Outsourcing IT services is anticipated to rise at a particularly rapid rate, according to Statista. The global market was valued at roughly $1.2 trillion in 2022.
If this trend continues, it will only increase the need for SaaS or cloud-based solutions in today's workplaces. The global market for IT outsourcing is projected to hit $1.392 trillion in value by 2023
To what extent do IT firms outsource specific functions? As a result of our yearly study of IT firms in the United States, Canada, and Europe, Computer Economics has published its IT Outsourcing Statistics report. According to it, companies outsource the following processes:
- Application development and management
- The administration of cloud computing infrastructure
- Support for the desktop
- Disaster recovery
- Customer care
- IT security
- Operation of the network
- Systems integration and implementation
- Web operations
Why do businesses turn to outsourcing? The detailed answer is below!
Remote software development team vs In-house team
Employees under an in-house model are exclusively responsible for the tasks and initiatives of the company they are employed by. On the other hand, a remote team model is a type of outsourcing.
The idea of working away from the office is no longer radical. As a result of technology advancements, businesses have increasingly exploited the possibility to outsource their tasks, services, and projects. Particularly in light of the epidemic, technological flexibility has shown to be beneficial for organizations.
It is indeed getting harder and harder to hire qualified professionals in today's market, especially if your budget is short. On the other hand, it might be challenging to find competent IT developers since they expect high salaries.
A remote team or an in-house team should be chosen depending on the objectives and stage of the company's development. There are cases of integrating two models as well, however doing so takes a more thorough examination of the project's details.
What outsourcing has to offer
Weigh the benefits and draw up a list of the requirements for putting your plan into action before selecting the model that will give you a competitive edge. Below you can find a list of advantages with a statistical backup that can be brought to your business by outsourcing. Check them out!
Despite the belief that outsourcing is more expensive than recruiting staff of your own, the fact is quite the reverse. Outsourcing developers are more cost-effective than in-house specialists since you just pay for the number of hours they work, rather than a fixed salary.
Recruitment and HR functions are handled by a third-party provider. Among other things, this vendor takes care of the costs of renting office space; software licenses; hardware; staff training; and workforce well-being compensations.Source: visual-craft
Organizations may do more with less money by outsourcing their work to third parties. There is a large wage disparity between industrialized countries in the West and developing countries. There might be a 60 percent pricing gap between work done in Eastern Europe and the United States.
In fact, cost reduction is the main outsourcing objective for 70% of companies.
Companies can save a large amount of money by outsourcing their work to third-party service providers rather than employing full-time personnel in-house. Sixty-two percent of enterprises claimed savings of between 10% and 25%, while the remaining 38 percent indicated savings of up to 40%.
Another example of a service that has the potential to save money is software development. The average annual salary for this sort of employment in Ukraine is $15,000 US dollars. However, their American counterparts get paid an average of $69,000 a year; in the United Kingdom it's $41,500 USD; and in Australia, it's $50,272.
The amount of costs saved with outsourcing depends on the revenue size of the organization. For example, if a business makes up to $25 million, it can save on average 7% by delegating its tasks to third parties. For comparison, $500 million companies typically save over 25% of their expenses.
Check the chart below to see the proportion between cost savings and revenues.Source: RSM
Access to experts / Added expertise
There is no doubt that using internal resources, it's possible to recruit highly qualified IT engineers. However, it is quite unlikely that one will be able to achieve the same level of quality as a business that concentrates the majority of its efforts on recruiting the most qualified individuals from across the globe.
With outsourcing, the options for hiring don't have to be constrained to the local pool of people. Since professionals with particular and limited talents are sometimes hard to get locally, it is a significant advantage. You can hire developers to round out your team because outsourcing providers have connections to several labor marketplaces.
Many firms based in the United States, the United Kingdom, Europe, and Asia get the majority of their technological workforce from nations located in Eastern Europe. An abundance of trustworthy suppliers with proven track records and experience in providing enterprise-level services can be found in this part of the world.
It's also possible that a vendor has already assembled a team of professionals who have worked together on similar projects before, including business analysts and project managers as well as UI/UX designers and software developers.
Another benefit of using an outsourcing network is that businesses have a far greater probability of hiring new employees on an as-needed basis. If a firm is worth its weight, they will be able to find you the best candidates for the position from anywhere on the globe on a one-time basis with no additional commitment.
And it isn't even necessary for them to be in the same room, let alone the same country! It's very hard to hire full-time employees remotely, but outsourcing allows you to access some of the world's best software development talents at the touch of a button (kind of).
- Sample preparation guidance automates many tedious and time-consuming steps involved in preparing samples for analysis.
- Integration with laboratory instruments and hardware enables seamless data exchange and connectivity of various devices across the lab.
- Analyzing and interpreting test results powered by self-learning algorithms eliminates human-prone errors and streamlines issue resolution.
- Compatibility with LIMS or LIS system helps to avoid duplicate data entry and improves in-team and cross-team collaboration.
- Ease of use involves building a simple but sophisticated user interface that optimizes complex workflows within the lab and enhances the overall user experience.
- Built-in troubleshooting allows users to identify and fix problems with their tests quickly.
- Compliance with FDA, HIPAA, and ETL infrastructure for effective and secure healthcare data storing and processing.
Outsourcing is frequently used by businesses as a quick and efficient approach to scale up their processes. When it comes to scalability, there is truly no better option than outsourcing. It works effectively for both one-off initiatives and long-term collaborations.
There are a number of factors that might make it difficult to quickly expand your staff. For example, it may be the expense of extra training for the particular degree of skill you require. However, an outsourcing organization that has made considerable investments in the training and coaching of its employees may guarantee great returns for its clients by ensuring excellent work.
Or what if you find yourself unexpectedly having to hold a large number of orders due to seasonal demand? A solution to this problem that is quick and easy can be found in a third-party vendor too. Outsourcing organizations are equipped to manage the type of order volume that you are not.
As a result of their combined knowledge with effective automation and competent human resources, a vendor may consistently and repeatedly provide appropriate customer solutions.
With the assistance of outsourcing, the power of your team may be significantly increased. It is particularly crucial for small to medium businesses since they often lack a variety of IT resources. It is preferable to delegate some responsibilities to professionals rather than overwhelming employees with work they are unfamiliar with. This will free up an internal team to focus on important company operations.
Outsourcing IT is especially advantageous for businesses that don't specialize in technology. In this situation, outsourcing all IT responsibilities to a single service provider is more efficient.
With the support of outsourcing, the power of your team may be significantly increased. It is particularly crucial for small to medium businesses since they often lack a variety of IT resources. It is preferable to delegate some responsibilities to professionals rather than overwhelming employees with work they are unfamiliar with. This will free up an internal team to focus on important company operations. Outsourcing IT is especially advantageous for businesses that don't specialize in technology. In this situation, outsourcing all IT responsibilities to a single service provider is more efficient.
Companies receive higher performance and faster outcomes if the job is broken down into many functional areas. Outsourcing is all about that. You assign certain duties to other professionals, who complete them concurrently with your primary business activities. Apart from that, the difference in time zones means that uninterrupted productivity may be maintained throughout the project. As a result, you'll be able to complete projects more quickly.
Despite the fact that outsourcing can alleviate many internal issues, human accounting and bookkeeping still presents a number of challenges. Whether the job is done internally or by outside contractors, there is always a chance that minor errors in the numbers will have big consequences. Inaccurate data and computations can result in lost or late payments, double-counted costs, late payments, and penalties. However, a corporation that offers outsourcing services can mitigate this risk.
Data entry by humans is almost entirely avoided when using outsourced services. Many internal operations teams might be downsized if outsourcing was utilized, which would lower risk and costs for businesses.
Crowdsourcing vs Outsourcing
The process of carrying out duties, providing services, or performing job activities while using a third-party provider's services is known as outsourcing. It involves transferring operational tasks and procedures from an internal to an external source
Crowdsourcing is the technique of assigning a task that is typically carried out by a designated agent to a crowd or group of providers in order to achieve a shared objective. It may be thought of as the next step of outsourcing.
Crowdsourcing is a tactic that takes advantage of internet users by putting out an open request for tasks. In contrast to traditional models, which care about contributors' workplaces, crowdsourcing is more user-centric and just requires participants to have access to the Internet.
On the other hand, outsourcing is just a tool that a business may use to improve its own processes and become more receptive to various work cultures. Contracts between corporations and third-party service providers are the basis of outsourcing.
An important benefit that can only be gained through crowdsourcing is access to a wide range of perspectives and expertise that would be impossible to gather any other way. This strategy has been employed by businesses to take advantage of flexible labor, outside knowledge, experience, and innovation.
By exploiting services that are less expensive elsewhere, outsourcing aims to reduce costs while improving service. Another reason why businesses outsource is to allocate risk, since when you contract with a third-party provider for a service, you basically shift some of your risks to the providers as well.
Nearshoring vs Offshoring Outsourcing
The term "nearshoring" refers to a business outsourcing some (or all) of its work to an outside company that is based outside its own country but yet inside its own area. At the most basic level, it encompasses the nations that are immediately next to the home country.
Offshoring is the practice of a business relocating a part of its development process to another country, no matter where it’s located.
Pros of offshoring outsourcing
In the majority of cases, more affordable locations are selected in order to bring the total cost of construction down to a substantially lower level. For western organizations wishing to outsource their software requirements, Ukraine, Czech Republic and Poland are some of the most preferred nations to look to.
Cons of offshoring outsourcing
Offshoring does have significant drawbacks, which should be taken into account. Time zones, cultural variations, language obstacles, and physical distance, as well as varying work habits, can all have an effect on the creative process and the final output.
Pros of nearshoring outsourcing
The fact that they are frequently constrained by comparable financial and regulatory limitations (such as data protection law) is a significant benefit. Nearshoring is becoming an increasingly viable alternative due to the distance, minimal time zone variations, and minor cultural differences. It enables less expensive travel and more development process control, particularly in urgent circumstances.
Cons of nearshoring outsourcing
The fact that nearshoring typically comes at a higher cost than offshore is a significant drawback of the practice.
How to choose a software vendor?
No matter how hard developers work to establish and adhere to industry standards, every software development firm is unique. Different client cooperation processes and strategies have an impact on the end product.
You must establish clear criteria for choosing a software development firm up front if you don't want your partner to ultimately fall short of your expectations.
For businesses, it’s important to make considerable efforts to hire a software development firm that specializes exactly in a given area and technology stack. Сonsider that you want to add .NET engineers that have experience with microservices to your existing internal team.
Regardless of the other criteria, you would prioritize those vendors who could offer you this level of competence and prompt staffing. Therefore, when you are searching for a certain skill set, you should select suppliers that have a demonstrated history of success in that field.
Make sure a vendor has expertise with similar initiatives in your business before starting a cooperation with them. It goes without saying that those who create solely fintech solutions and have expertise in insurtech only cannot be as proficient at providing automotive software development services.
To a similar extent, coordinating massive initiatives across several geographically dispersed teams is possible. It would be difficult for a corporation that has never worked with remote teams to build efficient cross-team communication at the organizational and technical levels.
Make use of popular review services like Clutch and GoodFirms to gather genuine consumer feedback about different software development companies. Furthermore, it is critical to obtain references from current and prior clients, who can provide you with true insights into the company's operations and service quality.
Reviews on Google and Facebook may also be beneficial. One of the key factors you need to look into is industry recognition. If a company seeks professional advancement, you can quickly locate it in the directories of the most sought-after software development companies.
In today's software industry, understanding agile development methodologies is essential. Make sure the software development company you choose is adaptable enough to accept change as your company expands. This has several implications, including scalability, embracing new technologies, providing a variety of price schemes, etc.
So once again, a vendor should be flexible enough to scale readily as your organization grows and rapidly adapts to your goals and strategy. Second, because technological development has accelerated so quickly, the technology you use now can be obsolete tomorrow. Choosing a software development company that can keep up with advances is important.
Additionally, your partner should be able to provide you with the price structure that works for you at that time if the scope of your project or your company needs alter.
Unordinary values and a distinct company culture may impede the quality of software products, affect collaboration, and hence cause delays in project completion. You need to learn more about the cultural quirks and business ethics of the provider if you want your cooperation to be effective
It's critical for businesses to ensure that the provider's culture is compatible with their own before entering into a long-term agreement. For instance, it is unlikely that Indian developers will challenge the client's specifications and propose alternate approaches to product development. Miscommunication and disappointed expectations are frequent results of this.
Eastern European software engineers, on the other hand, are more familiar with Western culture, making it simpler for them to collaborate with North American and European companies. Actually, this is why many businesses pick Ukrainian vendors. Collaboration with them is usually pretty smooth.
Why IT outsourcing to Ukraine is the best choice
One of the most promising IT hubs that meets all the criteria mentioned above is Ukraine. This country is home to great startups known all around the globe. Some of the most famous names are Grammarly, GitLab, Jooble, PetCube, Preply, Viewdle, and CleanMyMac.
Apart from creating their own IT products, Ukrainian developers help western businesses implement their boldest ideas. Several industry giants have their research and development operations established in Ukraine. These include Google, SnapChat, Magento, and Huawei.
In fact, IT companies based in Ukraine can boast of highly qualified specialists, affordable rates for out-of-the-box solutions and great flexibility.
Notably, Ukraine's IT sector has remained steady despite Russia's invasion. In the first quarter of 2022, IT exports achieved a record $2 billion in revenue. In comparison to the $1.44 billion registered during the same period previous year, this number represents a 28% increase in export volume.
Most IT businesses kept their existing clientele and contract volumes during the war. Moreover, 79 percent of IT companies even gained new customers. And on top of that, 5% to 30% revenue growth is expected this year, according to some polls.
So, what’s helped Ukraine’s IT sector reach its peak of resilience and strength? As it turned out, Ukrainian companies have prepared excellent anti-crisis business strategies. Besides, a major role was played by IT staff that stands out with their extraordinarily high enthusiasm and motivation.
As one of the top outsourcing companies in Ukrainian IT industry, Blackthorn Vision keeps providing its clients with top-quality software and ongoing assistance for their deployment. How do we manage to do this?
First, we use secure servers located in Western Europe and the United States to host cloud infrastructure and maintain our operations. Secondly, 93% of our team members are based in western regions of the country, which allows them to work in a safe and favorable environment.
Our company always provides a realistic assessment of your project and offers several candidates for each position to choose the best fit. Among other key advantages of Blackthorn Vision is that we are Microsoft’s Gold Partner, so our operations are supported by the IT giant.
Lastly, we have an exceptional client-focused attitude, which helps us stand out from tough competition. We engage dedicated development teams that provide greater flexibility to meet our clients' needs. A dedicated team embraces your schedule and workflows, quickly adapting to changes in product requirements. So, no matter what happens, a dedicated team is always up for a challenge.
Get in touch with us to find out more about our work approach.