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Why Outsource? Top 8 Reasons for IT Outsourcing

There has never been a better time for businesses to outsource software development to an expert third party rather than maintaining in-house provision. Gone are the days when outsourcing was associated solely with cost efficiency and cheap labor. Today it is about partnering to achieve a step change in performance and deliver a better quality of service. Neither would be possible without outsourcers offering brainpower, wider technical insights, high-end technology and many other obvious benefits.

So why wait? After all, ‘if you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business’ (Lee Kuan Yew). Here are eight key considerations when embarking on a quest to solve the ‘why outsource’ riddle.

1. Paying Less, Getting More

Getting more quality for less money has always been the primary factor driving companies’ outsourcing initiatives. Building an application involves gathering a whole lot of professionals under one roof – software engineers, application developers, UI/UX designers, QA engineers and testers. No one is likely to master this entire skill set, and hiring the whole range of expertise may cause a serious budget strain.

This is what makes outsourcing software development a significant money-saver. It offers a great price-quality balance given competitive labor rates, an unmatched engineering talent pool and technology acumen of outsourcing tech nations. Not only do vendors deliver top-notch services, they are also able to find excellent solutions to difficult technical issues that call for exceptional competence and innovation.

2. Accessing Brainpower

How do you find, attract and retain truly passionate, gifted and skilled software engineers to deliver your company’s business requirements? One of the most attractive assets of IT outsourcing is a wealth of expertise it provides. Unable to find talent locally or afford expensive in-house resources, organizations increasingly resort to outside agencies to access a broader pool of technical expertise across the globe. Development partners provide their clients with dedicated teams of top quality professionals that would otherwise be unavailable to them. This gives clients an opportunity to benefit from the best industry practices, an extensive experience that outsourced teams already gained on other projects and knowledge honed through decades of partnership with a wide range of agencies and brands.

There is a strong case to be made for bringing in outside experts when a complex technology is involved and specific deep-domain expertise is needed. This is especially true for small and medium-sized enterprises, as outsourcing puts businesses on a level playing field and opens the door to smaller operations tapping into the same best-in-class expertise that larger businesses have at their disposal.

Yet another important aspect to outsourcing partnership is that the third-party knowledge base could augment the company’s own. Outside agencies may take a fresh look at the situation, speak impartially, introduce novel methodologies, bring new insights, and serve as an extension to central teams, thus allowing their clients to get the best of both worlds.

3. Getting More Flexible

As the demand for flexibility and speed is rising, there is a growing appeal of outsourcing for smaller businesses seeking to compete with large enterprises. It allows scaling up to ramp up capacity and downsizing if fewer resources are required, removing internal headcount restrictions, and going to market quickly and efficiently.

4. Harnessing High-Tech

Technology has always been a cornerstone of IT business. IT outsourcing is becoming a major opportunity for firms and organizations to deal with ongoing technological change. Clinching an outsourcing deal with a view to leveraging another company’s technology breakthrough is not a rare occurrence. With leading-edge technology at their fingertips, a multitude of best-of-breed outsourcing providers, assist their customers in utilizing emerging technologies, techniques and practices.

5. Staying On the Cutting Edge

Keeping innovation at its very core is a common boast of technology outsourcing. The rise of state-of-the-art technology has put a lot of new R&D centres on the global map and many more are now popping up throughout outsourcing countries. Rather than simply offering lucrative deals, outsourcing suppliers can create added value for their customers by adopting ground-breaking approaches and driving innovation. Both parties have matured over the years of outsourcing relationships. IT outsourcing companies are under pressure to stay ahead of the curve in a competitive market, so they need to build robust, long-lasting innovation capabilities to be at the forefront of technological advances and achieve innovation success. Meanwhile, it is the sourcing executives’ responsibility to ensure they have the right governance, pricing and incentive mechanisms, adequate skills and effective managers in place. If the two sides adhere to (and act on) these principles and preserve relationship dynamics, this is where innovation endeavours are destined to thrive.

6. Gleaning Strategic Advice

Outsourcing has been traditionally perceived as a necessary evil when dealing with big do-or-die projects or delivering support services. The synergy of outsourcing relationships proves this commonly held misconception wrong. IT outsourcing holds an immense potential for establishing a strategic partnership between software vendors and their clients and can become a real business-builder. Rather than merely performing IT functions on a short-term pay-as-you-go basis, outsourcing companies, by virtue of their unparalleled multi-sector expertise and dedicated customer service, can act as consultants, advising their clients on the most challenging issues and helping them develop long-term business strategies, revisit overall approaches and improve operations.

7. Cutting Overheads

Overhead cost reduction is another legitimate consideration when opting to outsource. Tallying up the overheads, such as hiring, developing and retaining talent, renting premises, buying hardware, investing in the latest technologies, paying hidden costs (pension, sick leaves, vacations), etc. makes the project value skyrocket.

External agencies usually take charge of the whole recruitment process, assemble a tech guru team to get the job done, provide premises, equipment and benefits package to their employees, thus freeing up internal resources to maintain focus on core business functions and enabling outsourcing buyers to sidestep a number of costs.

8. Entering Mature Outsourcing Markets

Building confidence between partners is core to any business. Client companies that enter into outsourcing relationships for the first time may want to see a proven track record of providers that demonstrates their ability to deliver the value that buyers expect from outsourcing contracts. In order to provide the evidence and develop a deeper level of trust, vendors use case studies that show how other clients have derived benefits from that partnership, present portfolios that showcase their software development expertise and create business proposals that offer solutions tailored specifically to clients’ needs. On the other hand, client organizations are elaborating evaluation criteria to identify the best practices, formulate business objectives, consider sellers’ proposals and achieve optimal solutions. The way outsourcing relationships are evolving reveals how mature outsourcing markets have become and how mutually beneficial outsourcing deals might prove in a favourable outsourcing setting.

Choosing to outsource was once viewed as a leap in the dark for businesses. Those who pioneered the industry had a lot of lessons to learn but eventually found themselves on the verge of discovering a whole new business reality. Many companies are still apprehensive to jump on board, but the attitudes are certainly beginning to thaw. IT outsourcing has turned into a common tool, and often a real game-changer, used by multiple organizations throughout the world. It most certainly has the elements to become the most pervasive IT industry strategy.

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