“The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity and reduce work cycles.” — Azim Premji
Outsourcing is the new normal. It is basically an arrangement made by a business where an outside contractor is hired to do certain work that could have been done by in-house personnel. When hiring in-house employees, companies need to spend a considerable amount of capital as salary, insurance, and other benefits. This will also take a lot of time. If businesses can figure out an existing firm with the precise expertise required, both money and time will be saved. This helps businesses achieve greater economies of scale and also keep informed of the latest technology in its niche.
According to the Information Services Group, when focusing on contracts with a total value of more than 25 million U.S. dollars, the annual global revenue from information technology outsourcing is estimated to amount to between 60 and 70 billion U.S. dollars. We, in this article, intend to tell you exactly why software outsourcing is important and how it holds the key to revolutionize your business.
1. Access to a larger talent pool and the latest technology
Organizations in today’s time need to embrace emerging technologies in order to grow and gain a competitive advantage. Expertise in every skill and technology cannot be demanded in-house. Hiring more employees will mean being exposed to a small circle of local talents and also very high time consumption. Also, these employees will then need training to understand how the business works, hence further increasing development and testing time. But with outsourcing, businesses get access to specialized and skilled workforce all over the world, thus expanding their search. Everything starting from wireframing to development and testing and project management is taken care of by the outsourcing team without any sort of training or guidance. The result in decreasing the skill gaps and exposure to greater talent and technology along with competitive advantage for the company.
2. Increased Focus on Core Business
Survival of the fittest! Remember? In today’s times, if your business is relevant, you are surviving. So, you have to find ways to innovate and expand in this competition to survive your competition. By outsourcing processes that are not your USP outside your company help to increase and improve concentration on strengthening other core processes and helps allocate more resources to processes that make the business tick. It doesn’t overwhelm your in-house staffs with work that doesn’t match their skill level, allowing them to focus more on micro and strategic goals in alignment to the business.
3. Reduced Spending and cost savings
When you are running a successful business, the carousel never stops turning. There is a broad category of costs associated like salaries of in-house staff, Operational and Recruitment cost, development environment costs, training, and maintenance etc. And acc. to research data, Companies can save 30% on operating costs by outsourcing their IT. There is a considerable difference in wages in developed and developing countries. Outsourcing produces greater economies of scale (i.e. cost savings due to increased production) and hence it is cheaper for a firm to outsource software activities and operations than to carry it in-house.
4. Better Risk Management
You know how we are advised to diversify our investment portfolio rather than put all the money in one place to reduce risk? Same with businesses investments. In this volatile business environment, effective and efficient risk management is critical to an organization’s long-term viability. Dividing certain components and operations amongst different vendors help mitigate risks and since the company that you are outsourcing to are experts in that field, they can help mitigate the risk better. Always remember, the key to a successful outsourcing relationship is “outsourcing transparency,”
5. Accommodate peak loads
Every business has times when their demand is at the peak. Without outsourcing, peak demand means re-distribution of available in-house resources to operations and processes they are not specialized in or hiring new employees. Both results in higher costs and a decrease in efficiency. With outsourcing, you can just hire a scalable team for just the peak period with absolutely no commitment and meet your customer’s needs with increased flexibility.
6. Better Security
Now, we will just assume that your in-house team doesn’t specialize in IT and you are outsourcing because you don’t want your in-house team to waste time figuring out technology and how it works. That means there are pretty good chances that they might make security-related mistakes and put sensitive information about the company at risk. Software development teams that you will outsource to often have a complete idea of all sorts of security breaches and knows how to deal with them efficiently.
7. Spend Less Time on Support
Software needs regular maintenance and support. So, you need a team to take care of the ongoing bugs and modifications elsewhere, so that you can concentrate on attracting and keeping customers. Generally, when outsourcing, there is a significant time-zone difference between you and your software vendor. This can be an added benefit as you actually get the benefit of round-the-clock business operations.
8. Reduce time to market
Businesses globally have recognized the need for speed and how it can be used to leverage competitive advantage. With outsourcing, you don’t need to depend on your available in-house resources for the product launch and can actually dictate the timelines, as your remote team will have dedicated developers at your service.
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Software outsourcing maximises flexibility. Outsourcing software projects is a great option to obtain digital transformation and growth through innovation while reducing risks and increasing profit simultaneously. It also helps businesses focus on obtaining a competitive advantage. Looking forward to Outsourcing? Explore a 5-step strategy that will enable any cost-focused company to invest smartly in software development.