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Did you know that 66% of businesses in the US outsource at least one department1? IT outsourcing is a common practice that involves using service providers to deliver IT-reliant business processes, application services, and infrastructure solutions. Outsourcing can offer some benefits, like decreased labor costs, but is also come with many challenges and risks.
In this article, we will argue that IT outsourcing should only be used in limited cases, and present an efficient alternative: offshore tech staffing. By the end of this article, you will have a better understanding of the pros and cons of outsourcing and offshore tech staffing, and be able to make informed decisions for your IT needs.
Outsourcing is the practice of delegating certain tasks, projects or business operations to external firms or specialists. Traditionally, it’s been a go-to solution for tasks outside a company’s core competencies or for short-term, specialized projects. Cooperation with an outsourcing partner can offer some benefits, such as cost savings, access to specialized skills, and increased efficiency. However, outsourcing also comes with some challenges and risks, such as loss of control, quality issues, communication barriers, security breaches, legal disputes, hidden costs, and cultural differences.
One classic example of outsourcing in tech is prototype development. When a company needs to rapidly develop a prototype to test a concept or present to investors, outsourcing provides access to immediate expertise without the long-term commitment of hiring. This approach allows for quick turnaround times and access to diverse skill sets that are necessary for a certain business process and might not be present in-house.
As for real case, let’s review the history of Slack. The company outsourced its logo design, website design, and app development to a design firm called MetaLab, which helped create the user interface and user experience of the app. Slack also outsourced some of its customer support and quality assurance tasks to other service providers.
Outsourcing in tech development is often ideal for specific, time-bound projects like prototype creation, where speed and specialized skills are the primary requirements. However, for sustained development and projects that are the core to a company’s mission and business functions, this approach may have its limitations. According to Statista, the top three reasons why companies outsource IT functions are to reduce costs, enable focus on core business, and solve capacity issues. However, the top three challenges of outsourcing IT functions are managing service quality, managing vendor relationships, and mitigating operational risks. Therefore, companies need to weigh the pros and cons of outsourcing carefully and choose the best option for their IT needs.
Outsourcing, while beneficial in specific scenarios, comes with its set of limitations and risks that are crucial for CEOs and CTOs to understand:
Outsourcing services are not the only option for businesses that want to leverage the global talent pool and reduce operating costs. Offshore tech staffing is a more efficient and effective alternative that can offer more benefits and fewer risks than outsourcing. Offshore tech staffing is a model of hiring remote IT professionals who work exclusively for your company, regardless of their location. Unlike outsourcing, where you delegate a part of your project to an external team, offshore tech staffing allows you to build and manage your own dedicated team of IT experts. You can choose the best candidates for your project, set the goals and expectations, and monitor the progress and quality of the work. Offshore tech staffing works as follows:
Hire specialists with TurnKey Staffing, a top tech offshore tech staffing firm.
Outsourcing and offshore tech staffing are two different ways of leveraging the global talent pool and saving costs for IT projects. However, they have different advantages and disadvantages that businesses need to consider before choosing the best option for their needs. The following table compares outsourcing and offshore tech staffing on various aspects, such as control, quality, security, cost, and knowledge retention.
Offshore Tech Staffing
Less control, delegated to external team, communication and cultural barriers
More control, own dedicated team, direct communication and collaboration
Variable quality, different standards and expectations, compatibility and performance issues
Consistent quality, aligned with project requirements, higher functionality and usability
Security and confidentiality risks, data breaches, legal and regulatory challenges
Security and confidentiality protection, data ownership, compliance with standards and policies
Cost savings, but hidden costs, scope changes, budget overruns
Cost savings, but transparent costs, flexible scope, budget control
Inadequate knowledge retention, loss of documentation, code, and feedback, knowledge transfer difficulties
Adequate knowledge retention, access to documentation, code, and feedback, knowledge maintenance and sharing
Outsourcing and offshore tech staffing are two different ways of leveraging the global talent pool and saving costs for IT projects. However, they have different implications for your business strategy, quality, security, and knowledge management. Whether you choose outsourcing or offshore tech staffing, you need to consider your project needs, goals, and budget, and find the best partner that can help you achieve them.
Offshore tech staffing has several advantages over outsourcing, such as: more control over your project, consistent quality, security and confidentiality protection, and cost-effective budgeting and transparency.
Some of the best tools and methods for communicating and collaborating with your offshore tech team are:
Activity reports: To monitor and report your activities and productivity with your offshore team.
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