What Is Outsourcing: Definition and Benefits

What Is Outsourcing? Definition and Benefits: Develux Guide

TABLE OF CONTENT

Any business includes a wide range of processes – from bookkeeping and logistics to IT system administration. Small companies and startups often don’t have budgets to maintain a separate department for each part of the company’s operations flow. That is why choosing an optimal outsourcing destination becomes a vital step if you aim to cut development budgets without compromising quality.

Outsourcing is an effective business model that is considered cost-effective and beneficial for short- and long-term projects. Opting for this approach helps you avoid wasting your company's resources on secondary tasks and, instead, focus on your primary business-specific objectives. This way, delegating the tech side of your business processes to an expert IT company can optimize the workflow, increase productivity, and save money. 

Here is a tangible guide that explains outsourcing’s definition, types, and benefits, as well as how it’s implemented in real life. 

Outsourcing: Definition

What is outsourcing? In general terms, it’s a business practice of delegating job functions or services to a third party. Information technology outsourcing implies transferring all or parts of IT support, maintenance, and modernization processes to an IT service company. For such companies, these tasks and services are a core activity. 

Depending on your company’s running objectives, outsourcing may concern a range of operations – from the entire IT functioning to detailed, smaller-scale components like custom software development, network services, disaster recovery, or QA testing.

Why do companies choose to outsource work? Some services are highly specialized and require deep professional knowledge. Others are provided once or on a non-frequent basis. Often, hiring highly specialized staff may be too expensive and not worth their minimal workload. 

Here is when outsourcing becomes the most optimal and cost-efficient solution. Outsourcing companies maintain highly skilled and experienced teams and provide each project with the specialists needed for the project’s successful completion.

More specifically, an IT outsourcing company is always a professional team – from junior engineers to seasoned experts – which has a developed working strategy depending on the project’s complexity level and goals. Moreover, such teams have internal project managers who monitor the entire workflow. This way, you delegate the overall process and can focus on your company’s business-specific tasks.

There are various types of IT services delegation. Based on the geographical factor, outsourcing can be:

  • Onshore – within the country where your company is located;
  • Nearshore – a neighboring country or located in the same time zone;
  • Offshore – a more distant location with a different time zone.

Traditionally, nearshore and offshore options are the most cost-efficient solutions. Often, you can find highly skilled professionals in different economic regions. This way, a lower budget for your company may still be enough to subcontract a top expert team from a country with lower salary rates. 

In addition to qualified IT staff, outsourcing companies continuously improve their services' quality by introducing various specialized software systems. This allows monitoring and controlling workflows, planning further activities, automating the system administrator's work, and reducing implementation time and resources.

Outsourcing companies take full responsibility for the IT infrastructure – besides providing support and maintenance, they also select software, hardware, and any extra contractors to maximize consistency among all solutions and improve overall efficiency.

Outsourcing: Pros and Cons

Whether you need to increase efficiency, optimize scalability, or improve your company's products' quality, there may be various reasons to opt for business process outsourcing. While this model has become more popular among entrepreneurs worldwide, it remains an important decision that can impact your company's management strategy. 

Like any other model, IT outsourcing services have their strong and weak sides. A better understanding of the key facts helps make the right decision.

Outsourcing: Benefits

Here’s an overview of the outsourcing partnership model’s strong sides that may be helpful.

  • Minimizing Management Costs

Most subcontracting vendors have their project managers and team leaders. Their internal specialists take responsibility for translating your objectives to each team member, assigning tasks, and optimizing the workflow. It significantly saves time on each stage project.  

  • Eliminating In-House Team Budgets

As many small and medium-size companies don’t have budgets or consistent workflow for in-house IT teams, this is the most cost-efficient solution. Choosing an outsourcing company from a different economic area may also help you cut expenses significantly. You also don’t have to include vacation payments, bonuses, and similar costs in your budgets as your subcontractor takes care of them. 

Most subcontracting vendors have their project managers and team leaders. Their internal specialists take responsibility for translating your objectives to each team member, assigning tasks, and optimizing the workflow. It significantly saves time on each stage project.  

  • Eliminating In-House Team Budgets

As many small and medium-size companies don’t have budgets or consistent workflow for in-house IT teams, this is the most cost-efficient solution. Choosing an outsourcing company from a different economic area may also help you cut expenses significantly. You also don’t have to include vacation payments, bonuses, and similar costs in your budgets as your subcontractor takes care of them. 

Outsourcing: What to Keep in Mind

However, some disadvantages of outsourcing may also arise. Business analytics advise considering certain factors while making a final decision.

  • Choosing Carefully

Even good advertising can sometimes be misleading. It may take quite some time to choose your IT outsourcing partner, as you need to carefully check their real-life cases, customer reviews, and online presence. In some cases, a well-advertised company may not meet your standards.

  • Considering Long-Term Partnership

Some outsourcing companies may not be ready for a long-term partnership. They offer standardized solutions to all their clients, which leads to a lack of flexibility. If you look for a reliable vendor for more than one project, you may have to collaborate with a few companies before finding the best option.

  • Minding Contracts

The outsourcing model’s legal background may sometimes become an issue in the long run. Signing a contract with a new subcontractor requires increased attention. In some cases, your collaboration may end up in your side’s disadvantageous position and less legal security.

Outsourcing in Real Life

Which is the best example of outsourcing? Whether it’s a law firm storing and backing up their files in a cloud, HR recruitment services, knowledge process outsourcing, or a small business delegating its bookkeeping to an accounting firm – there are many examples of this business model in almost every field that can help to answer the question “What is outsourcing?” 

Custom Software Development

In this context, outsourcing is the practice of hiring an IT company to create enterprise software that facilitates your business and your specific task performance. It can be a custom CRM, a cross-platform application for brand expansion, or a fully customized ERP developed according to your employees' and executives’ routine needs. Most business-specific software is designed to automate all work processes, provide excellent communication between departments, and incorporate data and analytics solutions. 

In today’s competitive business environment, most successful companies opt for custom software. The development companies offer substantial multi-component software systems. These components can be combined and scaled to facilitate any niche-specific tasks and objectives. 

IT Consulting

This type of IT outsourcing contract is highly popular among companies with existing software solutions, tech strategies, or even their own IT teams. Often, such businesses require external assistance in these strategies’ assessment or further planning. IT consulting comes into play when you need to test new solutions deployment or formulate system implementation plans.

This outsourcing type is beneficial for successful HR management strategies without having your extended HR team. Experts specializing in talent mapping and recruitment help you interview and hire tech employees and provide candidate’s in-house trials. They also assist in outstaffing for single projects and ensure potential candidates’ credibility. 

Digital Marketing

Other outsourcing example includes marketing delegation. As your company's online presence is vital for attracting customers and generating revenue, you would usually have two options: either hiring your in-house marketing team or subcontracting this part of business development to an existing team. Like in other outsourcing types, the latter approach means no extra cost for maintaining and managing your in-house employees.

When digital marketing services are offered by an IT outsourcing company, their marketers have a solid backup of their tech teams. This model ensures high-quality and up-to-date SEO and digital strategies implementation, as well as professional video content and ad creation. Digital marketing expert teams develop a full promotion campaign for your company – from market research and competitor analysis to content plans and campaign creation. 

Develux and Our Services

Today’s market of IT outsourcing services offers thousands of potential outsourcing companies that would become your reliable long-term tech partner. Whether you need to create a highly business-specific enterprise software for your company, transform your business model, or boost your online presence – Develux offers our top multi-skilled experts. 

Making a final decision while choosing between outsourcing companies may become a challenging task. Here’s Develux philosophy. 

Custom Development and Project Support

We provide the support and resources necessary for your project. We guide the work process at all stages and provide detailed progress reports. We assign our experts to perform separate tasks if your budget doesn't include a UX designer or a data analyst or take over the entire process of your enterprise app’s development and deployment.

Professional Communication

We provide effective end-to-end project management, ensuring smooth workflow and your project’s successful completion. This way, you don't have to spend your time and resources explaining your ideas to each team member – our managers are here for you on call 24/7. 

Cost-Effective Partnership

We carefully elaborate a contract for each project and comply with its terms and conditions. We focus on our clients’ success and value feedback. Develux is interested in your future projects involving experts from different fields according to the needs of each case.

Questions & Answers

What Are Outsourcing Types?

Outsource staffing can come in three main forms. Onshore subcontractor companies are located in your country, while nearshore – in a neighboring country or the same time zone. You can also find expert teams in remote locations – offshore. This is usually the most cost-effective option.

What Are the Benefits of Outsourcing?

According to the outsourcing definition, it’s a process of hiring an external expert team for performing specific tasks. Outsourcing companies provide agreed services and take care of project management, recruitment, and wellbeing of their specialists. This model is considered one of the most cost-effective.

What Project Types Can I Outsource?

In general terms, business process outsourcing means that any project can be delegated to experts – from bookkeeping to IT consulting to recruitment. The most popular cases for IT outsourcing include custom software development, quality assurance and testing, mobile application development, and data analytics.


What Is Outsourcing?

Outsourcing is a business model of delegating parts of your business processes to a third-party company. For example, small and mid-size enterprises hire an IT company for specific tasks like custom software development or system administration and maintenance.


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