According to Deloitte, 76 percent of IT firms take advantage of outsourcing. There are many reasons why IT companies delegate their tasks to their colleagues that are more often located overseas. Contributor Dmitry Reshetchenko. – Junior Outreach Specialist.
Among the most meaningful reasons, there are cost reduction, competitive advantage, and better customer service. However, the evolution of technology has changed the way companies think about the main benefits of outsourcing. Deloitte Global Outsourcing Survey 2016 compiled a list of most frequent reasons why companies outsource their projects to offsite services providers.
Reducing costs is possible in several ways: lower software development rates, less costly software, hardware, network, and meatware that altogether constitute IT infrastructure and a more favorable tax system in the country where outsourcing partner is located.
Shift focus on major tasks or core business
Often, IT companies seek for a technology partner to delegate them minor tasks like testing, design, or development of a single module while they can tackle more important issues.
Solve problems with performance and capacity
Low performance and low capacity can become one of the major problems faced by IT companies. Thus, they may look for a reliable partner that can accompany them in project management starting from defining initial requirements for the product and ending with the deployment of complex systems.
Improve the quality of services
By delegating minor tasks to offshore developers, IT companies can focus on more important things including optimization of internal business processes. As a result of any transformation, an organization can identify its strengths and weaknesses and find ways to enhance the quality of its services.
Gain business goals
Software development is a very time-consuming process. It engages lots of human resources and efforts. Thus, many companies forget about their initial objectives. However, by using external human capital, they will be able to focus on major things.
Have access to specific knowledge and skills
Software development is a process that is constantly requiring innovation. By searching for new technology stacks overseas, IT firms may acquire innovative skills and advanced knowledge.
Delegate business management authority
Sometimes, when critical situations in management arise, a CEO may want to change the way business processes are managed that’s why they can seek for external professionals who can bring order to the company.
Transform business digitally
This reason is very close to the latter. By using external skills and best practices, IT firms can reinvent their processes significantly. By implementing special software like CRM or ERP, they can improve customer satisfaction, productivity, and performance.
In 2019, we can add to this list such benefits as automation of different processes inside and outside of the organisation. Automation is introduced mainly in organisations which want to better manage repeatable tasks, improve the standardization of process workflow, create a straight-through process.
How to Measure Return on Investment of Outsourcing?
Innovation is what IT companies seek from best countries to outsource software development, however, many of them are unsure how to measure and evaluate the value brought by innovation. To confirm that your outsourcing benefits and goals have been reached, you should know how to measure the value of such a cooperation. Here is a guide to check your ROI:
Learn as more as possible about your existing processes and define your outsourcing requirements. Undertake a cost-benefit analysis considering all the hidden expenditures and qualitative advantages. Discuss the metrics that will be applied to measure ROI with your outsourcing vendor. Carry out a regular ROI audit using as much accurate data as possible.
To understand the expected success, you should conduct a cost-benefit analysis. Considering the cost, you should always check every quote you get for any hidden costs. Also you should learn if the time of cooperation affects the price of the project. For example, long-lasting cooperation may ensure lower hourly rates.
After cost analysis, you should make a list of major benefits of outsourcing and discuss with the provider how these benefits will be measured. Qualitative benefits may include not only financial aspects but also the value brought by innovation, the competitive edge, and other values delivered with the help of outsourcing.
Today, not only big IT companies but also small firms and even startups take advantage of outsourcing. There are many advantages to small and middle-sized enterprises of outsourcing some of their in-house functions including cutting costs and ensuring that back-office tasks are completed by experts in the latest technology trends and legal regulations.