Everything Your Business Should Know About IT Projects Outsourcing

Outsourcing IT projects is a great way to save time and money. By outsourcing your IT projects, you can reduce the time needed to complete the project and the overall cost. You can also outsource your IT projects to a company that has experience in the field. By outsourcing your IT projects, you can ensure that the project is completed on time and within budget.

Outsourcing is a route that few business owners take. This is because many people are unaware of the real and perceived risks associated with this hiring model.

While there are many myths about outsourcing, such as the loss of managerial control, this business model has been widely adopted by both private and public entities.

For starters, it enables businesses to achieve their goals at a lower cost due to lower labour costs in foreign markets. Furthermore, it enables access to expertise and productivity on a scale that an in-house team may not be able to match.

In this article, we will look at the general outsourcing market, the factors that have contributed to the industry’s rapid growth, and outsourcing tips for a software development project.

What is Outsourcing?

Outsourcing is a business practice in which a company hires a foreign or local individual or company to perform services that would normally or previously be performed by an in-house team.

In this type of working arrangement, the hired service provider retains control of their workforce and computer systems in order to deliver the expected services on-site or at an off-site location.

Although the terms offshoring and nearshoring are used interchangeably, there is a significant difference between the three. A closer examination of the nearshore outsourcing definition reveals some significant differences.

Nearshore outsourcing is a “young offspring” of offshoring in that it involves hiring a service provider closer to home, even if they are still based in another country or region.

Offshoring, on the other hand, refers to the relocation of business processes to a remote location.

Now that we’ve sorted out the major differences between the three, let’s take a quick look at the IT outsourcing market.

Brief Outsourcing History

For decades, developed countries such as the United States and Europe have outsourced to developing countries such as Egypt.

As international telephony became more common, businesses realized that their call centers in America and Europe could be managed seamlessly and at a lower cost by individuals sitting halfway around the world.

Basic telephony was eventually supplanted by the Internet as time passed. And as bandwidth increased and Internet penetration increased, so did the number of outsourcing applications.

IT Outsourcing Market Overview and Stats

During the early stages of outsourcing, all of its whims were strictly limited to Fortune 500 companies. The infrastructure and startup costs were so high that companies would need to operate on a massive scale to justify the ongoing costs.

Companies can now outsource almost any task or service they can think of. Everything is possible, whether it’s programming, app development, or database management.

Some companies have even gone so far as to outsource entire call center operations, customer service, manufacturing, human resources, and bookkeeping.

As a result, the outsourcing market has experienced unprecedented growth. According to a 2019 report by Outsourcing Insight, close to 65% of small businesses are currently engaged in outsourcing.

The global outsourcing market reached $85.6 billion in revenue in 2018.

In comparison to process outsourcing, the IT sector contributed $62 billion in revenue, compared to $23.6 billion from BPO.

Different Types of Outsourcing

IT Outsourcing

IT services offshoring is one of the most common types of outsourcing. It entails a company contracting out some or all of its technology-related services to a service provider. Every business, large or small, has different IT requirements. If they have a skills shortage within their in-house team, they may choose to outsource to fill the void.

Professional Outsourcing

When running a business, there will come a time when complex tasks will be unable to be completed by an in-house team. This could be due to a variety of factors such as insufficient training, a lack of time, or a lack of tools and technology needed to complete the task.

Outsourcing qualified professionals makes economic sense in this situation because a company can save on overhead costs. Accounting and legal services are two of the most commonly outsourced professional services.

Multisourcing

Although multisourcing is most commonly used in IT services, it is also applicable in many other business areas. Multisourcing simply means outsourcing IT services and other business functions to third-party service providers such as Develux. Multisourcing assists in assembling the best-of-breed team to complete a task and achieve business objectives.

Business Process Outsourcing

Another popular and large type of outsourcing is business process outsourcing (BPO). It is typically used to contract specific or multiple business processes to a third-party provider.

BPO is particularly common in the manufacturing industry, where manufacturers outsource critical business operations in order to achieve high-quality results.

Pros and Cons of Outsourcing

Pros

Cost Advantages

One of the most significant and obvious advantages of nearshore outsourcing is cost savings. In comparison to Western countries with high salaries, some geographical locations, such as Eastern Europe, have lower rates, and you can get software engineering nearshore outsourcing services at a much lower cost without sacrificing quality.

Increased Efficiency

Working with an outsourcing service provider allows you to benefit from years of experience and expertise on your project. This means that your job is being done efficiently by people who have a deeper knowledge and understanding of the subject.

Focus on Core Areas

You can focus on core business activities by outsourcing non-core business processes. As a result, you can focus your efforts on R&D and brand development, which will eventually increase your bottom line.

Save on Infrastructure and Technology

Offshore and nearshore outsourcing firms both invest heavily in infrastructure and new technologies. Working with such a provider eliminates the need to invest in similar infrastructure because the service provider is responsible for it.

Access to Skilled Resources

Another critical aspect of outsourcing investment is access to skilled resources. It should be noted that recruitment, training, and onboarding are all time-consuming processes. Outsourcing service providers are required to handle all resourcing requirements, and they have a large pool of skilled resources.

Cons

Loss of Confidentiality

As previously stated, the service provider is in charge of the majority of activities in an outsourcing arrangement. As a result, confidentiality is compromised, and the risk of losing sensitive intellectual property data cannot be overstated.

As a result, it is critical to protect yourself against such unforeseen circumstances by instituting checks and balances.

Losing Management Control over your Project

Delegating critical business functions simply means you have limited operational and deliverables control.

To avoid this, make sure you have a contract in place that clearly states what happens if the provider fails to meet their obligations.

Quality Control Issues May Arise

Quality and adherence to standards issues may arise if the service provider lacks the necessary experience, skills, and technology to deliver in an outsourcing relationship.

Cultural and Language Barriers

Many companies looking to outsource frequently face cultural and linguistic barriers. Although these obstacles are surmountable, they can have a significant impact on a company’s brand and the success of its offshoring ventures.

Key Tips When Outsourcing IT Services

Clearly Define the Objective and Scope of Your Project

This may appear to be a no-brainer, but it is critical.

If you want your project to succeed, you must have a clear statement that states exactly what you want to achieve. By clearly defining your project’s requirements upfront, you eliminate deviation from the intended purpose.

Furthermore, be sure to outline the expected deliverables down to the last detail, as this can have a significant impact on the overall project.

Choose the Right Service Provider

Thoroughly researching and vetting your potential software development partner will save you time and money in the long run. While assessing potential service providers, ask as many questions as possible, check their references, and solicit feedback from previous clients.

Start Small

When working with an outsourcing company for the first time, it’s a good idea to divide your project into small, simple subtasks.

This allows you to determine not only their mode of operation but also their capabilities before entrusting them with the “mission-critical” project.

Value Comes First

Although it may be tempting to choose a provider solely based on price, this could lead to problems later on. It is always advisable to select a vendor who can strike a balance between quality results and good value.

Peg Payment to Pre-Defined Milestones

Having clearly defined milestones allows you to set up scheduled checkpoints to review the status of your project as it approaches completion. Always tie the service provider’s payment to these milestones as the client.

As a general rule, don’t pay more than 30% of the total project cost up front. The other payment package should be based on the completion of the subsequent milestone.

Communication is Key

Effective communication is one of the most difficult aspects of outsourcing. This is due to major uncontrollable factors such as time zone differences and different work schedules.

However, with a little effort and the right communication tools, such as Skype, there could be a significant improvement in communication.

Have a Project Manager

You should always have a project manager for any outsourced software development projects. He or she oversees the small moving parts and ensures that everyone is in the loop.

Involving a project manager in team communication also aids in establishing the nature of the problem. Some teams will spend countless hours dealing with a problem not because they lack resources, but rather because they lack knowledge.

Ask Questions

Try to visualize your project from start to finish, imagining and listing any obstacles that may arise along the way.

Ask many questions as you can about these challenges, and demand straightforward answers. The last thing you want to do is commit to a company only to be disappointed later.

Here are some questions you should ask the service provider:

• What technologies does the team specialize in?
• What similar projects have you worked on in the past?
• How many (technology’s name) developers do you have in your entire team? And how many of them are senior developers and junior developers?
• Will I have access to the files in the course development?
• How do you communicate in the course of the project?
• What role do you see me taking up in this project?
• Will you allow me access to the source code via GitHub?
• What is your price tag for this project?
• What exactly am I getting in this project?
• Do your services include support, consultation, design, development, licenses, or something else?
• How long will it take for you to deliver the project? Naturally, some projects may take longer than others and you should give the development team enough time to do their magic, without taking their sweet time.
• What happens if you don’t deliver to my expectations? The sad reality of software development is that you may not get 100% of what you want especially if you don’t have metrics to measure success. How the team deals with such a scenario should give you an indication of what happens in case they don’t deliver as expected.
• What sets you apart from the rest?

Only Pay For What You Need

Outsourcing service providers have a large pool of skills that can be used on projects at any time. Unfortunately, some of them will try to upsell some of these supplementary services in order to increase the value of their contracts.

Throughout your working arrangement, keep in mind that you only get to pay for the services you require. Avoid supplementary offerings that will not help you achieve your current goals.

Negotiate Ownership Up-Front

When working on an outsourced software development project, make it clear that you own the final product as well as any other components of the product.

Make it clear to the service provider how you intend to use the product they agreed to deliver.

Concerns About Sensitive Data

If the service provider will need access to sensitive data, you should express any privacy and security concerns you may have.

In such cases, it is best to avoid using a private freelancer and instead opt for a company-type solution.

While a freelancer may be completely honest and trustworthy, their systems and networks may be less sophisticated than those of a full-fledged company.

Don’t Forget About Post-Development Support

If you want to be assured of continuing support from the service provider after the project is completed, it’s always a good idea to have a support clause or a warranty in place for software development projects.

As a general rule, always negotiate the post-development support clause before beginning work.

Finally, you must specify whether future modifications will be free or at a reduced cost. This will save you time, money, and unnecessary headaches in the future.

Have a Contract

Never expose yourself during the service engagement, project development, or delivery period.

Sign a legally binding document that clearly communicates the scope and terms and conditions of your project to protect yourself from potential losses.

Here is a list of important documents that you may need your software development provider to sign:

Service Level Agreement (SLA) – This document clearly lays down the project’s scope, turn around time, and reports.

Software Requirements and Specifications(SRS)– This document lists all the specifications and requirements for your software product.

Key Performance Indicators (KPI) – Help in evaluating the progress of your project at the different phases of development.

Non-disclosure Agreement (NDA) – Unfortunately, we are living in a world where data theft, is a norm. For this reason, you need a legal document to protect your project’s data.

Similarly, keep track of and record even minor agreement changes, and save copies of digital communication exchanges such as emails. They may come to your aid in the future if something unexpected occurs.

Useful Tools When Outsourcing Software Development Projects

When outsourcing an agile software development project, it is critical for you as the product owner and service provider to maintain an effective and efficient mode of communication and project tracking system.

There are a few project management and communication tools that you will find useful in this regard.

For communication purposes, you should have Skype and a G Suite (Gmail, Google Drive, Google Docs, and Google Calendar).

However, because email inboxes can become clogged and Skype may not be ideal for conference calls, some additional tools must be used.

Some of the best conference call tools on the market are Zoom, Google Meet, GoToMeeting, UberConference, and Join.me. They enable you to collaborate with your offshore developers as a group.

Slack is another excellent tool for communication and team collaboration that you should consider.

It is critical to keep everything and everyone on the development team on track in order to meet deadlines. As a result, you’ll need a tool like Google Calendar to keep everyone in the loop, though you may also require other tools.

If you want to be successful with your outsourcing venture, you must have a strong and comprehensive project management tool. You can use Azure DevOps or Basecamp or Trello for this because they have user-friendly features that allow you to manage and keep your project on track.

Above all, such a tool saves you money by preventing slacking.

And, of course, since you’re working on a software development project, you can’t go wrong with GitHub.

This tool is essential not only for the development team, but also for you as the business owner. It provides real-time feedback on the status of your project, access to source code, and complete control over the code.

When is the Best Time to Start Outsourcing?

It is your responsibility as a business owner to ensure that all client demands are met on time.

But how do you know when you need a second set of hands? Is it when things start to feel a little too much? Or when you can’t seem to strike a balance between work and life?

The following are indicators that you should outsource:

Your In-house Team Appears Worn Out

In the world of software development, having a motivated team is important because it affects how creative they are in their work.

Plateaued creativity and tunnel vision among team members may indicate that it is time to consider outsourcing.

You Can’t Keep Up With The Workflow

Having a lot of work is a great problem for any business. However, it can also be a curse, especially if you have more work coming your way.

When missed deadlines become a regular occurrence, you may need to hire a contractor to assist you.

You Want To Scale But Solo Can’t Just Cut It

Almost every business experiences a period of rapid growth during which everything appears to be moving in the right direction.

However, if you work with a small team, it means they will have to work extra hours to accommodate the increased workload. As a result, productivity per employee suffers, stifling growth.

As a result, you may need to bring an extra pair of hands on board to help offset the backlog so you can focus your energy and resources on growing your business.

Looking To Spread Certain Risks

As a business owner, you may occasionally come across minor day-to-day tasks that you dislike carrying out. However, if it is a technical task that you are unfamiliar with or despise, you can try outsourcing it.

There is a good chance that such a task will take up a lot of your time and energy, when a qualified person could do it in less time.

Conclusion

The world is quickly becoming a massive marketplace. The Internet and all of its technological interfaces have made it easier to merge different marketplaces, removing the need for multiple fragmented marketplaces to operate.

As a result, the employment landscape has continued to undergo dramatic and far-reaching changes, such as the emergence of numerous computer-based roles.

One of the areas that has undergone significant change is the software development world, where companies outsource workers.

Businesses can benefit from faster, cheaper, and easier product development by contracting software development.

To be successful, you must define a coherent outsourcing strategy as well as a clear understanding of the risks.

With the tips provided above, you should be able to avoid most, if not all, outsourcing blunders.