Site icon MWDN OUTSTAFFING IT SERVICES

WHY DO COMPANIES OUTSOURCE IT SERVICES?

The lack of highly skilled specialists necessary for the fastly developing IT sector is one of the main reasons why more and more companies choose outsourced IT support services and software development. 

Just think of it – in eight years, businesses will need but wouldn’t be able to get almost 85 million technical specialists. This lack of labor force, predicted by Korn Ferry, would lead to a huge loss of annual revenue (up to $8.5 trillion). Looks like it’s high time to get better acquainted with the concept of delegating IT services, including software development, to third parties.  

Contents:

WHAT IS AN EXAMPLE OF OUTSOURCING?

Outsourcing is widely used in many businesses, from car manufacturing to software development. You can see what business processes are usually delegated to third parties in the image below.

Global Shared Services and Outsourcing Survey Report

Image source: Deloitte 2021 Global Shared Services and Outsourcing Survey Report

Here are just some of the companies that choose to outsource part of their business processes: 

Along with that, most online shops outsource the development of their e-commerce websites; healthcare providers delegate medical coding and billing to third parties; and almost all banking groups, that want to stay in tune with the times, order financial apps from FinTech outsourcing companies.

One of the most frequent examples of outsourcing in IT is customer support outsourcing. Usually, a company based in a country with a high cost of living hires a company in a country with a lower cost of living. The contractor company then provides the client company with necessary services connected with supporting the IT product. 

Good examples are Google which has representative offices with support teams in almost 60 countries and Microsoft which also delegates the functions of its call centers to third parties around the globe.

Software development is yet another business process that is frequently delegated to third parties. As a matter of fact, according to the Deloitte survey 2021, almost 65% of their respondents choose to outsource intellectual technologies instead of holding a large team of in-house developers and engineers. 

Companies can choose between three main outsourcing models

Outsourcing is also divided into variations depending on the geographical location of the customer and its vendor.

According to the geographical classification, there are three types of outsourcing

Offshoring means that you choose a vendor that is located in another region of the world. For example, you’re an Israeli company that works with a Ukrainian IT partner.

Nearshoring is when you hire a vendor that has its office in a country that has common borders with the country where your business is located. The case would be if a German customer hires an IT vendor from Poland.

Onshoring is a way to delegate software development services to a vendor that is located in the same country as your business. For example, a Congo-based branch of Vodafone getting help from a Congo-based IT company would be considered onshoring.

Overall, India continues to hold a leading position among all the industries that choose to outsource some of their business processes.

Here is a quick glance on top-3 countries for outsourcing composed by Deloitte:

decreasing order of preference

Image source: Deloitte 2021 Global Shared Services and Outsourcing Survey Report

WHAT IS THE MAIN PURPOSE OF OUTSOURCING?

Although its position throughout the years is changing, cost reduction always remains among the top 3 reasons, why companies choose to outsource. Among many others is the scalability of the business, better-organized working processes, flexibility, agility, access to the most innovative tools, and the best-skilled technical talents.

Here are the top 5 outsourcing objectives for 2020: 

Outsourcing objectives

Image source: Deloitte Global Outsourcing Survey 2020

Here is a result of the MWDN survey – three main reasons for outsourcing declared by our customers: 

main purpose of outsourcing

Our customers opt for outsourcing to meet three main goals.

  1. To cut expenses

Our American and Israeli clients note that the salaries of Ukrainian developers are much lower than the salaries of US or Israel-based developers with the same skill sets. By delegating some parts of their business to our country, they can drastically decrease their direct expenditures on labor costs.  

  1. To hire rare talents

A decade ago, businesses used to outsource tasks that required a labor force of low qualification, like assembly lines or call centers. This is not the case in 2022. Today companies opt for outsourcing to hire rare and unique talents that their native labor markets are lacking. Ukrainian developers, particularly those, hired by the MWDN are of Middle to Senior level and have years of hands-on experience with vintage and the newest technologies alike. For this reason, they are in high demand among our customers from Western Europe, the USA, and Canada. What is more, recently we started to hire tech talents all around the globe, which increases our talent pool even more and gives our customers access to even more varied specialists. 

  1. To speed up the time to the market

Our customers state that cooperation with our experts allows them to save time on the development and deployment of their projects. With our assistance, our clients can hire more remote specialists to work on their projects and by getting more experts to work on their tasks simultaneously, they can speed up the time their projects need to get to the market.

WHEN SHOULD YOU NOT OUTSOURCE?

Many companies choose to outsource their side projects while keeping full control over core businesses. Others believe that management and planning are not the things to be delegated to contractors from other countries. However, there are no strict rules about whether you should or shouldn’t choose to outsource any parts of your business.

Here are some examples when a particular outsourcing model is not the best choice for your particular case.

Don’t choose fixed price outsourcing if:

Don’t choose classic outsourcing if:

Don’t choose outstaffing if:

In all the other cases, find your model of outsourcing and enjoy its multiple benefits.

CAN COMPANIES OUTSOURCE THEIR IT PROCESS?

If you have an office with hundreds of employees all working with computers, you will have to manage at least a small department of computer hardware specialists who would assist your workers with desktop setup and repairs when needed. 

For the rest of the IT functions, including

You can easily apply the outsourcing business model by hiring a reliable contractor.

Summing up

 

READ MORE ABOUT OUTSOURCING IN IT DEVELOPMENT AND SUPPORT :

Exit mobile version