Build the Best IT Outsourcing Strategy for Your Business
Quick Overview: IT outsourcing strategy is a long-term plan. It helps decide which IT functions are better to keep in-house and which should be delegated to an outsourcing service provider. The plan allows businesses to cut costs and save time and resources. Most importantly, it prevents companies from making unreasonable business moves. It ensures systematic steps on the way to achieving specific business goals.
Having an ultimate corporate strategy is important for the integral success of your business, right? Companies have been facing uncertainties every now and then as new technologies emerge, and the trends change quickly. To keep up with this competition and to survive in the present market, businesses across industries need to opt for digitization with the aspect of outsourcing. It will help the firms to eliminate risk, enhance their performance, and provide the ultimate experience to the clients and employees.
So, let us walk you through the strategic outsourcing services and look at the best practices for developing a well-performing outsourcing strategy.
On This Page:
- What Are Outsourcing Strategies?
- Things That You Need to Know About Strategies of IT Outsourcing
- Different Types of Outsourcing
- Which IT Services are Outsourced?
- Steps to Develop an Effective Outsourcing Strategy
- Top Advantages of Strategic Outsourcing
- How to Implement the Best IT Outsourcing Strategies?
- How Can Valorwide Help You with IT Outsourcing Strategies?
- Bottom Line
- FAQs
What Are Outsourcing Strategies?
An outsourcing strategy plan puts in front a floor map of how a business hires third-party companies and individuals to perform tasks. On the latter, where most businesses rely on their internal employees, the approach of outsourcing of IT services helps eliminate expenses, enhance productivity, and improve the overall quality of the work. A software development outsourcing company can help you in the best possible ways and will help you eliminate your project risk quickly.
Moreover, the strategy consists of standards, procedures, and regulations that help the business to analyze the factors like who an organization hires and how much it pays them. The organization may employ an individual or a large corporation, depending on its needs. Ensure that you pay close attention to why outsourcing in specific niches like web development or software development outsourcing plays a crucial role and is essential.
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Things That You Need to Know About Strategies of IT Outsourcing
Now that you know what IT outsourcing strategy looks like, let’s not overlook a few things that play a crucial role. Simply put, IT outsourcing strategies need the cooperation of several departments (for instance, legal, HR, operations, etc.)
Most of the time, businesses have a goal set in their mind, which is to get the best technology at the lowest cost. Nevertheless, remember that it can easily lead to failure. And to avoid the same, you must pay attention to certain things. Wondering what are we referring to? Read on.
First, it is essential that you have clear objectives set and you and your team have a clear understanding of the same. Another issue that might arise in external outsourcing is the factor of communication.
As a business, ensure that you make it simple, crisp, and straightforward for both parties to understand the corporation’s requirements, terms, and conditions. Furthermore, the outsourcing industry’s value is estimated to hit $405.6 Billion by 2027; interesting, isn’t it? Also, now that you are already diving into all that you need to know about strategies for IT outsourcing, ensure that you also investigate successful software product development lifecycle.
Different Types of Outsourcing
Outsourcing strategies have grown and developed into different types with specific purposes. To understand it better, you need to know that outsourcing can be classified into different types:
Offshore refers to working with distant countries.
Onshore refers to third-party services that you are looking for in your own country.
Nearshore refers to hiring from neighboring countries.
With these classifications, you need to know that outsourcing strategies are grouped into categories; wondering what are we talking about? Read on.
1. Professional Outsourcing
It is the practice of outsourcing professionals who can fill in the gap and provide you with the services that you need. For instance: your company is looking for skilled mobile app developers, so in such cases, you can consider outsourcing the service and helping the developer to fill in the gap.
2. IT Outsourcing
In this type of outsourcing, businesses use external service providers to effectively deliver IT-enabled business processes, app services, and infrastructure solutions. In today’s world, every small or large business has IT needs, no matter what, right? With the help of IT sourcing, you’ll be able to contact a third-party IT service cost-effectively.
3. Multisourcing
Multisourcing, as the word suggests (multi-sourcing), is one of the best approaches to outsourcing in which IT operations and technology infrastructure are contracted to several vendors.
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4. Manufacturer Outsourcing
It is the process of hiring people outside your company. It is the best outsourcing known to cut down the labor cost. With the help of this outsourcing, you can either get help with assembling the parts or get help with building an entire product.
5. Process Specific Outsourcing
It involves integrating an external service provider with a task it masters. For instance, you can consider contracting a specific company for the delivery service if you are a retail company.
6. Project Outsourcing
This type of outsourcing can be used when you have a project and need help to complete the same. In such cases, you can consider outsourcing your project. It’ll help you save money and use expertise outside the company.
These are the different types of outsourcing that you need to know about. Yet again when it comes to looking for the best or most trusted companies be it for web or software development outsourcing, it gets daunting! So, ensure that you know the best ways to find a reliable software development company as it’ll help you to make or break the deal!
Which IT Services are Outsourced?
Before we start with the outsourcing strategies, let us look at all the services a business can outsource. So, the most widely outsourced services are:
- Application development
- Web development
- Custom software development
- Mobile app development
- Application maintenance and support
- Disaster recovery
- Data cloud storage
- Web security
- Product development
- Database management
- Infrastructure management
- Website or app testing
These are a few IT services that can be outsourced. Yet again ensure that you pay close attention to how you can scale software development team, web development teams, and other such teams in your organization for the best ROI.
Steps to Develop an Effective Outsourcing Strategy
Now let us walk you through some of the best tips to help you craft a winning business strategy, especially for IT outsourcing needs.
Step 1 – Define the Goals of Your Outsourcing
The primary thing that you need to get started with when crafting an outsourcing strategy is setting up clear goals and expectations. Ensure that you clearly define what type of software development you need. Look into the challenges it must solve for your business. It’ll be great if you put all the information in a document to use as a guide.
Step 2 – Create Project Descriptions in Detail
This step plays a crucial role, especially when you are looking forward to coming up with an effective IT outsourcing strategy. Ensure you create a detailed project description that sketches the necessary skills to complete the task.
For instance, as a business, you want to outsource the marketing of new product launches. Ensure you look for critical skills such as in-depth product knowledge, expertise in social media strategies, etc.
With the help of detailed descriptions, you’ll be able to justify the outsourcing to the stakeholders, and they’ll know what you expect from the service. Moreover, you can also provide the desired performance target for the third-party provider. You can add metrics like production outcome or cost-savings.
By setting the criteria of your expectations, you’ll be able to promote open and transparent communication with the team or individual you decide to outsource to.
Step 3 – Plan Your Budget
Budget plays a crucial role, so you must initially set a project budget and payment terms. As a business, you must decide if you pay the party based on production, time-worked, or per-project basis. Ensure you choose a payment schedule, type, and recipient contact information.
Moreover, it is essential to consider all the potential hidden costs and risks that can happen during your collaboration and then plan your budget accordingly. Not to overlook that software development processes can often be very unpredictable. So, it’ll be great if you are ready for unexpected financial outcomes.
Step 4 – Appoint a Manager for Outsourcing
Though on the one hand, where outsourcing helps with the responsibilities of the internal team, appointing a manager for outsourcing is essential. This individual will be facilitating the communication between the company and third-party provider.
With the help of an outsourcing manager, you’ll be able to pay close attention to the project requirements. You can update the internal team and answer any contractors’ questions. All this is doable, and the reason behind the same is that an outsourcing manager is ideally great with communication and project management skills.
Step 5 – Request Proposals
The outsourcing manager can help you by sending the project description to the relevant firms and requesting proposals. With the help of proposals, the companies or individuals can decide which option would be most productive and cost-effective.
At this stage, the businesses can conduct interviews with the contractors. It will help the companies better understand the contractor and how the source can contribute to the utmost goal.
One of the most crucial factors that one needs to consider is where the outsourced work originates. If your business can do without constant supervision, it’ll be great if you consider an offshore firm in a distant country. The reason behind the same is that it’ll offer more affordable rates.
Onshore outsourcing, or outsourcing services to a company in the same country, should be considered if more direct collaboration is required.
Step 6 – Select a Company
After paying close attention to the proposals and conducting interviews, the outsourcing manager can choose the firm most aligned with their organization’s goals. As a business, you can request revisions to the outsourcing terms and finalize a contract.
These stipulations will help the teams streamline and standardize the process. Plus, the company can also use the document for guidelines for future outsourcing contracts.
Step 7 – Analyze the Output
When you complete all six steps, ensure that you monitor the output. Also, pay attention to the processes of the outsourcing company. Get feedback from your employees to analyze if their productivity is improving with the help of collaboration or not.
Determine and evaluate the firm’s work to ensure it meets its standards and complies with relevant regulations. In worst-case scenarios, the outsourcing manager can state the concerns and resolve any issues if the third party cannot meet the company’s expectations.
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Top Advantages of Strategic Outsourcing
When it comes down to niche expertise or in-demand skills, which could be in software development, web development, or digital marketing, strategic outsourcing can help businesses to enhance their operations. Plus, it’ll help you to cut down on overhead expenses. Now let’s walk you through the top benefits of strategic outsourcing.
1. Get Niche Expertise and Strategic Leadership
If you have been facing issues with specific things or have skill gaps between the team, you can consider outsourcing professionals in a particular niche. With the help of their skills and expertise, you will excel at it and be able to quickly fill the gap in the team or an area of need.
2. Focus on Strategy and Core Business Competencies
Outsourcing non-essential projects and digital support services helps free up time, focus, and resources. Keeping in sight the aspect of continuous innovation strategy, the agencies and outsource partners can be simple, “set and forget” for maintenance, monitoring, and general support.
3. Save the Labor and Infrastructure Cost
You’ll agree that good talent is difficult and expensive to find, right? And let’s not overlook the time and energy it takes to ramp up and manage new hires. A partner or an agency will always have the equipment or the technology to plug in immediately, as they are familiar with the current best practices.
Though on the one hand, agencies and outsourcing practice are an expense, yet again, it requires comparatively less investment, depending on the market. Moreover, it is often comparable to or less expensive in monthly billings than hiring a full-time employee.
4. Enhances Capacity, Speed, and Quality
Other than supplementing the existing team, with the help of an IT outsourcing company, you can enhance your current production and scale up and down to meet organizational needs. As the source gets familiar with your organization’s environment, they can plug in seamlessly with the proper scope. Moreover, the outsourced partners are usually experienced in delivering work to the client without organizational distractions and priorities.
5. Better Risk Management
When you try to solve challenges yourself without the help of professionals, there are chances that you will end up making costly mistakes. There are also chances that you might end up hiring the wrong person for your task. Yet again, when you outsource your work to the experts, you’ll easily manage risk across the entire organization.
6. Enhanced Resource Utilization
Several companies out there employ out-of-the-box software and might not take maximum advantage of its use. The reason is that these companies are not adjusted to specific organizations’ needs and goals and cannot be. But, with the help of outsourcing software customization and integrating with third-party experts, you’ll be able to leverage your full potential.
7. Access to Global Knowledge Base
You’ll agree that you cannot be expert and professional at everything, no matter how hard you try! But you can easily access the pool of experts and professionals when looking forward to partnering with various service providers.
These are a few top benefits that come with an effective IT outsourcing strategy. For more insight on the advantages of outsourcing software development services, read our blog and get a better clarity.
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How to Implement the Best IT Outsourcing Strategies?
First, we cannot conclude or put it like there are good or bad outsourcing strategies. The success and win-win situation of outsourcing depends on the number of aspects that every company should look into before they look forward to hiring external services. Here we have put together a few steps that you can follow to ensure that the process can be smooth and successful! Let’s look into the steps right away.
- Ensure That You Outsource for the Right Reasons – Make sure that you do not fall for a strategy that is only cost-driven. Cross-check and ensure that the outsourcing and business strategies are aligned.
- Define Your Expectations – Ensure that you craft a sound business case. It should be able to outline the business value of outsourcing and how the initiative supports your business objective.
- Put Together the Documents – To make the collaboration between you and your outsourcing partner work out, ensure that you prepare all the relevant documents and requirements needed to proceed with the development immediately.
- Pick Up the Right Vendor – Ensure and cross-check that the vendor can suit your requirements and complete your tasks of any complexity.
- Build an Effective Contract – Ensure that your contract reflects the strategic goals and defines the expectations of the vendor and the company.
- Track the Process – This one plays the most crucial role. So, ensure that you are getting what you are paying for. Reporting and transparency in the project are critical. For the same reason, it is highly recommended to clearly define your KPIs and ensure that everything is done in a very timely manner.
How Can Valorwide Help You with IT Outsourcing Strategies?
As a leading software development outsourcing company, our professionals can help you with outsourcing strategies. Our diverse tech expertise offers the ultimate edge with an excellent resource pool that will enable faster time to market. With 23+ years of experience and 4200+ successful software development outsourcing projects, our professionals offer the best outsourcing services.
Our professionals understand your unique business needs. They will craft ultimate solutions to help you accelerate your software development process. Moreover, we understand how difficult it becomes to cope with cultural differences and provide the desired results. For the same reason, our professionals understand how important it is to master cultural differences to ensure offshore outsourcing success.
Conclusion:
By now, you must have clarity and a better understanding of outsourcing, right? You must be well versed by now that it is one of the best and most cost-effective solutions, especially regarding software development and digitization initiatives. For professional help, you can rely on an offshore software development company and get the best help.
To make your journey and collaboration with your chosen IT outsourcing partner, ensure that you take your time for the preparation stage. Also, with the help of clarity and an effective outsourcing strategy, you can make your staff augmentation initiative successful. It will help you to bring 2X business benefits with ease.
If you have been looking for a skilled development team to help you get started, then Valorwide is your one-stop solution for the same. Speak to our experts now and find out how our outsourcing services can benefit your project.
