Best IT outsourcing strategies for businesses

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“If you deprive yourself of outsourcing and your competitors do not, you are putting yourself out of business.”

Lee Kuan Yew (Former Prime Minister of Singapore)

Modern businesses have started confronting uncertainty as new advanced technologies emerge and blend with everyday lives. From startups to full-fledged enterprises, every business is looking to digitize its process using top-notch outsourcing strategies. Outsourcing is a great way to help your business at various growth stages. In order to maintain consistent sustainability and productivity, every company must find a balance of in-house and outsourced resources.

According to the recent Gartner forecast, worldwide IT spending is projected to total $4.5 trillion by the end of 2022, a 5% increase from 2021. Strategic outsourcing services, which include consulting and management solutions, are expected to have the second highest spending growth in 2022. Moreover, business and technology consulting, a segment of IT outsourcing, is projected to grow by 10% over the last five years.

Here is a table that exhibits IT outsourcing spending by businesses worldwide:

2021 (Spending) 2021 (Growth %) 2022 (Spending) 2022 (Growth %) 2023 (Spending) 2023 (Growth%)
Data center systems 216,337 11.4 226,475 4.7 237,021 4.7
Enterprise software 604,946 14.4 671,732 11.0 751,937 11.9
Devices 787,417 13.0 813,699 3.3 804,253 -1.2
IT services 1,186,103 10.7 1,279,737 7.9 1,391,742 8.8
Communications services 1,444,324 3.4 1,462,712 1.3 1,494,167 2.2
Overall IT 4,239,127 9.0 4,454,354 5.1 4,679,119 5.0

Source- Gartner (January 2022)

With the global adoption of mobile software and app development, cloud services, the Internet of Things, AI-based processes, and enterprise transformation, organizations have increased their reliance on external IT consultants. Businesses that outsource can easily overcome the gap between an organization’s digital business model and its internal resources and capabilities.

Speaking of overcoming digital gaps, it’s high time that every business learns to strategize its outsourcing process. Since the right outsourcing decides the success or failure of your business, here’s an article that familiarizes you with every whereabout of technology outsourcing and tells you why you need to outsource your technology requirements.

Here’s what lies ahead of you:

  1. IT outsourcing business market overview
  2. What is IT outsourcing, and why should businesses invest in it?
  3. Types of strategic IT outsourcing services available for your business
  4. Various outsourcing strategy models you can follow
  5. Business benefits of outsourcing your technical requirements
  6. How to develop the best IT outsourcing strategy for your business?
  7. How can Appinventiv fulfill your IT outsourcing needs?
  8. FAQs on business outsourcing and strategy

By the end of this article, you will be able to embrace a selective approach to IT outsourcing aligned with your business needs. So let’s begin.

Current IT Outsourcing Market Overview

  • Figures estimating the market size of IT outsourcing vary based on what kind of industries, sources and segments are included in the process. All segments and strategy outsourcing segments combined accounted for total revenue of $351 billion in the last quarter of 2021.
  • Moreover, digital transformation and services such as cloud computing and its segments, SaaS, PaaS, and IaaS, are considered the primary objective for IT consulting.
  • Other noteworthy developments, such as advancements in chatbots and support services, automated and Defi payment gateways, business smart wallets, etc., have shaped the IT outsourcing landscape to its full potential.
  • The average spending per employee by businesses that outsource IT services is estimated to surpass over $862.50 in 2022.
  • Apart from global IT outsourcing services, the global ITO (Information Technology Outsourcing) contract value stands at $66.5 billion, while the worldwide BPO (Business Process Outsourcing) contract value stands at $26 billion.

Here’s a detailed graph of revenue generated by the US on IT outsourcing services from the year 2016-2027:

You might also want to know the top 5 revenue generating countries for IT outsourcing services and solutions.

revenue generating countries for IT outsourcing services

Now that we are familiar with the current withstanding IT outsourcing market, we are going to understand what it means to your business.

What is IT outsourcing?

IT outsourcing is the process of utilizing external service providers to efficiently deliver IT-enabled business solutions, software development services, and infrastructure processes for business outcomes.

A successful IT outsourcing strategy helps you achieve vision and growth and structure the best possible business objectives for sustainable services. You can reduce overall costs, accelerate time to market, and leverage technology assets, all when you have the right strategies for outsourcing.

Types of Strategic IT Outsourcing Services Available For Your Business

There are multiple types of IT outsourcing defined by how an where you want to include the resources in your work process:

1. Project-based outsourcing- Businesses popularly know project-based outsourcing as software development outsourcing, Nearshoring, and offshoring based on different engagement models. Here you can provide all project-related information to your outsourced software development company to develop, manage and maintain your project needs.

2. IT Outstaffing- This concept is also known as Body leasing. Under this case of the outsourcing model, you can hire specific resources from your IT service provider based on their hourly and monthly rates.

3. R&D Center- This concept is also called the Offshore office concept. Various businesses and startups open Research and Development centers in multiple locations and hire resources and services from IT outsourcing companies to work on their projects.

Outsourced R&D can help your company with expertise, tools, and technologies to get to market faster. There are certain benefits of IT outsourcing strategies for businesses. Let’s shed light on a few of them.

Business Benefits of Outsourcing Technology Services

IT outsourcing might put in certain challenges and dip points, however, with a right outsourcing strategy by your side, the results can be sustainable and scalable. Here’s what right IT outsourcing can change for you:

Business Benefits of Outsourcing Technology Services

As exhibited above, there are innumerable benefits to outsourcing business activities. Here are some most common reasons why businesses should outsource their technology requirements.

  • Businesses that outsource services are able to enhance focus on variable objectives and goals
  • You get access to world-class business objectives
  • With successful strategies of outsourcing, you can control and decrease your operational costs
  • You can distribute risk between your outsourced company and resources

On top of that, businesses that outsource IT can save dramatically. As per numerous surveys, over 80% of the companies with fewer employees take in significant savings from outsourcing external resources and tools. A good software development company will offer access to equipment and other services at lower costs than your business may incur on its own.

You are also likely to read: in-house vs. offshore, what is the right development approach for your business. If you are still in the dilemma of going offshore, here’s how you can decide.

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When to Outsource IT Services for Your Business

IT outsourcing can be reliable in every possible circumstance. However, the most common reasons why businesses go offshore are:

Budget issues

Most companies outsource IT to small businesses with limited financing to start new projects with skillful resources. You can also choose to outsource when looking for enhanced digital optimization. IT outsourcing services are transparent where you know what you are paying for; hence, you will never be spending extra.

Lack of time

Every project needs to be appropriately managed to achieve satisfying results. If you are already stuck with multiple projects and are not able to deliver your ideas timely, an outsourced software development team can be of great help. Relying on good outsourcing strategies, you can always stay in the loop with your team to get things done.

Security issues

You cannot provide data security and relevance to your project without any experience. Security is the biggest challenge in any software or product development. Only a reliable and experienced software development company can overcome potential data risks by managing resources through standard policies.

Lack of skillful staff

You have a great product idea and a budget to develop it right, but all you need is a skillful team to guide you through the technical journey. The technology gap in companies is a significant issue that can be handled by outsourcing external staff to drive your assets skillfully.

Now, let’s see what IT services you can avail of from your outsourced development company.

IT Services You Can Outsource For Your Business

Right before you build your IT outsourcing strategy, it’s crucial for you to know what IT solutions can be outsourced. This will help you request a relevant set of services from the providers in a shorter time frame.

IT Services You Can Outsource For Your Business

The most widely availed IT outsourced services by businesses are:

Once you validate your outsourced requirements, you are all set to develop an outsourcing strategy that works right for your business.

IT Outsourcing Strategies You Can Follow

An IT outsourcing strategy is a long-term plan that determines which IT functions you can keep in-house and which tasks can be outsourced to cut costs and save time and resources.  Strategies of IT outsourcing are grouped into the following categories:

  • Professional outsourcing strategy- If your company lacks software and mobile app developers, you can outsource the professionals to fill in the gap and offer required services.
  • Complete outsourcing strategy – The strategy to fulfill all your IT needs, from consulting to development and management, comes under full outsourcing.
  • Multi-Sourcing strategy- This strategy includes outsourcing IT along with other business requirements.
  • Manufacturer outsourcing strategy- If you want to develop a product under your brand and just need a provider with all resources and solutions, you can outsource development service providers.
  • Process-specific outsourcing strategy- here, you can outsource a software development company that only looks after a specific process designed by you.

While these were various outsourcing examples and models for strategizing your business needs, here’s how you can build the right outsourcing strategy for the long run.

How to Build the Best IT Outsourcing Strategy For Your Business

IT outsourcing strategies ask for the cooperation of several departments, such as legal, HR, operations, etc., so that you are clear on your requirements and business plan. Usually, businesses have one goal for outsourcing strategies- to get the best technologies and resources at the lowest cost.

Another challenge in external outsourcing is communication. Once you delegate your needs to your outsourced company, make sure you have a constant communication model to get a win-win. What else?

Here are a few standard practices to develop the best IT outsourcing strategy for your business:

Outsource the right resources for the right reasons

Companies usually fall for cost-driven outsourcing strategies where they only focus on the budget factor. If you are looking for successful delivery on all your needs, you need to outsource the right resources skilled with the right requirements.

Communicate what you expect

In a good outsourcing strategy, the company is always clear with its expectations from the external service provider. Develop a second business case that outlines the business value of outsourcing and how it supports your goals. In addition to the case, develop a realistic plan for the end digital product you and your software development team can rely on.

Documentation

In order to attain a successful business partnership, you need to prepare and store all relevant specifications to process development the right way. Make all documents ready and give thorough market research on what paperwork you will need to validate your outsourced team.

Outsource the right service provider

Your outsourced development team should be capable of completing all your complex project requirements within the discussed time period. Make an all-inclusive checklist on the shortlisted companies, check their portfolio or client reviews, and make sure that you have your management team involved in the outsourcing process.

Also, check out: Questions to ask when hiring a development team.

Choose the best engagement model

There are various approaches to collaborating with an IT company, so make sure you research every approach before finalizing the deal. Also, set a limit to the number of financial resources you are willing to allocate to your outsourced development team. Once you decide on your budget, you will be able to choose the suitable engagement model for your team.

Create an effective contract and track progress

Your partnership contract should reflect your strategic goals and the legal basis of your long-term collaboration. Pay attention to every aspect and discuss standard policies of project development with your outsourced team.

Moreover, to ensure you have chosen the right team, keep track of daily progress made by your team. Communicate frequently and define KPIs to get everyone on the same page.

These are the primary factors to keep in mind when strategizing your outsourcing process. When it comes to digitizing initiatives and development, outsourcing is a very time and cost-effective option for any business. Do not hesitate to talk to industry experts and find out more insights.

You may also read- software development outsourcing tips by industry experts

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How can Appinventiv Fulfill your Technical Requirements?

Appinventiv provides scalable custom software development services aligned with your business needs. Our suite of development services includes software consulting services, enterprise software development services, software product development services, software, and API integration services, custom CRM development services, and more.

Our development experts carry the expertise of managing diverse development projects at every level of complexity, making us the right fit for you.

FAQs on IT Outsourcing Strategies

Q. Is outsourcing a good business strategy?

A. Outsourcing is the perfect business strategy to speed up product development, improve efficiency, cut costs and focus on the core competencies of the business.

Q. Which outsourcing model is the best?

A. Multisource outsourcing is considered to be the best outsourcing model since it involves the selection of more than one software development service provider to make sure that each function is given the best possible team. However, for small businesses and startups, project-based outsourcing is considered best where one development team is hired to manage one project at-a-time.

Q. What different kinds of outsourcing services are available?

A. Major outsourcing services available for businesses are:

  • Professional outsourcing
  • IT outsourcing
  • Operational outsourcing
  • Manufacturing outsourcing
  • Process outsourcing
  • Project management outsourcing etc.

THE AUTHOR

Sudeep Srivastava

DIRECTOR & CO-FOUNDER

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