IT sourcing is a fast growing part of the industry, and a solution to scaling problems for companies of pretty much any size. While the benefit of a huge company farming parts of their workload out are obvious, even small companies could be using IT outsourcing to get past some of the challenges they’re facing.
IT outsourcing is a great way for a start-up to scale-up, a company to get access to different expertise, or for a reactive industry to grow or contract along with their product’s timeline.
IT Outsourcing Types and Models
IT outsourcing is a general term, there is quite a bit more variety within it than most would think. Essentially, it is moving work outside of your in-house structure to save money, make things more efficient, or scale faster. However, this can be done in different ways and with different models to achieve diverse goals. These are the main types of information technology outsourcing:
All of these types of outsourcing just refer to where the outsourcing is done. Onshoring is outsourcing in the same country and often close together. This includes ‘homeshoring’, or hiring staff to work remotely. Nearshoring is outsourcing to places that are close by, this gives some benefits with closer time zones and communication. Offshoring is outsourcing to anywhere that is further afield. This is largely what people think of when you say outsourcing, it is the type that typically gives the biggest economic savings.
IT Outsourcing Models
Those types of outsourcing only really address the location that the outsourced staff is working in. The important thing for outsourcing information technology is the model. These are the main models for IT outsourcing and what goals they accomplish:
Model to Implement Defined Scope
This model is outsourcing to implement work that is already planned and defined. It has a lower barrier to entry for your outsourced staff’s expertise since they’re just carrying out instruction. It is essentially delegating the implementation phase, freeing up your in-house team to work on the big picture. This achieves the goal of getting things done quickly and without much prep work when hiring.
This way, IT outsourced tasks can be done through an agency, or it can be organized from scratch. With fewer requirements for those that are hired, it is a simpler form of IT outsourcing to set-up.
Create Product from Scratch
Outsourcing isn’t limited to implementing already defined scope, you can use it to create a product from scratch.
This version puts the entire project into the IT outsourcing process. It will understandably require finding people with greater expertise, knowledge, and authority than those in the implementation model. The upside is that you can delegate even more responsibility or tasks, and get a much bigger financial benefit since less in-house work is needed.
This model for IT outsourcing is harder to organize, so a lot of start-ups or companies choose to use an agency or platform. This helps to cut down on the admin involved in set-up like vetting staff, hiring people, and management. These outsourced IT services are less likely to result in a loss of quality since those involved have been completely vetted.
Uptech are an agency that focuses on this outsourcing model. It can be difficult to outsource in this model since you essentially have to take care of finding and vetting staff of the same quality as you need for in-house staff. This can make this form of outsourcing as much of a headache as regular hiring. Using an agency like Uptech avoids this, as they can make the process of outsourcing to skilled workers as simple as other outsourcing.
Outstaffing is a type of outsourcing, but it isn’t quite as full-on as the other models. This is staffing up an entire team with outsourced workers. This allows you to take even more advantage of the financial benefits of outsourcing information technology, but you do have more set-up. The vetting and hiring of outsourced workers might take a lot longer than with the other models. This version of IT outsourcing can give some set-ups the best of both worlds, providing a nice middle ground between an in-house and outsourced team.
Most Commonly Outsourced Industries and Functions
Outsourcing can benefit a lot of different industries. The breakdown of which industries contributed the most to outsourced revenue can illuminate which industries and functions are best served by outsourcing:
- In 2019, global outsourcing has a market size of $92.5 Billion. 66.5% of this comes from IT outsourcing alone, with another 26% coming from business process outsourcing.
- For 2018, information technology outsourcing accounted for 62% of the total $85.6 billion. Another 23.6% came from business process outsourcing.
- In 2017, outsourced information technology accounted for 64.3% of $88.9 billion. Business process outsourcing contributed 24.6%.
With 92.5% of the market for outsourced services coming from IT and business processes, there is a clear advantage for these fields. Telecommunications is another big source of outsourced services, but it is IT outsourcing that is the primary driver of growth here.
Reasons for IT Outsourcing
With outsourced IT services accounting for so much of the market, it is clear there are some reasons for this. Outsourcing provides benefits in a lot of industries, but it can be particularly helpful for technology. These are some of the main reasons why technology firms or start-ups might choose to outsource:
- It is Cost Saving
- Corrects a Lack of In-House Expertise
- Gives Team Size Flexibility
- Provides Relief When In-House Team is Overloaded
- Helps Meet Challenging Deadlines
- Delegate Tasks
- Reduces Admin Needs from Hiring and Vetting
- Access to International Talent
- Fast Upscaling
- Avoid Interruptions in Workflow
A lot of these reasons can apply perfectly to smaller or growing firms looking at IT outsourcing.
Advantages of IT Outsourcing
Outsourced IT services are a very popular solution, and that’s because they work. There are some drawbacks though, and no method is perfect. These are the main advantages and disadvantages:
- You can take advantage of lower costs of living and better tax arrangements for more of your workforce.
- You can find outsourced workers that are skilled in areas that your team might be lacking in.
- Your team is free to focus on other things without sacrificing upkeep on the day to day maintenance or management.
- IT outsourcing does away with the long, expensive, and frustrating process of vetting and hiring staff.
- You can grow or shrink the size of your team considerably faster, making you more responsive to market changes and more agile.
- Timezones and distance can become a problem if IT outsourcing isn’t properly handled.
- You need quality control in who you hire for IT outsourcing to get the benefits of it.
- Language or organizational problems in outsourcing can cause a loss of quality or delays.
A lot of disadvantages come with badly done IT outsourcing, which is often avoided by using established agencies to help with more complex outsourcing.
IT Outsourcing - Summary
IT outsourcing can have a lot of benefits to businesses of different sizes with widely different purposes. While many assume outsourcing is simply an effort to save money without much thought to quality, IT outsourcing can be done in different models that have a lot of benefits without those downsides. With the benefits of an instantly saleable team, fewer overheads, and more agile working relationships, IT, in particular, is generating the majority of the market for outsourcing. While there are disadvantages to it, properly done information technology outsourcing can help businesses of many different sizes to get things done quicker and easier.