT services from the US.

Slack

Slack is a messaging platform that outsources design services to enhance its design components. Earlier, Slack hired MetaLab to design its logo and website comprehensively. As a result, with the success of Slack, many other companies have hired MetaLab to get the benefit of unique design solutions.  

Skype

Skype is the most famous and oldest video-calling app. Its success and brand value are thoroughly backed by expert solutions from Eastern Europe. App developers have made Skype a big hit. Consequently, Microsoft has overtaken it and now Skype is one of their products. 

Furthermore, the above examples display the prominence of choosing the right IT outsourcing services partner. So, you should also ensure to oversee the portfolios while searching for the ideal IT outsourcing services company. 

Being the software device provider, our work has pleased global clients. One of the renowned projects is online ticket booking solutions. It has been built with an effective tech stack and a combination of React and NodeJS. You can also connect with us to outsource IT services for your business. Because our future-ready solutions get your project covered with the emerging tech trends.

Top IT Outsourcing Trends in 2024 & Beyond

To make your IT project get a value-driven solution, you need to analyze the market trends. IT outsourcing is indeed the dynamic slope that undertakes various tech and market demands. After examining various data, here are some of the booming IT outsourcing trends in 2024. 

• The extreme shift towards Artificial Intelligence & Machine Learning Functionality
• Focus on Cybersecurity & Data Privacy Solutions
• Increased Weightage to Customer-Centric Product
• Adaptive to Cloud-based Technologies

Outsource IT services to us! 

Rlogical Techsoft has gained the trust of our clients. In the last 13+ years, we have delivered outstanding projects to different clients globally. One of the renowned projects is a green energy-saving app. It has been managed by our dedicated development team. However, you can hire IT experts in various technologies based on your website or application needs.   

So, your wait to get the best IT outsourcing services company ends here. Our experience and latest strategies will make your project successful. 

FAQs

Why is Outsourcing IT Services necessary? 

Reasons to outsource IT services are;

• Time and deadline constraints 
• Inadequate in-house staff
• Overly burdened with existing tasks
• Costs of in-housing development are higher than outsourcing

Which are the primary IT outsourcing models?

The main IT outsourcing models are;

• Dedicated Team Model
• Staff Augmentation
• Project-based
• Fixed Cost
• Team Extension

However, dedicated teams and extended team models are widely accepted. But many entrepreneurs misinterpret them as the same. You can read the article on the dedicated team vs team extension. 

Apart from IT, which other industries can leverage outsourcing services? 

Certain industries benefit from outsourcing services are as follows;

• Healthcare
• Retail
• E-commerce
• Banking and Finance
• Manufacturing and supply chain

How much does IT outsourcing cost? 

Well, there is no such predefined cost of IT outsourcing. It completely depends on which outsourcing models you choose. Aside from that, it also impacts software types, features, and other factors.