IT Outsourcing

IT Outsourcing

According to Gartner, IT outsourcing is the use of external service providers to effectively deliver business process solutions, applications and IT infrastructure enabled to drive business results.

Outsourcing, which also encompasses utility services, cloud hosting and software-as-a-service, helps customers develop the best strategies, select the right IT providers, structure good contracts and manage agreements to achieve beneficial win-win relationships with their suppliers.

Outsourcing also enables companies to reduce costs, accelerate time-to-market and leverage external assets, intellectual property and expertise.

IT outsourcing in the current global context

The practice of remote working is constantly increasing as a result of social distancing during the COVID-19 pandemic. Led by businesses in response to World Health Organization guidelines, the modality has a daily impact on combating the spread of the virus.?

Companies are facing a major challenge with remote working, with an added aggravation: they are now also dealing with processes they wanted to automate before most of their employees worked from home.

These circumstances will be the deciding factor for the digitization and automation of their work processes for many companies. This will decrease the limits of outsourcing performance in the future. Therefore, in the long run, companies tend to outsource their IT processes and scale their business to other countries.

Types of Outsourcing Services

Offshore Outsourcing: This type of outsourcing is defined by the migration of a service to be performed in another country where labour is cheaper. Tasks such as: application development, support and maintenance are sent to be managed by third parties. Some problems of this practice are: the differences between time zones of those involved and language and cultural barriers. Highly sought after in this environment, India stands out for the quality of the IT services provided and for the fact that a large part of the population is fluent in English.

Nearshore Outsourcing: As the name implies, Nearshore is the allocation of some type of task to be performed in a neighboring country or nearby region. This method ensures greater practicality, since the services will be performed in a place with a culture, language and time zone similar to that of the country that houses the contracting company. An example of this is that in the 1990s, Canada began to perform various services required by US companies.

Onshore Outsourcing: Onshore Outsourcing is the type of outsourcing of a service with the least probability of the problems mentioned above (language, culture and time zone) occurring. This is due to the fact that the outsourced tasks will be carried out by companies of the same country, state or even city as the company that is hiring. This practice offers fewer risks, however, it is possible that the contracted company may learn to manufacture such technology and become a competitor of its contractor.

Advantages of Outsourcing

Predictability

Costs are more predictable when you outsource. For example, when you use a hosted server, it offers to fix expenses in predetermined amounts every month. There are no maintenance or equipment costs.

Proficiency

The most popular reason to outsource any project is to have access to expert knowledge and experience that current employees may not offer - without the need to invest in lengthy training and learning curve of a large number of employees.

Access to global resources

Outsourcing can help companies expand their boundaries by connecting the best experts in various fields in many places around the world to the project - without physical, zone or language barriers.

Economy

Outsourcing can dramatically reduce costs. According to research, over 80% of companies with only a few employees would save huge sums just by outsourcing email management! Now think about this on a much larger scale. IT companies have the ability to offer access to equipment and services at much lower costs than the amount you would need to invest to have it on your own.

10 Best Practices for IT Outsourcing

Determine the right project

Not all projects can be "outsourced". Outsourcing works best when your project has specific requirements or is not related to your core business.

For example, many companies turn to cloud services like Google Cloud and Amazon Web Services to host their websites. The company may excel at creating web applications, but lack the resources to manage a hosting environment.

Instead, they hire cloud service providers to provide and maintain the infrastructure for them. This gives them the benefit of a professionally maintained environment without the cost of maintaining their own systems.

Outsourcing should leave your team free to focus on what they do best, as well as allowing you to deliver your project faster.

Have a clear plan

Have clear objectives and a clear timeline. This gives you more control over your project. It also allows suppliers to create realistic bids.

The more information you have, the easier it is to estimate the size and cost of the project. And by creating a good plan at the beginning, you'll always have something to guide you should you end up going off track during the process.

Choose a supplier you can trust

Choose a company you're comfortable sharing relevant business information with so that progress walks on the foundations of trust.

Select a provider who understands your industry. They should also be fully aligned with your goals and business culture. The more they understand your needs, the smoother the project will go.

If you're still in doubt, consider starting a small test project. This allows you to work together without jeopardizing your main project.

Have a dedicated team

For large, long-term projects, it's important to have dedicated resources.

Many suppliers charge using the Time & Material model. The problem with T&M is that the service provider can switch developers to different tasks based on availability.

This is great for the company, but it means the team is constantly changing. And constantly rotating new developers takes time and money.

Dedicated teams provide a consistent team for the life of the project. Although initially more expensive, you reduce training and onboarding costs. Developers need to be introduced to the project only once. The result is a team that understands your project end-to-end.

Be agile

Agile methods are the leading approach to software development: according to the Project Management Institute, 71% of organizations use Agile. What's more, Agile projects are 28% more successful than traditional projects.

Agile development is done in several short iterations. Each iteration lasts just a few weeks and involves creating, testing and releasing improved versions. Now, compare that to traditional development, where each new version of the same product/service can take several months.

Agile allows you to implement new changes with greater flexibility and speed. Companies as large as Microsoft have found success with agile in everything from small internal projects to enterprise-level projects. And despite its flexibility, many vendors offer agile at a fixed cost.

Don't base your decision on price alone

Many companies turn to outsourcing to cut costs. And while it's a more cost-effective model, that shouldn't be your only argument for deciding to invest in this modality.

The key is to find a supplier that is cheaper than an in-house team, but offers the same quality of delivery and level of expertise.

It can be a difficult balance to find, but remember: you get what you pay for.

Many long-time supporters of outsourcing recommend creating a list of options to then discard the lowest price - and the highest. Only then choose from the remaining options according to your budget, requirements and expectations.

Outsource research and development

Many companies research and develop products in-house to retain ownership of the intellectual property of the solution. But R&D is a complex area and, without the right resources, companies can spend more time and money on solution validation research than on building the final product itself.

R&D outsourcing provides companies with the tools, technologies and expertise needed to get to market faster.

One popular option is Captive Units, dedicated R&D centers that provide a complete structure - facilities, staff and managers. Ukraine is one of the leading providers of such units, with a market valued at US$3 billion.

Document Everything

Document every stage of your outsourcing initiative, including deliverables, revisions, project plan changes and updates. This helps you track your progress and provides the information you need to keep up after the contract ends.

Documentation doesn't need to take on a specific format and can be done by archiving emails, meeting notes, manuals, bug report submissions and even code improvement comments. The important thing is to have a record of what was done on the project - and when it was done.

Communicate clearly

Nothing is more disastrous for a collaborative effort than not communicating. Communication keeps both parties involved and aware of project updates.

This can be difficult during the outsourcing process, especially if teams are in different countries with differences in language, work culture and time zones. However, the success of the project depends entirely on communication. Obstacles, development issues and requirement changes can have devastating effects on a project if not communicated quickly and clearly.

With the tools and technologies available today, there is no reason for teams not to communicate. If you can't schedule a face-to-face meeting, make a call, send an email, set up a chat room, or use online communication aggregator tools.?

Even if another company is working on it, this is still your project and you should treat it as if it were being done in-house.

Constantly track the progress of your outsourcing team. Use tools like JIRA, Trello and Slack to monitor changes, updates, goals and comments from the team. Review deliverables frequently and don't hesitate to contact the vendor with questions.