How sound is your IT strategy? If you answer “not very”, “I’m not sure” or even “I don’t have a strategy”, then you have a big problem in your hands. During these dark times, when many workers are relying on tech to carry them through the workday, having a solid IT infrastructure is especially important.
Because it’s so vital to have an IT infrastructure in place that you can rely on, some businesses outsource their services to third-party providers. But what exactly is an IT outsourcing company?
Definition
IT outsourcing companies are providers hired by organizations to provide technology services and resources. This is in contrast to an in-house IT team, which consists of employees who work for the business. An outsourcing company acts as a third-party vendor that works with multiple clients to develop technology solutions on a contract or as-needed basis.
There are many different models for IT outsourcing, as well as arrangements and services they provide.
Types of Outsourcing
- OnshoreThe business outsources IT services to another organization or individual within their home country. For example, a company based in Texas might outsource services to a provider in California. This is often the most convenient arrangement since there are no cultural barriers and minimal — if any — timezone discrepancies — but it’s usually the most expensive one as well.
- NearshoreUnder this partnership, a business outsources IT services to a provider in a nearby country. An organization in the United States, for example, might work with a provider in Latin America. This is often seen as the best of both worlds — the partners are culturally similar, in similar time zones, and the price is lower than that of an onshore arrangement.
- OffshoreOutsourcing to an offshore partner means working with a provider overseas. A company in the U.S. could outsource IT services to India or China, for instance. This is usually the least expensive arrangement, although there might be complications, such as communication and geographical barriers.
Models
- Project-BasedIn a project-based model, the business outsources a specific project to an outside provider. Often, this is a project that doesn’t fall under the purview of the contracting business and its core business functions. This doesn’t necessarily mean the arrangement will be short-term — the provider might complete a series of projects for the business as needed.
- Staff AugmentationPerhaps you don’t have the necessary skills in-house to complete certain tasks or projects. Staff augmentation is a good solution for filling in any gaps that exist in your on-site team. This is typically a longer-term arrangement than a project-based one. Staff augmentation is also a good model if you have tasks that require additional workers to complete. Your provider can perform regular maintenance and adjustments as part of their contract, allowing your full-time employees to focus on other issues.
- Development CenterOpening an off-site development center is often considered an outsourcing arrangement. A development center contains resources that the home office can’t accommodate and employees people from the region to carry out IT operations.
- HostingThrough a hosting model, the contracting business hires an IT provider to establish and run a server or multiple servers. Unlike other arrangements, the provider is responsible for one specific task that requires minimal work to maintain — rather, you’re essentially paying for the equipment and storage space, as well as the technical skills to update them.
Reasons to Outsource
#1 Gain Access to Talent Around the World
As we’ve discussed, outsourcing means you can work with a provider in a country that’s not your own — even one on the other side of the world. You may find specializations you lack in-house but need to complete a project.
#2 Control Costs
Even if you choose an onshore IT outsourcing model, you’ll still save on costs. In-house teams require full-time salaries, benefits, and additional fees for resources and equipment. Not only will you not need to provide full-time salaries and benefits to a third-party team, but the vendor will also have its own infrastructure and resources that you won’t have to fund. Moreover, the provider will invest in the training and professional development of their team.
Of course, if you outsource to a provider in a developing country, such as one in Latin America or Asia, you’ll save even more.
#3 Focus on Core Business Functions
Perhaps you have some IT-related projects that are integral to your core functions as a business, such as app development. You may want your in-house IT team dedicated to those matters, but where does that leave the rest of your tasks — including general maintenance and upkeep? Outsourcing will allow you and your in-house team to focus on core business functions.
#4 Share Risk
Compliance, functionality, and other IT-related risks are mitigated when you outsource projects and tasks to a third-party provider. This is because the provider will share the responsibility and risk as a partner in the venture, which makes you safer overall.
#5 Assist with Growth and Short-Term Needs
As your company grows, you may find that you don’t have the staff and resources to accommodate your efforts to scale up. Many businesses outsource during transition periods. This provides short-term solutions to keep them going until they determine how they’ll meet their longer-term needs, either by hiring full-time IT employees or forming a more established relationship with an IT outsourcing company.
Alternatively, you may have fluctuating demands depending on the nature of your industry, the season, and other factors. During busy periods, outsourcing can help you accommodate your workload.
Commonly Outsourced IT Services
There are a number of commonly outsourced IT services. They include:
- Web development
- Web design
- Web/cloud hosting
- Web optimization
- Cybersecurity
- Application development
- Software and website management and updates
- Technical support
- Database management
- Data storage
- Quality assurance (QA) testing
An IT outsourcing company can provide many advantages to businesses of all sizes, offering different models and means of delivering technology services of all types. If you’re considering using one as part of your strategy, think about your goals, and do your research to find the best partner for you.
FAQ
How does outsourcing work?
Outsourcing is a business process where a company hires a third-party provider to perform work that would have otherwise been done in-house. This third-party provider can be located in the same country or overseas. The main purposes of outsourcing are to save money, reduce expenses, and access skills that are not available internally. Outsourcing can take various forms, such as onshore, offshore, nearshore, and onsite sourcing, depending on the location and nature of the provider.
Why outsource IT?
Outsourcing IT is often pursued for reasons such as reducing labor costs, which can be significant in maintaining a large in-house IT team. It allows companies to save on average 38%-48% in labor costs, and even more in high-cost markets. Outsourcing IT also enables access to specialized skills and services like systems operation, support services, data backup, disaster recovery, authentication, and cloud computing management that might be too expensive or challenging to develop internally. The decision to outsource IT typically depends on factors such as the size of the organization, its specializations, and unique business needs.
