The above quote by Singapore’s former PM perfectly summarizes why businesses need to embrace outsourcing. Hence, businesses are embracing outsourcing to leverage economies of scale and trump competition. Market research values the IT outsourcing market at USD 617.69 billion and predict it to grow at 5.48% CAGR to reach 806.53 billion by 2029.
Moreover, outsourcing is no longer limited to clerical jobs. Instead, businesses are increasingly outsourcing niche services like mobile app development, IoT, Data analytics, cloud services, etc. But you shouldn’t outsource just for the sake of outsourcing. In fact, finding the right balance of in-house and outsourced resources is the key to success. This is why businesses should embrace strategic outsourcing.
Why strategic outsourcing? A recent study revealed three quarters or 78% of outsourcing projects are successful. Moreover, the most common causes of failure include-
- Poor communication
- Inadequate project management
- Bad vendor selection
- Unrealistic expectations
- Planning issues
- Micromanagement
- Cost conflict
That is why it is important to have a clear plan or strategy before you begin outsourcing information technology or any other domain. In the following pages we will talk at length about creating an effective outsourcing strategy. But, before diving in, let’s have an overview of the outsourcing market, outsourcing service types, and benefits of IT outsourcing.
Outsourcing Market Overview
According to a study by Market.US, the business process outsourcing market will be worth 544.8 billion by 2032, growing at CAGR 8.5% between 2022-32. Further, 66% of US businesses outsource, helping bring $62 billion in international revenue. The following graph projects the global business process outsourcing market growth of different service types from 2022 to 2032.
Types of IT Outsourcing Services
Outsourcing can be of various types depending on the way resources associate with your business. The variations are-
1. Project based outsourcing.
Depending on the engagement model and outsourcing partner’s location, there can be three types of outsourcing models- nearshoring, onshoring, and offshoring. Under project-based outsourcing, the business offers all project related information to the client and expects them to develop, maintain, and manage the project needs.
2. IT Outsourcing
Commonly referred to as body leasing, this model allows a business to hire specific resources from the client depending on hourly and monthly rates. For instance, Remote Resource TM lets you hire software developers on a full-time, part-time, or ad hoc basis.
The company offers you a vast pre-vetted talent pool of Indian developers to choose from. The hourly wage rate of the developers varies depending on experience and skill level but are always a fraction of local rates in the US.
3. R&D Centre
This concept is also referred to as offshore office. Under this model business open offices at different locations and then hire resources from IT outsourcing organizations to work on their projects.
Advantages of IT Outsourcing
Businesses embrace outsourcing for several reasons. In general, adopting the perfect outsourcing strategies can offer such advantages as–
1. Increased Core Competency Focus
By embracing strategic outsource solutions for your non-core activities you get enough time and resources to focus on your core business. This leads to improvement in overall performance. For example, when you outsource software development to an external organization, you will have more time and resources to focus on client management.
2. Quick Closure of Niche Skill Gaps
A constantly changing technological landscape requires businesses to stay updated on the latest technologies. However, small and medium-sized businesses might struggle to quickly acquire manpower at a heightened cost for niche skills. Opting for strategic outsourcing is the perfect remedy for such exigencies.
For example, businesses can hire Indian software developers from Remote Resource TM to take care of niche functional areas like data analytics, IoT, app development, etc., to quickly close the skill gap. This will help businesses stay ahead of the competition and avoid lagging.
3. Cost Savings
Resources in the US command a fortune for expertise in niche skills. Besides, businesses must also bear logistics, infrastructure, and other expenses. However, you can hire Indian developers at a fraction of the budget. Additionally, the remote staffing organization also takes care of infrastructure, logistics, and other expenses at no extra cost to you.
IT Outsourcing Strategies
The outsourcing strategy is a plan under which businesses determine the functions to keep in-house and those to outsource. Additionally, for IT outsourced services, businesses need to plan, and choose a vendor perfectly suited for the job. Broadly, IT outsourcing strategies are grouped under the following heads-
Professional Outsourcing Strategy
Under this strategy, businesses hire specific resources to fill in niche skill gaps in their in-house talent. For example, if your business lacks software or business app developers, you can hire Indian programmers and fill the skill gap. This will help you stay relevant and offer these services to the client.
Complete IT Outsourcing
Under this strategy, businesses fulfill their entire IT needs from consulting to solutions development and management through outsourcing.
Multi-Sourcing strategy
Under this strategy businesses outsource IT and other verticals. Businesses often work with different vendors for outsourcing specific service verticals. However, remote staffing organizations like Remote Resource TM lets you hire skilled resources belonging to different verticals.
Manufacturer outsourcing
Under this strategy, businesses choose an external vendor to assemble the parts or manufacture the entire product for them. This strategy helps significantly reduce the labor and infrastructure costs of businesses.
Process-specific outsourcing strategy
Under this strategy, businesses outsource a specific function to an external provider that has mastery over it. For example, retail businesses can choose to outsource the delivery service.
Summing up
Outsourcing is the way out for small and medium businesses to trump competition. However, it is always advisable to have a strategy before outsourcing information technology or other functions. In this context, businesses can choose one of the strategic alternatives presented in this blog.
Moreover, for a successful outsourcing outcome, you need to be clear about objectives, select a competent vendor, clearly communicate your requirements, and monitor project progress. Connect with Remote Resource TM to learn more.
