4 Reasons Why Companies Decide to Outsource IT in 2024

Introduction

Many managers and CTOs tend to overlook the fact that they're not multi-skilled robotic beings. 

We understand that; it's frequently challenging to entrust tasks, and similarly, it's not easy to contract out responsibilities. However, the growth of the business appears to be on the line.

Let's center our attention on that incredible feeling when you assign a task and someone accomplishes it exceptionally well. Why did that occur? It happened because of your dedication – you provided clear instructions to this individual – and because the person chosen was the right fit for the job.

If you can achieve this level of success with delegation, you can replicate it through outsourcing as well. The benefits for you will be significant – allowing you to direct more of your attention towards what you're most needed for: leadership and generating income. 

If you're not completely sold on this concept, let's delve into the four primary reasons why companies opt for outsourcing.

Why outsource software development?

1. Outsourcing means more capital for growing

It might sound like a cliché, but the truth remains: saving money is not only wise, but also an essential strategy for many companies aiming to grow, evolve, and maintain their presence and market share in the market. If you tend to be more of a saver than a spender, you're essentially freeing up your capital to be invested in other valuable facets of your business.

Both saving and steering clear of hefty expenditures hold great significance, particularly during the initial stages of development. Fortunately, you have the opportunity to leverage outsourcing to achieve this. Whether you opt for nearshoring or offshoring, these approaches can assist you in curbing outsourcing expenses while upholding the quality of your projects.

Moreover, outsourcing can yield benefits if you're seeking funding for your endeavors. Investors are more inclined to place their trust in your company when they observe that you're channeling funds back into areas that generate income.

Choose to outsource - your benefit

Your benefit lies in the opportunity to save money, allowing you to invest in other crucial areas of your business, especially during initial development stages. Outsourcing, whether through nearshoring or offshoring, enables cost reduction while maintaining quality. This financial prudence can also enhance investor confidence as they see your commitment to reinvesting in income-generating aspects.

<span class="colorbox1" fs-test-element="box1"><p>Tip: When you decide to outsource, it's crucial to balance cost with quality. Check our guide to custom software development rates in various regions here.</p></span>

2. Outsourcing lets you focus on the core activities

Ed Reeves, co-founder and director of Moneypenny says: “I hate doing accounts. It has, and always will be, my idea of purgatory. So one of the first things I did when I founded Moneypenny was to hire an accountant, someone who loves sifting through spreadsheets and sorting out figures.”

This serves as a fantastic illustration of effective time management! Entrusting tasks that require assistance to others is a smart move.

Thanks to outsourcing, you can halt the squandering of time on activities that only provoke frustration. By tending to your company's well-being, you'll also carve out time for yourself – a paramount achievement for any entrepreneur.

The focus should be on expansion, not immersing yourself in every minor operational aspect vital for the core aspects of your company's functioning. This principle holds true for every manager and CTO across all sectors of the present market. Every individual requires the space, time, and environment to channel their foremost abilities. If such an environment is elusive, contemplating outsourcing becomes a strategic option, facilitating swifter growth.

Choose to outsource - your benefit

Your advantage lies in recognizing tasks that bog you down and delegating them. Outsourcing liberates you from time-wasting and frustrating activities, enabling you to prioritize your company's growth. This approach applies universally to managers and CTOs, affording them the space to focus on their strengths. Ultimately, outsourcing becomes a pathway to faster business expansion.

3. Outsourcing gives you access to experts

Working with the right, talented and dedicated people – is the way to successful growth. Of course, it’s an ideal situation – we know how hard it is to find such people nowadays. So the question is: how to find those geeks and invite them to work with you?

The answer is – outsource them.

Undoubtedly, there are tasks for which you require part-time or one-off assistance. Whether it's developing an app, designing a website, creating a logo, orchestrating a marketing campaign, or devising a content strategy – whatever the task, it demands expertise.

Outsourcing provides access to these proficient individuals, enabling you to not only tap into their talent but also save both money and time compared to in-house hiring. Leveraging widely-used cloud technology allows you to compete on par with even the largest players in the market!

For example, in Brainhub, we specialise, among other services, in IT team augmentation. It helps to speed up software development process with remote developers and product experts.

<span class="colorbox1" fs-test-element="box1"><p>Tip: Always look for the experts in chose fields. Check out the ranking of top custom software development companies to spot experts.</p></span>

Choose to outsource - your benefit

Your advantage lies in partnering with the right, skilled, and committed professionals, which is crucial for successful growth. Although finding such individuals can be challenging, the solution is outsourcing. This approach is ideal for tasks requiring part-time or one-off assistance, such as app development, website design, logo creation, marketing campaigns, or content strategies. Outsourcing grants access to expert talent while saving both time and money compared to in-house hiring. Moreover, utilizing prevalent cloud technology empowers you to compete effectively against major market players.

4. Outsourcing means flexibility

As you may know, in our fast-paced and changeable market, your business has to be flexible and ready to customize to client’s needs.

Let’s imagine a client who run a marketing agency. It typically gets a few phone calls and email inquiries a week. But after a very successful online campaign and an article in a respected trade magazine, the phone went red and emails keep on coming.

The client needs support to maximize growth and control the level of service. Outsourcing support will allow this client for deriving professional help and expert’s knowledge in a busy period.

In this scenario outsourcing brings advantages such as:

• instant help
• professional support
• adaptable service
• empowering your business
• higher responsiveness
• free resources and time to focus on growing
• fighting competitors

Choose to outsource - your benefit

Your advantage lies in being adaptable to changing market dynamics and tailoring your business to meet client needs. For example, by outsourcing support during this busy period, you can ensure professional assistance and expert knowledge, effectively managing growth while maintaining service quality.

Areas of successful outsourcing

Today, the perks of outsourcing can be described as more strategic – focusing on added-value and assigning more & more activities to specialized contractors.

The areas for a successful outsourcing are as follows:

• clear business objectives
• strategic planning and following one consistent vision
• selecting vendors
• properly written contracts and agreements (clear terms and conditions)
• great communication within a company
• leadership support

Example of a success story: outsourcing company + National Geographic

We cooperated with National Geographic to realize their visions. Our responsibility was to build a whole product from very beginning of conception, through implementation, to maintenance.

Thanks to a lean startup processes, we decreased the software delivery time by 80% (when compared to internal National Geographic IT resources). Even a big corporation can act as an Entrepreneur, by becoming an Intrapreneur and benefit from outsourcing.

How to start building an outsourcing strategy?

Building an effective outsourcing strategy involves several steps:

1. Identify goals: Define clear goals for outsourcing. Determine what you aim to achieve, whether it's cost savings, expertise access, scalability, or other specific benefits.
2. Evaluate tasks: Identify tasks or projects suitable for outsourcing. Focus on non-core or resource-intensive activities that could be handled more efficiently externally.
3. Assess risks and benefits: Evaluate the potential risks and benefits of outsourcing. Consider factors like data security, quality control, and potential impact on in-house teams.
4. Determine scope: Define the scope of outsourcing. Specify which tasks, projects, or processes will be outsourced and the level of involvement required from the outsourcing partner.
5. Select outsourcing model: Decide on the outsourcing model that suits your needs – offshore, nearshore, onshore, or a combination of these. Choose between freelancers, specialized agencies, or dedicated teams.
6. Choose providers: Research and select outsourcing providers based on their expertise, experience, reputation, and alignment with your goals.
7. Budget allocation: Allocate a budget for outsourcing activities. Consider costs related to service fees, communication tools, project management, and any unforeseen expenses.
8. Communication plan: Develop a clear communication plan. Establish channels, frequency of updates, and reporting mechanisms between your company and the outsourcing partner.
9. Contract agreement: Create a comprehensive contract or agreement outlining expectations, deliverables, timelines, payment terms, confidentiality, and dispute resolution.
10. Transition plan: Develop a plan for transitioning tasks to the outsourcing partner smoothly. Ensure that all necessary information and resources are provided for a seamless handover.
11. Performance metrics: Define key performance indicators (KPIs) to measure the success of the outsourcing arrangement. This ensures alignment with your goals and tracks progress.
12. Quality control: Implement quality control measures to maintain the desired level of output from the outsourcing partner. Regular assessments and feedback are essential.
13. Data security: Establish data security protocols to safeguard sensitive information throughout the outsourcing process.
14. Risk mitigation: Develop contingency plans to address potential risks that may arise during the outsourcing engagement.
15. Change management: Communicate the outsourcing strategy to your internal teams and manage any potential resistance or concerns that may arise.

How to find an outsourcing partner?

Finding the right outsourcing partner involves a systematic approach:

1. Define needs: Clearly outline the tasks, projects, or services you intend to outsource. Identify the specific skills, expertise, and resources required.
2. Research: Research potential outsourcing partners extensively. Look for companies, agencies, or freelancers with a proven track record and expertise in your industry or the specific tasks you need.
3. Ask for recommendations: Seek recommendations from colleagues, industry peers, or online communities who have experience with outsourcing. Their insights can lead you to reliable partners.
4. Check rankings: Utilize online platforms like Upwork, Freelancer, or specialized outsourcing platforms that connect you with freelancers and agencies offering various services.

Your next steps

Evaluate your business operations and identify areas where outsourcing could be beneficial. Determine which tasks or projects could be effectively delegated to an external team of experts or teams. Look into different outsourcing providers, whether they are freelancers, specialized agencies, or offshore companies. Research their reputation, experience, and capabilities to find the best fit for your needs.

Remember that outsourcing is not a one-size-fits-all solution, and the approach you take should align with your business goals and needs.

FAQ - why do companies outsource?

Why is outsourcing so popular now?

Outsourcing has become increasingly popular for several reasons:

1. Globalization: Advances in communication and technology have made it easier to collaborate with teams and professionals from around the world, enabling companies to tap into a global talent pool.
2. Cost savings: Outsourcing often offers cost savings compared to hiring and maintaining in-house teams. Companies can access skilled professionals at a fraction of the cost, particularly when working with offshore providers.
3. Focus on core competencies: Companies are recognizing the value of concentrating on their core competencies and strategic goals while outsourcing non-core activities to specialists.
4. Rapid technological advances: The rapid pace of technological advancements necessitates specialized knowledge, which outsourcing can provide without the need for constant internal training and development.
5. Startups and SMEs: Outsourcing allows startups and small to medium-sized enterprises (SMEs) to access resources and expertise that might otherwise be out of their financial reach.
6. Digital Transformation: The shift towards digitalization and online business models has led to a greater reliance on technology-related services, making outsourcing IT and digital tasks particularly attractive.

When should a company outsource?

A company should consider outsourcing when:

1. They lack of expertise: If the company lacks the required expertise in a particular area, outsourcing can provide access to skilled professionals who can handle tasks efficiently. For example, a company can use the help of one of the top Node.js development companies to provide them with expertise in this technology.
2. They need cost efficiency: When it's more cost-effective to outsource a task rather than hiring and training in-house staff or investing in specialized tools and technology.
3. They have temporary or seasonal needs: For tasks or projects that are temporary, seasonal, or project-based, outsourcing allows the company to scale up or down as needed without permanent commitments.
4. They need to focus on core competencies: Outsourcing non-core activities lets the company focus on its core competencies and strategic objectives, enhancing overall performance.
5. They have resource constraints: If a company has limited resources, outsourcing can help manage workloads, preventing burnout and maintaining productivity.
6. They aim at the global expansion: When entering new markets or expanding globally, outsourcing can provide local expertise and market knowledge, helping the company navigate unfamiliar territories.
7. They care about rapid growth: During periods of rapid growth, outsourcing can help manage increased demand while keeping service quality intact.
8. They need time savings: For tasks that are time-consuming and take focus away from core business functions, outsourcing allows the company to allocate time more efficiently.
9. They need an access to technology: Outsourcing can provide access to advanced technologies, tools, and infrastructure without the upfront investment.
10. They want to mitigate risks: For tasks involving legal, regulatory, or compliance matters, outsourcing to experts helps mitigate risks associated with non-compliance.
11. They want innovation: Outsourcing innovation-oriented tasks can infuse fresh perspectives and ideas into the company's processes and strategies.
12. They need scalability: Outsourcing offers scalability without the constraints of physical space, enabling the company to handle fluctuating workloads.