For years, IT outsourcing has been the main strategy to obtain a high-quality product or service at a fraction of the cost. Currently, there are established IT outsourcing heavens in Eastern Europe, Asia, and Latin America, to name but a few places.
But what is actually IT outsourcing? What are the different types and options to choose from? This article aims to provide the answers to help you devise an outsourcing strategy.
IT Outsourcing Disambiguated
By definition, IT outsourcing involves contracting a third-party service provider to cover some or all of the IT operations within a business. The operations usually include software development, infrastructure projects, management, etc.
The important thing is that the third-party provider is fully accountable for support and maintenance. Professionals in the outsourcing world refer to this as the fully managed service.
On the other hand, there are companies that may opt for co-sourced support. This is usually used by large enterprises. In addition, there’s an in-house IT team that monitors the work of the third-party provider.
An enterprise might choose one outsourcing company that has the experience and the capacity to cover all the IT needs. This method has been tried and tested, but, at the start, it might be better to outsource different IT aspects to different companies.
It gives an organization time to assess the deliverables to determine which provider offers the best solution. Then, it’d be the right time to expand the collaboration and offer the provider more IT-related aspects to handle.
Different Types of Outsourcing
There are five main types of outsourcing – offshore, onshore, and nearshore outsourcing, cloud computing, and managed services. Each option is characterized by certain features, so it pays to take a closer look.
- Offshore – means offloading the IT work to a foreign country (often a different continent). The hotspots are China, India, and the Philippines. And the benefits are tax savings and low cost.
- Onshore – is also known as domestic outsourcing. A company finds a provider within the country to cover the IT tasks. These can be done on-site and remotely.
- Nearshore – involves contracting a company from a neighboring country. In theory, this type of outsourcing should provide easier communication and travel.
- Managed Services – refer to specific IT aspects such as custom VPNs, call and messaging centers, IP telephone lines, and more. Some companies also outsource network reporting and monitoring as well as firewall services.
- Cloud Computing – models such as IaaS, PaaS, and SaaS are the most common Cloud computing services that are outsourced.
IT Outsourcing – Business Benefits
The most obvious benefit is cost reduction. That’s why outsourcing became so popular. However, this business model has become so much more than just a good way to keep the expenses high and margins low.
The outsourcing company may possess the technical expertise, certificates, and gear that would otherwise take months or even years to obtain. Therefore, it’s better equipped for handling IT-related tasks within a certain field.
At the same time, there’s staffing flexibility. An enterprise that opts for outsourcing has the upper hand to employ addition human resources as per seasonal spikes in demand or requirements.
Are There Any Downsides?
Formerly, cultural and language barriers were the biggest enemy of outsourcing. This translated to slower turnaround and, in some cases, the quality suffered.
Top IT outsourcing companies were quick to improve on this. Now different time zones are the biggest enemy. But then, there are business management tools and procedures that minimize the impact of outsourcing in these particular zones. Be that as it may, the trick is to perform thorough due diligence and carefully plan each step to avoid potential problems.
IT Comes from Where?
As one of the most viable business models across different industries, IT outsourcing is here to stay. And the best thing is that it keeps up with the needs of most demanding enterprises. But before you contract an outsourcing company, don’t forget to carefully assess the in-house needs.