Every entrepreneur dreams of becoming as successful as Richard Branson, Steve Jobs, Larry Page, and Warren Buffet.
In today’s ultra-competitive world, entrepreneurs have been fortunate enough to have different platforms from where they can hire talented professionals.
Let’s consider you own an IT company & want to generate your business. Well, scaling up means hiring new employees, that can add up to the additional cost. In this case, outsourcing becomes a wise decision to make. Yes, that’s true. Outsourcing in a country where labor is cheap can help you save up to 60% of the development cost. As a matter of fact, many outsourcing facts and statistics that supports this business strategy..
Are you planning on outsourcing your business functions like software, website or mobile app development? Undoubtedly, outsourcing is a great business strategy. Just, make sure that you have in-depth knowledge about this business strategy, what are the different types of outsourcing and why it is beneficial for your company.
Before we talk about the types of outsourcing, let us understand;
What is IT Outsourcing?
IT Outsourcing can be defined as the strategic utilization of external IT resources. These external resources or remote developers are professionals living in different geographical locations, handling tasks and delivering functions as per the requirement that is otherwise managed by internal resources.
Application or software development, web development, technical support, application support, networking, data center management, data storage, security, etc, are a few examples of outsourcing services.
You may wonder why an enterprise chooses to outsource, right? Though there are countless reasons why companies work with offshore developers, the most common ones are:
- For boosting brand visibility.
- Access to global resources.
- Controlling operational cost.
- To increase efficiency for time-consuming tasks.
- To distribute risks.
- Reducing service delivery time.
- Accommodate peak loads.
However, when you hire a dedicated development team and handover tasks to them, they maximize flexibility. This type of work offers a great opportunity to obtain digital transformation and growth while reducing risks and increasing profit.
The Different Types of Outsourcing: (Infographic)
Outsourcing can be broadly classified into three major categories based on location. Let’s discuss the three types of outsourcing and which one should you choose!
Handing over tasks to a company located in the home country or nearby region is onshore or local outsourcing. Let’s discuss a few benefits of onshore outsourcing.
- Speak the same language.
- Are easily accessible.
- Easy to control.
- Live in the same timezone.
Form the above benefits, onshore outsourcing looks very promising and reassuring.
But before you start jotting down the top outsourcing companies in your region, you have to take care of one thing so that you don’t get disappointed. That is the cost they will charge from you. Although there are no cultural barriers in onshore development, the operational cost is very high as compared to other outsourcing options.
Countries like the USA has a very high cost of living that corresponds to high hourly rates for developers ($100-$250 on an average of approximately). It is entirely up to you if you are willing to take the risk and choose this option. But there is no guarantee that high rates will ensure high-quality results.
Recommended Read – Cost-Benefit Analysis of Outsourcing: India vs USA
Nearshore software outsourcing is getting the work done by companies or professionals that are located in countries having similar time zones or minimal time differences.
In this type of outsourcing, hourly rates of the developers may vary from $25-$50.
This adds up the major cost savings making everything a breeze. Although, there should be some similarities related to time, culture and people. Many United States companies outsource work to Canada and Mexico.
Pros of nearshore outsourcing:
- Geographical proximity
- Less or no timezone difference
- High efficiency
- Cultural and language similarities
Nearshore Outsourcing is a good choice for projects that need innovative thinking and experimental tasks. Your product or service will not only be fully developed but fully supported by the team. Retain a good control & high responsiveness when you choose a nearshore company that will thoroughly understand your market. Everything is translated into better quality because the workers don’t have to adjust their schedule to other countries’ working hours.
This type of outsourcing is a strategic practice where the company hires a third party or an individual from another country to perform certain tasks for your business, usually to leverage cost benefits.
India is the first country that comes to mind when you think of offshore developers. Low price is the major factor. Hourly rates range from $10-$20. Surprised? Don’t be, because that’s true.
Here is why most enterprises consider outsourcing in India or offshore outsourcing:
- Less Cost: The best thing about offshore outsourcing is that currency exchange works in your favor. It also saves the cost you would have invested in renting large office premises or extending the already existing office. Moreover, in this type of outsourcing, you only have to pay when the task is complete and not otherwise.
- Professionals Having Right Skills: Your business idea may be excellent but you may not know how to perform the task. In this case, outsourcing in India becomes a huge advantage. It’s because India has a large talent pool of professionals that are ready to work at low wages.
- Round The Clock Customer Support: Offshore outsourcing gives you the opportunity to connect with your customers across the globe as you provide them 24/7 assistance.
- Scale Your Business: Offshore outsourcing can help boosts your business as the tasks are performed by experienced and highly skilled professionals. Having more time in hand, the business owner can then focus on other business objectives.
- Risk Mitigation: When you rely on technology, it may become outdated too quickly. And this happens quite often. The offshore development companies keep you ahead of the curve as they stay up to date with the ever-evolving trends in the industry & technology.
Which Type of Outsourcing to Choose And Why?
Your preference completely depends on the complexity and depth of the occurrence. Offshore Outsourcing Is A Win-Win Situation! Collaborating with an offshore development center levels the global playing field and you should consider it because of the following reasons:
1. Get The Best That The World Has To Offer:
While outsourcing, there is nothing that can stop your search for expertise professionals overseas. When you can hire dedicated developers no matter where they are, then why settle for less? On top of that, the option to choose the best strategy among different types of outsourcing makes the process more flexible.
2. Get More Services At Reasonable Prices:
Cost of living differs from country to country. Also, outsourcing gives you the opportunity to hire remote teams from the country where your budget fits in.
3. Span Time Zone:
Every business has some deadlines to keep. In such a case, outsourcing becomes a great decision. While you & your local team are busy sleeping, your hired remote team can complete the urgent tasks.
Recommended Read – Offshore Development: The Bigger Picture
Depending on the service you are planning to outsource, your offshore development partner can enhance your operational efficiency, streamline communication and make it simpler for your existing team to collaborate.
If you genuinely want your business to outshine and stay ahead in the competition, focus on core competencies and utilize the latest technologies. Just choose the best strategy for your business, from different types of outsourcing, hire a remote development team and achieve all that you want to and more!
Planning to develop your product/software offshore? Don’t know which outsourcing model to choose? Check this post & find out the best engagement model for offshore development!