Business Process OptimizationProduct Development

Outsourcing IT is not just a single service but many. What are their differences?

Outsourcing IT is the answer to all your staff and cost-related dilemmas. Or is it? The idea has been known for some time already. Any manager interested in money-saving, expanding operations or adding value to their business will probably consider putting it into practice at some point. Maybe now it’s your turn, and maybe outsourcing is already on the agenda and you will have to make some decisions, but you want them to be informed. This article is all about the nuts and bolts of outsourcing IT and is intended to give you an overview of the service and examine its different variants and their potential benefits. What role can they play in helping you overcome the challenges your organisation is facing?

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Contents:

What are the IT outsourcing services?

When it comes to maintaining an in-house IT team, depending on the size and nature of the business, your company might find itself in one of the scenarios listed below:

  1. You have your own in-house IT team; however, the number of projects undertaken or the scale of the project is increasing, which in turn necessitates rapid introduction of additional members of the staff, but it would be preferrable to avoid onboarding each one of them and bypass the individual recruitment process.
  2. You have your own in-house IT team; however, an outside team is needed, one with specific know-how that works in a different kind of tech.
  3. You have your own in-house IT team; however, that team is currently preoccupied with a project connected with a new product and cannot be distracted from the task at hand.
  4. You are a large organisation with multiple IT teams on duty and collaborating with other IT entities is their operational model of choice.

If you are already experiencing any of the above, it might be the right time to consider farming out some of your IT services and get involved with outsourcing. But what does that mean, exactly?

In the most broad sense, outsourcing is “the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company’s own employees and staff” (Investopedia 2022). When applied to IT outsourcing, the definition narrows down and the practice is understood as hiring an external service provider to “deliver some or all of the IT functions required by a business, including managing infrastructure, directing strategy and running the service desk” (QuoStar 2021). This is still a fairy broad field of activities and it’s very likely to conjure an image of a diligent help desk employee bravely combating installation problems of a user from the other side of the globe. And yet outsourcing IT can be so much more than that. Ranging from app development to business process optimisation, available solutions vary in characteristics and scope, but the one common thread is that they are used to support, facilitate or expand day-to-day operations a company is engaged in.

That’s the gist of it. So, the first step is to recognise the need to hire a contractor from the outside, and the next one is to pick the right type of outsourcing service. The determining factor will be the distance between the in-house team and the outsourced team, which will translate directly into the model of the relationship between them.

What are the types of IT outsourcing (based on geography)?

One of the distinctive criteria of outsourcing IT services is the geographical location of the outsourced team, which in turn will inform their modus operandi and translate directly into costs defrayed (or money saved).

  • Onshoring – the type of outsourcing where the team operates from within the same country as the company (e.g. a company in Warsaw, a team in Łódź, both in Poland).
  • Nearshoring – the type of outsourcing where the team operates from a country on the same continent as the company (e.g. a company in New York, US, a team in Calgary, Canada); some definitions specify that the team’s country should border the company’s country (Next Technology Professionals 2021; Magenest 2022).
  • Offshoring – the type of outsourcing where the team and the company are located on different continents (e.g. a company in New York, US, a team in Łódź, Poland).

Of the three, onshoring is the more expensive option (same country means similar wages and taxes, hence little room for cutting costs) but has all the advantages attributed to close-distance business partnerships (it’s easier to communicate, coordinate and manage; face-to-face meetings are possible; same tax system means less hassle when it comes to financial proceedings); offshoring is the direct opposite, offering the biggest opportunities for cutting costs, while nearshoring lands somewhere in between.

What are the types of IT outsourcing models?

Depending on the specific needs and the scale of the project, you may decide that more hands are needed onboard and as a result employ the services of one or more IT experts to accomplish a given goal. This process usually falls within one of the available models:

  • Staff leasing. Also called body leasing or staff augmentation. Means to hire a single or multiple unconnected IT professionals for a team for a limited time, usually when a gap is found in the in-house team (e.g. a missing skillset/toolset) and it’s necessary to fill it in order to complete the project.
  • Team extension. In this variant a team of specialists is hired, often through the help of an extension service provider (like a software house, e.g. Inwedo), with specific skills required for a particular project and a proven track record of a previous shared experience. This team works alongside the company’s internal IT team and the outsourcing partner entity helps with managing the outsourced professionals.
  • Using a dedicated team. The third option is to use an outsourcing vendor to employ the services of a full team that will work independently from the in-house team, usually at their own premises, and take full ownership of a project (or its specific aspect). Dedicated teams are highly-qualified and self-managed entities and often include a wide range of specialists, ranging from developers or QA engineers to business analysts, project managers, designers, and more. In this model, the vendor becomes a trusted partner of the company rather than just a temporary service provider; in some cases a dedicated team may replace an internal IT team entirely.

Inwedo provides both the team extension and dedicated team services. You can find more about differences between main outsourcing models here and here.

When do you need IT outsourcing?

In the 21st century, business realities of today may undergo a dramatic shift tomorrow and everything remains in constant flux. In this rapidly evolving environment, one thing is blatantly clear: growing demand for IT services. But depending on the type of business, you might ask yourself: do we even need our own in-house IT team? And if there is one already, another question arises – are they enough to not only support the daily operations of my company but also to help it grow and reach new heights of innovation?

The natural pain area of any commercial endeavour is connected with time. Whether it’s about creeping deadlines for long-term projects or the pressure of getting a new product on the market as soon as possible, it might be worth investing in staff outsourcing and get that much needed influx of new talent, skillsets and experience without the need of searching for them on your own. With the right outsourcing model chosen (preferably in cooperation with an external service provider), cutting down on the costs may also be on the table. Outsourcing is also the recommended choice when a business is not IT-centred as a dedicated team will allow it to (re)focus on its own core activities.

What IT solutions can you outsource? Outsourcing examples

The range of IT services that can be outsourced is very broad and encompasses most of the IT domain. The list includes (but is not limited to): application/software development, web development/hosting, application support or management, technical support or help desk, database development or management, telecommunications, infrastructure – hardware, software and network installation and support, networking and communications, disaster recovery (DRaaS), data centre management, data storage, email, security – virus, spam and other online threat protection (QuoStar 2021). The focus here will be specifically on examples of business process optimisation through application and software development as these are the areas that we are most experienced with and can offer the most market insights for.

Fresh food, fresh orders

A company operating in the ultra-fresh food market and providing ready-to-eat products in a B2B model found itself struggling with analytics. Reaching out to an external IT service provider resulted in ditching Excel spreadsheets in favour of a custom made application designed for production planning, order analysis, inventory, stock analysis, and daily updates. More about that here: https://inwedo.com/case-studies/green-factory/.

Less carbon dioxide, more knowledge

An organisation working in the climate change area and to restore the balance in the use of land in Sweden contacted a software house to help them build a platform for sharing knowledge and collecting data. The end result was a web solution in the form of a user-friendly application both for the farmers and the experts that support them in their goal of reducing the amount of carbon dioxide in the air and implementing greener methods of cultivating soil. More about that here: https://inwedo.com/case-studies/svensk-kolinlagring/.

What are the benefits of outsourcing IT services?

Outsourcing IT services can have various positive effects on your company, ranging from boosting its IT capabilities and supporting the in-house IT team to offering new, technology-enhanced ways of running the business. In some instances, a brief and supposedly just a temporary cooperation might even grow into a strong partnership with a trusted outside service provider. Here’s the breakdown of the expected interconnected wins:

  • A dedicated group of experienced IT veterans is coming on board but there’s no need for an individual recruitment process or building an IT team from the ground up.
  • Because the team is all set, it saves time and relieves the organisation from having to perform onboarding of each individual and getting its own in-house IT team ready.
  • Streamlined accounting process combined with clear reporting procedures allows for a more focused budget planning, improves the cash flow and – if accompanied by efficient communication culture and collaboration based on transparency – provides the means to track the costs of the service more closely.
  • A reliable vendor providing IT outsourcing services always considers the customer’s business goals. This kind of approach and taking the accountability for the outcomes is a great relief to project managers because the business and the success metrics of its operations are being overseen by even more responsible and experienced people.

Outsourcing IT comes in many different shapes and forms and its different models of complexity reflect different needs of market entities. Be it small companies in search of an IT guru to help them with a project, or gigantic corporations employing services of dedicated remote teams from around the world. Everyone – including you – interested in saving costs and enhancing their business operations can turn to an outside vendor and find the best IT solution to continue on their path to success.

Sources:

Magenest. (2022, February 3). What Is IT Outsourcing Service? What You Should Know About It. Retrieved July 1, 2022, from https://magenest.com/en/it-outsourcing-services/.

Next Technology Professionals. (2021, February 17). Onshore, Nearshore & Offshore – What Is It? Next Technology. Retrieved July 1, 2022, from https://nexttechnology.io/onshore-nearshore-offshore-what-is-it/.

QuoStar. (2021, January 3). What Is IT Outsourcing? Retrieved July 1, 2022, from https://www.quostar.com/blog/what-is-it-outsourcing/.

Twin, A. (2022, March 31). Outsourcing. Investopedia. Retrieved July 1, 2022, from https://www.investopedia.com/terms/o/outsourcing.asp.