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Christine

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IT Outsourcing: How to Choose the Right Partner?

The opportunities of the modern digital world have wholly erased the boundaries and distance challenges, taking partners closer to digital platforms. Today having access to a global talent pool and collaborating with off-shore outsourcing companies is more practical and cost-effective than hiring in-house teams. Of course, outsourcing comes along with challenges that can be tackled if the service provider is competent. Software development outsourcing continues leading the chart as the top service in terms of supply and demand. To estimate the values driven by outsourcing services, it is wise to point out the advantages of outsourcing and the tips to find a software development outsourcing company.

IT outsourcing market overview and statistics

The competitive market has expanded its geography, and any business can now go far beyond its location. With companies pushing boundaries, the service providers started developing new strategies of engaging off-shore partners. The evolvement of digital solutions created a whole new infrastructure and outsourcing industry that transformed outsourcing from luxury to necessity.

Digital transformations efforts accelerate IT outsourcing, already generating billions of dollars of revenue. By the end of 2021, the global IT Outsourcing market is projected to reach $92,5 billion by the end of the year. Furthermore, by 2024 is expected to grow $98 billion at a CAGR of 5%. Amid the pandemic, the businesses opted for remote management that promoted outsourcing, pushing back the role of in-house offline teams.

Apart from the pandemic and the global transformations, outsourcing has become a priority strategy in light of talent shortage. In-house talent pools can be overrated and limited for tackling business challenges.

  • 70% of the IT industry market worth will be generated from outsourcing by the end of this year.
  • India still leads the global outsourcing with the lowest rates for services.
  • Armenia has become a new strategic outsourcing direction with great potential and perspectives already hosting major industry events like the World Congress on Information Technology 2019 (WCIT 2019), Global Innovation Forum, and more. Moreover, Armenia is chosen by major IT industry players as a new technological hub with successful products released to the global market.
  • More than 93% of industries will have improved IT outsourcing by adopting cloud services.

Top Reasons to Outsource Software Development

Outsourcing has obvious advantages that can leverage business processes and gain a competitive advantage.

Cost-effectiveness
Most businesses have chosen to outsource IT services as the best means of cutting the budget up to 60%. In-house teams maintenance will always mean more expensive because it includes huge expenses on office support besides employees salaries. When outsourcing, the business owner pays only for service.

Time optimization
Outsourcing services proved to save time on recruitment and hiring in-house specialists, training and adaptation. Off-shore companies with relevant competency and expertise will immediately get on board, saving time and money.

Focus on core internal competencies
It is much easier to unload the workflow and help the internal team focus on core processes by delegating part of the services. The challenge of outsourcing partially is to create regular communication with internal and outsourced teams.

Gain technological advantages
IT outsourcing allows businesses to implement the latest technology solutions and gain a robust competitive advantage.

Flexibility
Outsourcing IT services is, first of all, flexibility. The companies can outsource separate IT functions that can be better addressed with a professional off-shore team. Moreover, partnership with service providers is beneficial for short-term projects.

No licensing costs
When outsourcing, the business owner is not responsible for tools and products used to reach results. Most software tools are open source, but there are ones that require license fees for usage and distribution. So this concern belongs to the service provider and not the business owner.

Better accuracy
The partnership with an off-shore service provider implies clear deadlines and a predefined budget. Of course, there may be unexpected expenses, but they can also be discussed in advance.

No micromanagement
With an in-house team, c suite executives and business owners are involved in the workflow dealing with micromanagement and routine. On the other hand, the project is coordinated with the project manager from the outsourcing team, who communicates with stakeholders.

Ultimate control over the process
Despite the prevalent fear and misconception that outsourcing means losing control over the processes, a dedicated team of professionals led by a project manager will constantly communicate with stakeholders.

Fast-track software development
The IT industry develops and transforms faster than ever. Every minute is priceless, and fast software development and deployment will boost all the following processes. Outsourcing IT services help to perform operations under tight deadlines.

Access to a global talent pool
With rapid IT industry evolution and technologies, the talent growth and access to all level talents worldwide enables access to any level specialist ignoring the distance. Dedicated outsourcing teams with the right skillset may become a full-fledged and integral part of a company.

Agile project management
The agile strategy has proved to be the most effective way to maintain outsourced teams. Delivering better velocity, the approach helps add changes and improve the product during the development process.

What to Outsource to a Software Development Company?

Common practice is outsourcing a complete development cycle, but other types of partnership and outsourcing may be mutually beneficial.

Custom software development - the collaboration implies a complete cycle of software development tailored for customer needs.
Software maintenance and support - the collaboration includes only timely upgrades and maintain the quality of the app.
Operations with a database and a data center - installation and maintenance of client’s database and a data center.
Outsourcing technical support - this type of collaboration involves only the support of customers.
Security and data recovery - handling security to prevent data loss or hacking.
Network and hosting maintenance - taking responsibility for network operations

How to choose the Right Outsourcing

Go through the checklist of requirements and get a shortlist of candidates that can further be filtered.

Define the scope of work
Knowing what you want means knowing what you need. Start with defining the project type and project scope to understand your requirements better.

Conduct thorough research
Any new project, be it a product development or partnership, starts with comprehensive research of the relevant market. Trusted directories of IT companies are the most convenient way to access a large number of qualified partners.

Check reviews
Testimonials, reviews and votes can help you create a clearer picture of future partners. Pay attention to both positive and negative reviews, and trust reputable directories.

Ask for references
Shortlisted candidates need to be checked in detail, and references from previous partners and project owners may be of great help.

Choose expertise above anything
Whether you are looking for long or short-term partnerships, the project success, first of all, depends on the service provider expertise. Make sure it fits your needs.

Communicate clearly about budget
Even if budget estimation depends on many factors and the vendor may face difficulties estimating the costs, try to communicate it and decide on approximate investment in the project.

Explore case studies
Dealing with a service provider experienced in a relevant field is cost-efficient and time-saving. It is essential to check the case studies of completed projects to understand how the agency has solved particular challenges, what features and tools are used, etc.

Make sure the partner is flexible
Flexibility means your partner is available regardless of different time zones, language gaps and cultural differences. The outsourcing vendor should be flexible enough to serve urgent requirements upon request.

Pay attention to team size
Unless you are a large company, don’t start a collaboration with big service providers. A dedicated team covering core competencies is more optional.

Check for financial stability
A financially stable partner is more reliable and professional. When searching for an IT outsourcing agency, ensure the company is registered and has years of experience.

Request cyber security protection of sensitive data and intellectual property
The main fear and challenge of outsourcing IT services is security. Handling sensitive data to third parties may be dangerous if the third party does not provide warranties for protecting sensitive business information. Make sure the outsourcing vendor is using the latest technologies for cybersecurity and physical security measures.

Shares cultural values and business objectives
This criterion may not be a priority, but it may be defined when having similar top candidates. Company culture and work environment may determine whether the partner is reliable or not. Learn the ethics, goals and expectations, choose the partner who is dedicated and passionate about business.

Ensure there is no language gap
This criterion may not be actual; it may become a problem if the outsourcing vendor cannot provide communication.

Where to look for a software development outsourcing agency?

The geography of outsourcing
Having covered all the essential questions about IT outsourcing, its advantages and the ways to find a dedicated service provider, it is critical to note the prices and popular regions for outsourcing.

North America - $90-$200
Western Europe - $80-$200
Eastern Europe - $25-$40
Latin America - $30-$45
Africa - $20-$45
Asia - $18-$35

The prices have nothing to do with the quality of services. Still, it is not wise to make the price a priority for business objectives. The price-quality ratio should meet the business goals and budget.

Conclusion

It is rather challenging to pick the best outsourcing partners in the abundance of options and easy access to the global talent pool. So how and where to start? Take the following questionnaire and try to fill in the answers of the partner candidates.

  • Do the off-shore companies have experience in relevant fields?
  • What is the experience of an outsourcing company?
  • Does the chosen agency implement modern technologies, software and infrastructure?
  • Does the outsourcing partner have qualified specialists covering your requirements?

Discussion (1)

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naruaika profile image
Naufan Rusyda Faikar

Woah, my region got the cheapest payout. Since I'm working at IT outsourcing company, I can say that this is a good article.