Category: Outsourcing and Offshoring

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Outsourcing and Offshoring

How to Come Up with an Effective IT Outsourcing Strategy for Your Business

Effective IT Outsourcing Strategy

Many companies consider outsourcing an effective strategy to manage their ever-growing and evolving IT landscape. And, it isn’t for no reason that they look up to outsourcing. IT outsourcing can help companies save up to 35-40 percent of their overall annual IT costs when planned and executed meticulously. That translates to millions of dollars retained and increased profitability in the long run!

But IT outsourcing isn’t as straightforward as it may appear. It isn’t a tactical move but a strategy that requires a thoughtful approach and the time and effort spent in pre-planning and identifying what matters. If you’ve decided to outsource IT services to an IT outsourcing company, ensure you plan the strategy well and make decisions that deliver tangible results. Here are some guidelines that can help.

5 Guidelines to Create a Useful IT Outsourcing Strategy

Here are some elements to factor in while devising an IT outsourcing strategy.

  1. Identify What and When to Outsource

When it comes to IT outsourcing, you don’t have to outsource anything and everything necessary. Some aspects of your IT infrastructure could be very well managed in-house, and you wouldn’t have to outsource them. Accordingly, assess your existing capabilities, infrastructure, challenges, pain points, unrealized financial losses, etc., to know which all aspects of your IT infrastructure to outsource. It will help you precisely outsource only where you need external help and retain the rest with yourself.

Now, when should you outsource IT functions? You could feel the need to do it on various occasions. For instance, you may outsource it when managing IT in-house is stressing your full-time resources, when the in-house IT management costs have blown out of proportion and taking a toll on your profitability, when you want to focus on the other equally crucial aspects like expansion, scalability, collaborations, etc. 

  1. Define Your Outsourcing Goals

Saving IT costs isn’t the only reason companies outsource. There could be many other goals that could drive the decision. Some other purposes could be establishing new services to bring in new clients, expanding current services to retain the existing ones, onboarding better technologies, achieving IT excellence, and ensuring IT compliance. 

Once you identify your actual outsourcing goals, identify the measurable goals. The more defined your goals, the better your outsourcing choices and strategy. 

  1. Understand Outsourcing Risks

Outsourcing is a globally tested and proven strategy. But it carries some potential risks, which you, as the company looking to outsource IT services, should know. Some possible ones could include inexperienced and inadequate staff managing your IT infrastructure, a poor or unresponsive support team, various hidden fees that could add to the outsourcing costs, compromised security, non-compliance, etc.

Of course, that doesn’t mean you shouldn’t outsource IT. It refers to being more careful and addressing these concerns before you sign the final documents. Planning SLAs carefully and ensuring the proper measures, penalties, and strict control over the outsourcing project is necessary while handing over your IT operations to an external team. Thus, you must choose a reliable, credible, and proven IT outsourcing company.

  1. Evaluate the Various Outsourcing Engagement Models

Over the years, outsourcing has evolved significantly to let multiple outsourcing engagement models emerge. You can leverage these models to achieve your outsourcing objectives. Some engagement models include the following.

  • Staff Augmentation: Recruiting external resources and looking after specific IT tasks while following your instructions and SLA clauses.
  • Dedicated Team: Hiring external people to extend the capacity of your in-house team. It refers to complete outsourcing without any in-house intervention. 
  • Project-Based Model: Outsourcing companies exercise complete control over a particular project from its beginning to completion.

Your prospective IT outsourcing company should decipher your needs and objectives and help you choose the suitable outsourcing model.

  1. Weigh Your Existing IT Management Against Outsourcing Costs

Outsourcing is considered a cost-effective strategy. But not always! At times, the various fees and factors involved in outsourcing could make it costlier than insourcing. To avoid letting that happen and stay alert about it, you must have a comprehensive report and breakup of your in-house IT management costs. 

Once you have that, you can ask for a detailed outsourcing cost breakdown of various outsourcing models and identify what’s more commercially viable.

Are you looking to outsource your IT functions? Partner with Techcedence. We are an IT outsourcing company of global repute and track record. While offering end-to-end IT outsourcing, we can also help you with consulting solutions that enable you to make informed and commercially more beneficial outsourcing decisions. Please write to us at sales@techcedence.com. Our experts will connect with you to take things ahead.

Categories
Outsourcing and Offshoring

Pros and Cons of Offshoring

offshoring

As an entrepreneur, you must have heard about offshoring. It involves relocating a company’s operations fully or partially to a foreign country. The most obvious benefits business owners expect from offshoring are reduced operational costs and increased profitability. And many companies have been successful at it! 

However, as someone eyeing offshoring, you must remember that offshoring is a strategic decision that involves a considerable investment. Hence, while focusing on benefits, you must also be cognizant of its cons or challenges. Knowing the pros and cons can help you optimize the benefits and mitigate the risks that offshoring could pose. Here’s a blog that talks about both.

4 Pros of Offshoring

Let’s start with the pros of offshoring and then proceed also to review its cons.

1. Considerable Cost Savings

As indicated earlier, this is the most significant benefit. Companies that plan every aspect of offshoring and partner with a reliable offshoring company save money and simultaneously augment their profits.

Usually, it is developed countries like the US, Canada, the UK, Australia, France, Germany, etc., that offshore their operations to developing countries. 

But the country of operations undoubtedly matters. It usually includes India, China, or the Philippines. These countries have relatively less expensive labor. In addition, the operational costs also are comparatively less there.

Per experts, offshoring your operations, for instance, software development can result in about 15-20 percent cost savings. The percentage could mean millions for companies with a significant business volume. 

2. 24/7 Operations

Offshoring proves to be a prudent idea for companies, for 24/7 operations aren’t feasible on their native soil. For instance, a US company offshoring customer support to a firm in India can reap the 24/7 operations advantage without engaging any local resources for it. Thus, with the required training and infrastructure, companies can provide round-the-clock services to their clients. 

3. Broadened Access to Expertise

Offshoring to a foreign country allows companies to leverage access to a broader range of talent – precisely skills absent or very expensive in their country. 

When it comes to IT offshoring, countries like India prove to be very useful. They have abundant skills available across the IT domain. It includes developers, testers, project managers, consultants, cybersecurity experts, and many more. 

While it isn’t that developed countries, do not have experts in these areas. They come at a relatively high cost tethered to them. These costs could collectively add to the project’s cost and affect profitability. 

In addition, offshoring provides a higher degree of flexibility and scalability. Working entirely with in-house resources doesn’t offer that advantage. Screening, hiring, interviewing and onboarding are arduous tasks that could pressurize companies, given project exigencies.

4. Focus on Core Business

This is very obvious. Companies that do not have expertise in a particular area might struggle with every aspect of it. But offshoring allows them to stay relieved about the operational aspect. They can focus on their expertise and the things at which they are the best.

4 Cons of Offshoring

Let’s now look at the flip side of the coin. Knowing a few challenges of offshoring can help you prepare and plan for them. Here are four of them.

1. Cultural and Language Barriers

This could be the first roadblock to seamless offshore operations. While language is one challenge, cultural differences could quickly escalate if not addressed proactively. Thus, it is imperative for both parties to understand each other’s culture.

Thanks to globalization. Things aren’t as complicated these days. People have the internet to study each other’s culture and language. Many companies send their employees to the client’s country to learn about operations and the client’s culture to avoid unnecessary conflicts. 

Virtual learning has further simplified communication. The entire team can attend virtual sessions and learn about cultural aspects and nuances from the client.

2. Reduced Operational Control

Another significant potential disadvantage of offshoring is reduced operational control. We say it is potential because it isn’t the case with every offshoring project. Some amount of control (routine decisions and operations) surely remains with the vendor company. But yet, clients can still prepare agreements that allow them to pull the strings and drive the project.

Thus, it all depends on the contractual terms and conditions. In most cases, clients retain maximum control to steer the operations based on their needs.

3. Jobs Exported to Other Countries

Many consider offshoring detrimental to a particular country’s jobs. The larger the operations, the higher the number of jobs exported. While it is beneficial for companies within their context, a greater number of companies doing it can significantly affect the country’s employment landscape.

4. Payroll Complications

Payroll is a complex aspect to deal with, no matter the country involved. When you offshore operations to another country, you introduce a wholly new set of payroll laws, rules, and regulations into the picture. Not having the right offshoring vendor can make things even more complicated and lead to pecuniary repercussions in the form of fines. Let alone the loss of reputation!

Are you looking to offshore software development in India? Consider Techcedence. We are an experienced technology partner with the resources, expertise, and experience handling offshore IT projects for various countries worldwide. Our consultants provide their strategic know-how and help you plan the offshoring operations to minimize risks and help you achieve a higher return on investment. Please write to us at sales@techcedence.com to know more.