IT outsourcing is becoming a more and more popular business decision, especially regarding software development, content creation, design, etc. About ten years ago, you could have only two options for completing your order: either have your staff or hire freelancers.
Nowadays, delegation is possible mainly thanks to outsourcing companies.
But as the options are uncountable. One must choose an outsourcing partner which matches their bandwidth and mainly budget. A common trend is outsourcing product development to India to avoid breaking the bank while hiring credible developers.
This is what we will talk about in our article, namely, such issues as:
- Why is outsourcing beneficial for business?
- How not to confuse outsourcing and freelancing.
- Criteria for choosing an outsourcing company.
We will also discuss possible risks for businesses and how to reduce them.
Outsourcing and Its Role in Business
Outsourcing is a popular task delegation solution in the US. Moreover, it is a real boon for a dynamic global market.
Why? First, it stimulates the company’s product development. You have the opportunity to delegate work to a real pro with profound benefits (in some countries, professionals charge much less for their work, while the quality remains at a high level). A business that sends its tasks to outsourcing receives several opportunities and benefits, namely:
- You save a lot of money and time, respectively.
- Outsourcing professionals know more and have more skills than in-house employees.
- By outsourcing a task, you unload your team, allowing it to concentrate on the functions of your company.
- You get access to the world’s best experts and specialists.
- You pay for high quality and qualifications at least half as much as in the case of hiring a specialist from your country.
In this case, outsourcers can be involved in any business processes, and even such mastodons of the IT market as Samsung, Google, and Microsoft do this.
It’s important to understand that outsourcing is long-term cooperation for the provision of an exact number of services that are not related to the direct activities of the employer.
This means that the customer pays for the services of the outsourcing company by the concluded contract. Work performers receive payment already directly from the contractor.
Freelancing and Outsourcing: What’s the Difference?
Remote collaboration is not always freelancing, and freelancing is not outsourcing. These two concepts have something similar, but there is a certain difference.
| Freelancer | Outsourcing IT company |
| These are independent specialists who find work tasks for themselves on the freelance exchange and request payments for them.
They do not work for anyone in the state; their salary and workload depend only on them and the quality of their work. They are something like loner among specialists who can choose an interesting project for themselves and take tasks in different directions and fields, and if they don't like it, they refuse. | It is a contracting firm that sells bespoke IT services and diverse products to clients on a technical basis, as well as manages clients' time- and budget-constrained projects.
For a programmer, this is a full-time job in the state, in a team of narrowly focused specialists, with a salary, management, and a normalized working day. There is less freedom than in freelancing, but the company also finds customers. |
How to Choose an Outsourcing Company and Not Regret It
Of course, outsourcing carries its risks for the business. And the choice of an unscrupulous contractor and inexperienced specialists can be too expensive. How to avoid failure? Just approach the option of an outsourcing company systematically. So, what you need to rely on the choice:
- Select your primary goals and why you decided to turn to an outsourcing contractor.
- Agree on all stages and processes of cooperation and designate them in the contract.
- Agree on the critical cases in which you will terminate the agreement.
- Сriteria that determine the readiness of the work and evaluate the results.
- The scope of available information for the contractor is standards for protecting personal data.
- The procedure for closing or terminating the contract.
- Areas of responsibility and mutual obligations for you and the contractor company.
A detailed contract with legal force and specified conditions is the main factor in protecting your company and your project.
Types of Outsourcing Companies
Interestingly, outsourcing is quite a broad concept and includes different cooperation models. We will talk about the three main ones, which differ in terms of the geography of cooperation and some nuances.
Offshoring
The most popular type of outsourcing cooperation. The key characteristics of offshoring are long distances and economy.
- Example: You are hiring an outsourcing company from the Philippines, but you and your firm are based in Europe. Filipino developers take several times less than European ones, and you win at least in price.
- What the risks are: communication problems, time zone mismatch, mentality, and business culture.
- How to solve them: resolve the language issue (through an interpreter or communication in an international language), coordinate the schedule of work and rallies, and study the cultural characteristics of the contractor.
Nearshoring
In this case, the contractor company is located much closer to you. For example, it could be some firm from a neighboring country. Unlike offshoring, you avoid significant differences in watch languages and cultural differences.
- Example: A German company hires a development team from Poland.
- What are the risks: about the same as in offshoring, but many times less.
- How to solve them: In fact, shorter distance already minimizes time zone and data protection issues (especially if you are collaborating with some European country with a high level of protection).
Onshoring
The closest outsourcing of all possible options. Onshoring means that the contracting company is already based in your country. That is, you can already forget about such problems as the difference in time zones, different languages , and cultural inconsistencies.
- Example: a New York business hires an outsourcing company from Dallas.
- What are the risks: this is non-economical and gives access to a smaller pool of talent than offshoring.
- How to solve them: clearly state the conditions of tasks, announce your budget, and be demanding in choosing an employee.
By the way, companies can work according to one of these models or even combine them. But, of course, much depends on how large the company is and what place it occupies in the global market.
Before Concluding a Contract: A Brief Checklist
No business can afford to compromise on the quality of outsourcing. It is even more important to immediately cut off those who break deadlines or are impolite in their work. Therefore, be sure to check the reputation of a partner before agreeing. This little checklist can help you:
- Check out the portfolio on the company's website and its Dribbble, GitHub, and Facebook profile.
- Ask to see the company's office during a video call.
- Chat via Skype or Zoom with key employees. Ask about their experience and how long they have been with the company. So you will understand whether to expect staff turnover.
- Check out their code samples if you have a tech partner you trust.
- Find out how quickly they can respond to urgent tasks and include the appropriate terms in the contract.
Finally, prepare and submit a test task with an agreed deadline.
Outsourcing is a widespread business practice and will continue to evolve. After all, first of all, business benefits from this: you save significant finances and at the same time hire experienced specialists to solve your problems. To avoid disappointment in the hired company, make sure that you contact professionals who know the approach to tasks.
IntelliSoft has many years of experience in IT outsourcing and all its stages: drafting tasks, concluding contracts, and project support. We are for an intelligent approach to cooperation.