Transformation involves substantial changes, in the case of businesses, that are induced, planned, and systematically implemented to achieve certain goals. But what about going further and improving other aspects of the company’s workflow rather than just a digital transformation?
IT outsourcing is an important service used to achieve goals during the implementation of a strategy. However, it takes on more relevance in a new COVID-19 world in which remote working modality is now an alternative that is not soon to end, instead, an open-minded vision and adaptation are required to assume a business transformation in this matter.
According to Statista (2021), the spending on IT services in 2021 is expected to be $1.2 trillion worldwide, which represents an increase of 9.8 percent from 2020, potentially due to the economic impact of the coronavirus. With this scenario in mind, we encourage you to take advantage of an IT outsourcing transformation to face new challenges and scale your business.
What IT Outsourcing Represents for Business Strategy?
Besides being a strategy to add more talent and specific data, IT outsourcing services represent an alternative to fulfilling objectives at certain times during the implementation of a strategy. Through this approach, a company or a project will have the talent and resources to respond quickly and with lower costs.
IT outsourcing involves software, projects, information systems, and staffing services provided by external parties to effectively deliver IT business processes, application services, and infrastructure alternatives based on company or project goals. Thus, in implementing this practice you will count on the website and mobile app development and management, technical support, and database management to mention some of the areas you will be looking to improve on.
In a highly changing market dynamic, optimizing costs means an inversion of resources in other areas or aspects of the market that could significantly change the business processes. You will also need to choose the correct type and model of IT outsourcing regarding your case. In fact, Clutch (2021) revealed that 80% of small businesses plan to implement outsourcing through 2021 to grow the company and save time. The same study shows that the U.S. maintains leadership in the rankings as the best IT outsourcing region in the world.
Offshore outsourcing involves offering services from a distant location, in most cases in different time zones, to increase profits for the company. In contrast, nearshoring provides IT outsourcing services within the same time zone or a few hours apart.
Onshoring is another modality in which businesses are in a different place than the operations center to reduce costs and gain meaningful local skills. On the other hand, multisource outsourcing involves delegating business processes to various third parties to diverge risks.
As with the IT outsourcing models, staff augmentation focuses on hiring top specialists while saving money by not recruiting them through a full-time modality. This model is suggested for short-term projects to stay motivated and onboard your regular staff. Software development companies in USA have taken a major role here by assuming the responsibility of hiring these experts.
You then have project outsourcing that offers a solution that provides exclusive knowledge and experience in case you need it by delegating some functions to third parties. This strategy will better suit highly defined projects that do not represent major changes in their progress. It is preferable for well-defined projects in which major changes are not part of the nature of the project.
Last but not least, a dedicated development center (CDC) model is based on placing resources in a country where the business already has its operations. This implies lower taxes and more talent for the company, which is key to gaining local insights and labor legislation. Implementing this model will give your company a technical and product advisor that will enrich the nature and scope of the company itself and provide it with alternative solutions.
The strategy will also work if you need to significantly recruit a medium number of talents and you can count on IT outsourcing companies to take on the task of reducing hiring risks. In addition, you will need a local company assessment; thus, it would be better if you could find both IT outsourcing services in just one alliance.
What Are the Pros and Cons of an IT Outsourcing Transformation?
Despite the different IT outsourcing types and models, there are major benefits and disadvantages. Here are the pros and cons of using any of those described.
Pros of Implementing an IT Outsourcing Transformation
In general terms, IT outsourcing services also imply access to new specialized talents, skills, and possibilities that were not available in the regular work modality of your business or project. This set of advantages could be limited by the location or more formal work conditions, but there are no major concerns when it comes to hiring third-party services with available external resources.
You can also enter more specialized markets or niches through upscaling knowledge, allowing you to focus on growing business aspects instead of just fulfilling tasks.
Another pro is a major focus on internal resources that could lead to better time management, teamwork dynamics, and task assignments because other duties will be covered by external sources. In this sense, business process outsourcing will also accelerate the process of improving the company’s efficiency and scalability as it shares responsibilities and risks.
As for savings, you can have both in terms of time and expenses. When you do not have a business infrastructure for employees and you do not have maintenance expenses, you will significantly reduce operational costs. Thinking about time, IT outsourcing services are quickly hired because you do not need to take all the related steps to find remote employees, especially if you count on the advice and support of IT outsourcing companies. In some cases, these intermediaries will train the new staff, so you will not have to assume the investment.
Additionally, it is common to have more hands working round the clock due to the time difference between team members. As a result, you will have more flexibility within the process and decisions you make.
As with all IT outsourcing models, the workforce augmentation strategy provides flexibility in terms of hiring and staff numbers. The project outsourcing model provides no micromanagement, but more responsibility on the project manager to carry the planning and execution forward and get tasks done faster. In contrast, the CDC strategy allows more control of processes, no micromanagement, and more intervention from staff to develop a final product that accurately meets the specialized industry requirements and customer needs.
Cons of Implementing an IT Outsourcing Transformation
A time difference can be beneficial in some cases, but it could also affect communication flow and delivery if you do not include management tools or consider the employee’s work environment. Work habits are a matter of concern because they define the quality of work delivered.
While the risk is widespread, control over the business or project is minimal. This difference in standards between businesses and IT outsourcing companies could lead to lower quality and some friction between teams if cultural corporate onboarding is not a consideration. In this scheme, communication could be severely affected due to time zone differences, delays in responses, frequency of meetings, and use of management tools.
A Harvard Business Review (1995) article suggested that the solution, in this case, is to build a measurable partnership. In doing so, both parties have shared goals to develop a win-win arrangement to minimize risks and ameliorate adaptability.
Another major concern if processes are complex or if there is not a Non-Disclosure Agreement or NDAs included is cybersecurity. By using this confidential responsibility and being legally binding in not disclosing your job details, you can reduce the potential risks of others outside the regular team handling data. Consequently, establishing safety standards and implementing certain tools to secure information is necessary during the hiring stage.
In terms of each IT outsourcing model, workforce augmentation has a major disadvantage: the long hiring process if you are on your own and the onboarding takes more time due to an involved corporate culture. In the second model, project outsourcing implies a lack of flexibility; thus, the final product will not necessarily meet industry-specific requirements and customer needs. Mentioning the latest strategy at CDC involves a long and perhaps slightly slower recruitment process, and good leadership is vital to making decisions because it is a more collaborative workflow.
Why Implementing an IT Outsourcing Transformation Should Lead Your Business for the Coming Years
Choosing the right IT outsourcing services and companies represents a win-win relationship with all of the described benefits. But that means more than we could have imagined in 2021 due to a world changed by the COVID-19 pandemic.
This crisis has lit up some of the challenges that we already have, but now they are becoming a need. Thus, remote work modalities, artificial internet, cloud storage, and cybersecurity are now part of the 21 Latest Web Development Trends to Follow in 2021 by Global Media Insight (2021).
By having this kind of assistance, especially during companies’ transition periods, your effort, whether it is a business or a project, will scale up. Instead, you can count on short-term solutions that could be the starting point for more complex alternatives for long-term objectives.
In the past, IT outsourcing was seen as a seasonable or useful resource simply to meet market fluctuations. But when it includes database management, automated processes, microservices, application development and optimization, and multi-platform experiences, it increases the company’s competition and opportunities.
If you are developing an idea, IT outsourcing could mean testing and validation of your project proposal in order to reach an MVP. You can then work on the hypothesis, changes, and final product alongside a more specialized or expert team to meet certain market requirements and needs. This also implies an alternative and less expensive approach to developing and launching a solution.
If you are introducing a startup, IT outsourcing services could represent a faster and lower-cost strategy to build a solid team and, furthermore, an initial product. In this sense, getting a good ROI to reach business profitability in the first year is key to successful market success. Doing so will allow you to invest resources in blindingly large portions of the project as you already count on a highly skilled team to use them in other areas.
Likewise, if you are looking for technical support to implement improvements or add new features to your software services, projects, or information systems, IT outsourcing staff is a good strategical move. This will benefit the project management triangle in scope, time, and cost.
It is important to clarify that IT outsourcing services involve the ability to manage and surf through change. An effective IT outsourcing transformation will involve not only external resources but also internal capabilities. These are more related to making a plan; defining the requirements, goals, and assets; choosing the strategy; implementing the transformation; and measuring the results to gain information and manage changes if necessary.
Software skills like communication, critical thinking, creativity, collaboration, emotional intelligence, flexibility, adaptability, and productivity are key to impulse, maintain, and strengthen relationships with third parties. A SmartSheet article (2021) based on a LinkedIn study mentions that “without a team that integrates these described abilities, managing a change of that scale would be a risky undertaking”.
Finding the Right IT Outsourcing Partner
While assuming new challenges can be difficult, you will no longer need to play your part as a leader. As we mentioned, it is common to count on IT outsourcing companies not only to hire new employees but to implement a transformation on a global level. From planning and hiring to improving your business strategy, do you need advice? Advancio will be your ally in every stage of this process as you understand the business process outsourcing transformation and choose the model that best suits your company.