How to Build an Outsourced IT Department, Cut Cost, and Maintain Quality
A recent study by Forbes 5000 shows that almost 57% of companies are using IT Outsourcing Services to hire remote developers. But did you ever think, about what makes IT Outsourcing so much popular? Don’t worry, we will discuss every point about IT Outsourcing in this blog. Not only this, we will also provide some tips to be kept in mind before outsourcing any IT department to meet your Software Development needs.
It’s always said that “Clear your basics before moving to the technicalities” so let’s first understand what is IT Outsourcing and why is it needed.
IT Outsourcing: What it is and Why is it needed?
When any company comes across the need to create new software to scale or support digital solutions, then it has two options to choose from. The first is, they can hire an in-house team to meet the client requirements, or second, they can hire a dedicated Outsourced IT department/ Outsourcing IT Company, etc. to outsource all the development processes of a Software.
To summarize, “IT Outsourcing is a hiring model where the company hires an external third party service provider for meeting their software development needs, scaling, or support.”
Now let’s learn about a few advantages that IT-Outsourcing provides to the company
IT Outsourcing and its Pros
It provides flexibility:- Outsourcing allows you to quickly deal with IT tasks and workloads. The best thing about outsourcing is that it allows you to fire and hire an external team anytime, without putting in any long-term commitment.
Focusing on the core business:- By outsourcing some projects, you are making way for the right bandwidth which will help you focus more on the core business activities by delegating the tasks to external resources.
Managing the risks:- When you team up with full-service IT companies, they often agree to share the responsibility if there are any problems with their services. They also typically offer help in case of disasters and make sure your data stays safe. It's a good idea to talk about these things and include them in the agreement when you sign up to work together.
After understanding what IT Outsourcing means and why it is important let’s understand the goals behind building an IT Outsourced Department.
Four Major Goals of Creating an IT Outsourced Department
Let’s understand some goals that a company chases to achieve by hiring a dedicated IT Outsourced Department. According to a study presented by the Deloitte Global Outsourcing Survey, 70% of companies have a primary goal of achieving financial gain but it’s not the only goal.
There are four more goals which an organization looks to achieve
1 Gain access to World's best talent and the best technology:
Do you want to hire a seasoned and skilled IT specialist from a developed country like Japan? Then, it is definitely possible as a service provider can help you find the best fit for developing a software that meets your client requirements from any corner of the globe.
2 Saving Money:
There are many ways to save money on outsourcing:-
By hiring an external team you will have to pay only for the work that they will be doing or the hours they have worked for. Nothing extra will be paid.
You do not need to spend money on having an office space, training etc.
Hiring IT Outsourced Specialists from a country that are highly skilled but are available at a cheap rate i.e. from a country like India instead of hiring them from a country like the United States or Germany.
The hired professionals would already be using professional tools, so by hiring them you would not have to incur the cost again.
3 Delegating a particular task:-
Although you are having a full time on-site team of developers, still there would be a situation where you would want to hire a freelance developer to meet the excessive workload. That’s when you would hire a freelance resource to meet the deadlines by delegating the whole extra project to them.
4 Increasing the speed of Development:-
The Deloitte Global Outsourcing Survey highlights that 20% of companies utilizing outsourcing services prioritize achieving a specific goal. Streamlining software delivery is a key focus, and various factors contribute to expediting this process:
Efficient Onboarding:- Industry experts require minimal onboarding time, ensuring a swift integration into projects.
Advanced Technology Adoption:- Skilled professionals are inclined to leverage cutting-edge technologies, enhancing the speed and quality of software development.
Performance-Driven Motivation:- The pay-for-work model incentivizes developers to work efficiently, fostering a results-oriented approach.
Moreover, technical outsourcing plays a crucial role in mitigating risks associated with new digital solutions. Engaging specialists with extensive experience provides insights on optimal implementation methods, contributing to project success.
Explore the opportunity to hire seasoned developers for your project. Access professionals at competitive rates, ensuring a cost-effective approach to achieving your software development goals.
Now, let’s understand the models and type of IT Outsourcing available in the market
After making your mind about hiring outsourcing development services, the next question in your mind would be should we hire the services from abroad or from the local geography, should we hire a company or a dedicated resource or IT Outsourced professionals.
There are mainly three types of IT Outsourcing models
Choosing the right outsourcing service provider is a critical decision that hinges on various factors, including geographical location. Each outsourcing model—Offshore, Nearshore, and Onshore—comes with its own set of advantages and drawbacks, catering to diverse business needs.
1. Offshore Outsourcing:
Offshore outsourcing involves hiring specialists located in a different country or even a different continent. The primary advantage is the cost savings, as skilled professionals from regions like Eastern Europe may offer services at a fraction of the cost compared to their counterparts in the United States.
Additionally, offshore outsourcing provides access to technologies and talents not readily available in the client's home country. However, challenges such as time zone differences and potential miscommunications due to cultural nuances may arise.
2. Nearshore Outsourcing:
ing entails hiring developers from neighboring or geographically close countries. This approach allows businesses to tap into top-tier foreign talent and leverage advanced technologies without significant communication barriers.
Choosing nearshore outsourcing strikes a balance between cost-effectiveness and easier collaboration, making it an attractive option for businesses seeking global expertise without the challenges associated with offshore arrangements.
3. Onshore Outsourcing:
Onshore outsourcing involves hiring developers from the client company's own country. The primary advantages include a shared work schedule and a similar work approach, fostering easier collaboration and communication.
However, onshoring may limit exposure to diverse experiences and innovative technologies that are more readily available in the global market. The cost factor may also be higher compared to offshore or nearshore options.
What are few Considerations for Decision-Making to ease the choice
Cost Efficiency vs. Collaboration:- Assess your budget constraints and collaboration requirements. If cost efficiency is a top priority and you can navigate potential communication challenges, offshore outsourcing may be suitable. For a balance of cost-effectiveness and easier communication, nearshore outsourcing could be the middle ground. If a shared work culture and immediate collaboration are paramount, onshore outsourcing might be the preferred choice.
Technology Access:- Evaluate the specific technologies and skill sets required for your project. Offshore outsourcing might provide access to unique talents, while onshore outsourcing may limit exposure to diverse experiences.
Project Complexity:- Consider the complexity and criticality of your project. More straightforward tasks may be suitable for offshore outsourcing, while complex projects may benefit from the closer collaboration offered by onshore or nearshore outsourcing.
Ultimately, the right choice depends on your project's unique needs, budget constraints, and the level of collaboration essential for its success.
There is one more type of classification for outsourcing by cooperation model which is as under:-
Team Expansion:- This approach involves adding external team members to your existing in-house development team. It's a smart move when you lack specific expertise internally or need extra hands for sizable projects.
Project Outsourcing:- Here, the entire project is outsourced to external developers. The outsourcing provider takes care of assembling a complete team and manages all stages of product creation. The client can either oversee the project directly or keep track of progress through a designated project manager.
Managed Services:- This method involves bringing in external specialists to work with your in-house team. The difference from team expansion lies in the level of collaboration – with managed services, the hired personnel works independently under the management of the outsourcing provider.
Choose the model that aligns best with your project's requirements and your team's capabilities.
After knowing the types of IT Outsourcing let’s understand what are the tasks that you can outsource by hiring a dedicated Outsourced IT Department.
IT Tasks that can be Outsourced
There are numerous IT tasks that can be outsourced but we have highlighted the most popular categories below
Mobile and Web Development:- Companies that provide services for creating software handle everything from planning to support. They can find the right people for tasks like analyzing needs, designing, developing, and maintaining the software. You don't have to commit to building the entire app at once; starting with a basic version (MVP) first can lower risks and costs.
Quality assurance:- As people expect better software, developers are focusing more on testing their digital solutions. Any IT Outsourcing company can handle the quality checks at every step of making a product. They can even use automation to make sure everything works well.
Design of user interface:- A user-friendly app interface attracts the users and this attraction will not let go to your competitors. By hiring an outsourcing company you can have the best UI/UX team at work to meet your project deliverables on time.
Post release help and support:- This is the most important point of consideration. After the successful delivery of the project the next step is after service support and this team of specialists can also help your company by using their skills to provide the most efficient after service support to the clients.
Getting help with IT decisions: Sometimes, companies don't know exactly what they want for their future product or how to make it happen. Outsourcing service providers are there to offer expert advice and guidance.
Making things efficient with DevOps: More and more developers and clients are liking the DevOps method. This way of working makes creating and running software better by using automation to connect and streamline different processes.
The biggest advantage of IT Outsourcing is that it enables you to choose which service you want to outsource from external specialists.
Now, you know what is IT Outsourcing, its types and also which are the services that can be outsourced from external service providers. But, now the real question arises i.e. “Where do you start?”
To answer your question we have prepared a detailed guide for you which will help you to understand the whole process in-depth.
Access your needs and resources:- The first step is to analyze what are the tasks that your team cannot perform, this will help you fulfill the skill gap for that particular task.
Hiring a technical manager for your team:- You do not have the right knowledge about software development? Then, hire a project manager who will manage your team and will also help you decide which outsourcing model to use and later on, will also help you reduce the risks.
Set your goals for Outsourcing:- Identify which goals you want to accomplish by hiring an IT outsourcing team. Based on your goals, the external supplier will help you find the best remote team to meet your requirements.
Creating the budget of the project:- Incorporating hidden costs is important for efficient project planning. The goal is to avoid unforeseen circumstances, such as the sudden need for additional specialists or the necessity to upgrade existing ones midway through the project. Reputable outsourcing firms will analyze and account for all potential expenses in advance, ensuring a transparent and well-managed project budget.
Outlining the desired results:- Before hiring the external partner you need to decide what you want to achieve by working together. Based on this your next step should be to choose the right fit which meets your requirements.
Choose your outsourcing company:- After ticking off all the pointers, the last step in the process is to choose the best software outsourcing company to delegate the work. There are a few considerations that you need to keep in mind in order to make the final decision at this step. Consider the below parameters to choose the best IT outsourcing company.
Cost Services:- Hiring a new team midway can result in loss of time and resources, before finalizing the vendor make sure to get quotations from several service providers and compare them before making the final decision.
Technology knowledge and industry experience:- Only having technology stack and knowledge is not important, the external developers should also have the right knowledge and experience in working with the desired industry.
Company experience:- A company that has years of experience and dedication in completing projects on time can provide the best bench resources that will fully meet the needs of your organization.
Reviews and Portfolios:- Asking the potential partner to provide all the testimonials of their past work, case studies reviews or speak to colleagues or peers who have worked with them in the past. Try to collect as much information as possible in order to find a cons about the work deliverables.
Communication style:- This is the most important parameter to consider while hiring an external team. The first conversation with the potential partner will give an idea about the work commitment and sincerity they hold. The number of days they are taking to answer your mails and queries shows their sincerity and dedication. Not only this, also look at the tools that they are using for communication as using proper tools can help you bridge the communication gap.
Considering these parameters will help you in finding the most suitable external partner to meet your development needs.
Despite so many advantages there is always room for possible risks and drawbacks to occur. While in the process of onboarding the best fit also do not not forget to evaluate the below mentioned risks.
3 Possible Risks you should be aware about
To avoid potential problems in outsourcing, it's crucial to think about possible risks and take steps to minimize them. Here are a few things to consider:
1. Limited Control Over Development:- When working with remote teams, especially in different time zones, it can be challenging to oversee the development process. To tackle this, make sure you have effective communication channels and regular check-ins to stay on top of things.
2. Security Concerns:- Protecting sensitive information is vital. When outsourcing, discuss and document all potential risks with your service provider. Besides a Non-Disclosure Agreement (NDA), you might need additional agreements, such as a Data Processing Agreement, especially if you're working with European Union countries, to comply with data protection regulations.
3. Choosing the Right Outsourcing Provider:- To avoid working with an incompetent outsourcing service provider, follow the guidelines provided in the "Choosing an outsourcing company" section. This ensures that you partner with a reliable and skilled team.
Remember, the steps for building an IT department can vary based on your project's type and size. The tips mentioned here are fundamental and serve as a helpful guide to successful outsourcing.
Summary
Let’s run a quick summary to understand “How to Build an Outsourced IT Department, Cut Cost and Maintain Quality” in brief.
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