IT Outsourcing Strategies: Types, Their Pros, and Cons

Modern companies are confronted with uncertainty as nowadays, new trends and technologies emerge and change fast. To keep up with the trends and survive competition, businesses that come from different fields, including information technologies, might use outsourcing. It is a helpful way to deal with specific issues and complexities as it has several benefits.

IT outsourcing strategies are key enablers of the sustainable competitiveness of the companies engaged in technology-intensive business. As a result of successful outsourcing experience, the company can reap the benefits of enhanced dynamic capabilities, market-oriented innovation, strategic flexibility, agility, and increased efficiency. The cooperation between outsourcer and outsourcee will result in the development of dynamic capabilities that are related to knowledge management routines such as learning, sharing, integration, and reconfiguration.

In the article, we will define the term “outsourcing strategies”, their types, advantages, disadvantages, and find out which practices are the best.

Outsourcing Strategies 2020

What Are Outsourcing Strategies? The Definition

Outsourcing means finding and hiring a third-party service provider to deal with certain tasks that are beyond the capabilities of the in-house team. Recently, the practice of working with external resources has grown into a trend as it brings a number of benefits to the outsourcers.

Outsourcing strategy is a plan built on the analyses and assessment of the functions that should be better performed by an external service. It means that the company defines tasks that are hard or impossible to perform with its own resources and starts searching for the companies that have all the necessary tools and qualified staff to deal with the task within the stated timeframe.

The same goes for outsourcing IT strategies, as IT companies work in different directions within the field and might not have all the means to complete certain operations or implement new technologies on their own.

Outsourcing Strategies Can Offer Such Advantages As Lower Costs, Higher Efficiency, etc.

The external cooperation brings a number of advantages as the company can build a wide network of competencies linked by outsourcing contracts, from which necessary functions such as raw materials, components, and systems can be outsourced. The company can build strong relationships and partner with external services to work on certain projects or tasks on a regular basis. It gives a chance to exchange knowledge and experience between the companies, to build tight, professional relationships, and develop managerial and communication skills of both teams.

Types of Outsourcing Strategies 2020

In addition to this, the strategies for IT outsourcing bring the following benefits:

  • Cut Costs

It is one of the most prominent advantages of outsourcing. It is common practice to be based in the USA or Western Europe but hire teams or individual specialists from Asian countries, India happens to be the most popular one. There are companies that offer their services at a lower price in comparison with the US and EU companies, but they have proven to be of high quality.

  • Add Up Efficiency 

Outsourcing results in higher efficiency, as you hire experienced teams who can deal with complex tasks and can provide the most effective and suitable solutions for your company. As they have a good understanding of the field and years of experience, productivity, and efficiency increases.

  • Focus on the Task 

Outsourcing services will take care of the issue you are facing at all stages of the process. The CEO and managers of the company would be kept in the loop but they will not be required to perform any of the tasks related to the project. Thus, it gives them an opportunity to work on the other important aspects of your company’s development.

Best IT Outsourcing Strategies

  • No Need to Invest in New Tech Tools 

Outsourcing service takes all the responsibility for the infrastructure and technologies. In most cases, they already have all the necessary tools to work on your task.

  • Skilled and Experienced Resources 

Outsourcing saves your time spent on recruitment and training of the specialists for the in-house team. Companies that provide outsourcing services have highly-qualified, experienced, and educated experts who will be able to complete the project.

It follows that outsourcing is also time-effective, as you do not have to spend years searching for the candidates and growing the specialists you need to support your business growth and development.

As for the disadvantages of outsourcing, you should check the outsourcing service before you have a contract with them. It should be a company with a good portfolio and customers’ reviews. It is recommended to contact previous customers in order to have a better picture of the company and make sure they have a good reputation and provide excellent services.

Types of Outsourcing Strategies: What is the Difference?

Over the years, outsourcing strategies have developed and grown into different types that have specific purposes.

Outsourcing strategies can be divided into:

  • Onshore – you are looking for third-party services in your own country;
  • Nearshore – hiring from the neighboring countries
  • Offshore – working with distant countries

In addition to this, outsourcing strategies are usually grouped into the following categories:

  • Professional Outsourcing
  • IT Outsourcing
  • Multisourcing
  • Manufacturer Outsourcing
  • Process-Specific Outsourcing
  • Project Outsourcing

Different Outsourcing Strategies — Different Goals

Every company that seeks for an outsourcing service should analyze their business processes and highlight an external team should change the functions or operations. Based on the analyses, they will be capable of choosing the right type of outsourcing strategy. For instance:

  • Professional Outsourcing: your company lacks mobile app developers, so you decide to outsource the professionals who can fill in the gap and provide their services.
  • IT Outsourcing: nowadays, small or large companies of any field have IT needs (infrastructure, software development, maintenance, support,etc.). It’s usually cheaper to contact a third-party IT service rather than build your one to deal with certain functions.
  • Multisourcing: this strategy means to hire IT services in combination with other business functions.
  • Manufacturer Outsourcing: if you want to produce products under your brand, you might look for a company (manufacturer) that already has all the necessary equipment and is capable of providing you services.
  • Process-Specific Outsourcing: means to hire an outsourcee that specializes in a narrow or specific service.
  • Project Outsourcing: you have too many projects, and you cannot complete all of them, so you look for a company that will deal with one or a number.

Best IT Outsourcing Strategies

It cannot be said that there are bad or good outsourcing strategies. The success of outsourcing depends on a number of aspects that every company should think of before hiring external services.

Different Outsourcing Strategies

Successful IT Outsourcing Strategies: Steps to Follow

Although IT outsourcing strategies described above have different goals, they all have the same structure. Thus, there are certain steps to follow in order to make it successful.

  • Outsource the right things for the right reasons: do not only fall for cost-driven strategy but make sure that both outsourcing and your business strategies are aligned.
  • Define what you expect: develop a sound business case that outlines the business value of outsourcing and how this initiative supports your company’s objectives.
  • Choose the right vendor: the vendor should suit your needs and be capable of completing tasks of any complexity. Also, do not underestimate your in-house staff and make sure that senior management is involved in the process
  • Create an effective contract: it should reflect strategic goals and clearly define expectations for the vendor and the company
  • Track the process: make sure that you are getting what you have paid for. The reporting on the project progress and transparency are extremely important

These are the aspects that companies should keep in mind in order to outsource external services successfully.

Strategies for IT Outsourcing: Things to Know

IT outsourcing strategies require the cooperation of several departments (legal, HR, operations, etc.), and the outcome depends on unified work and a clear business plan. Usually, organizations have only one goal for this strategy: to get the best technologies at the lowest cost. But it can lead to failure, and it is essential to take into account the tips listed above.

First of all, it is essential to have clear objectives, and your team should understand them. Another critical issue in external outsourcing is communication. Companies should make it simple and clear for both parties to understand the requirements, terms, and conditions of the cooperation.

Outsourcing is cost- and time-effective, but it should not be treated as an easy one. Having a clear and detailed plan for the process will help you make any existing strategy successful and will bring you a number of advantages.

Talk to our experts today to  find out more about the topic and how your business or project can start benefiting from it!

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