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IT Outsourcing Best Practices: Do You Need to Develop an IT Outsource Strategy?

Chief Business Development Officer
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Expert in offshore development strategies for technology companies and startups. Legal background in M&A, IP rights, and contract law.
25 January 2021
7 min

The prominent feature of the tech industry is its ever-shifting environment. Thus, keeping the budgets along with the constant expansion and provision of the new IT services may be troublesome objectives without strategic decision-making. In fact, a sustainable and effective outsource strategy is the key to meeting your business goals. With a consistent approach, you will be able to minimize the risks and downsides of controversial outsourcing practices. Here we are going to discuss who needs to develop an IT outsourcing strategy and how to do it in order to enjoy its advantages.

 

Potential Challenges of IT Outsourcing

 

Outsourcing software development might be a challenge for several reasons. First of all, working on a product requires focus, time, and unique technologies because it is the core of your business. In the case of outsourcing software development, unplanned expenses may arise due to numerous adjustments and fixes. Considering that no one except you knows how the final version ought to look, edits are inevitable. 

 

results-of-offshore-development-center

 

Secondly, there is always a risk of violation of intellectual property rights due to revealing core information about the product and corporate insights. Undeniably, it’s better to assign confidential tasks to entrusted IT experts. What’s more, external employees don’t have the essential background and understanding of your business’s history and values. Consequently, while outsourcing the main business operations, you might obtain poorer results because of a less committed team of developers.

 

Finally, IT outsourcing may also prevent potential investors from putting money into your idea. It’s not uncommon for them to perceive outsourcing activities as a scarcity of knowledge and proficiency. In many cases, a skilled team of software engineers plays a key role in the final decision. The truth is that great ideas mean nothing, as long as there are no developers to implement them into practice. 

 

These points prove that it is much better to delegate secondary business processes – such as accounting, human resources, and facility management – to the contractors. You can make it certain by developing an IT outsourcing strategy on your own to evaluate and minimize the possible risks. Alternatively, you can alter the initial plans and start your own offshore software development. Read this article to find out the difference between outsourcing and offshoring.

 

If transferring part of your business to third parties does not sound appealing to you, consider opening your offshore development center. That’s exactly what BigCommerce did after long-term cooperation with outsourcing companies. They were tired of the constant competition for  IT experts in the outsourcing industry. With our help, BigCommerce managed to assemble their professional team at a rapid pace. The company engaged nearly 30 specialists in six months and over 50 engineers more within one year, which was a great boost for the business. What is more, we took care of the compliance process with the best national and international practices to ensure full legitimacy and transparency. Consequently, with Alcor’s legal assistance BigCommerce was successfully transformed into a public company and got access to the IPO market.

 

 

What is an Outsourcing Strategy?

 

IT outsourcing strategy is a plan regarding what to outsource, when to do it, and to which extent. There are a large number of outsourcing strategies among traditional and innovative ones. For instance, a long-tail strategy combines primary long-term partnerships and contracts with a few smaller suppliers, who cover the operations beyond the capabilities of main providers. However, All strategies have the same aim: to provide a detailed method of transferring activities at the lowest possible cost – to get the best revenue figures. Just choose the most appealing and appropriate plan and you are good to go.

 

Usually, many departments are involved in writing an outsourcing strategy, including legal, finance, and HR. Their joint efforts help to define operations that are beyond the capabilities of the in-house team. When those are specified, the company starts looking for providers that have essential qualifications and instruments to deal with the delegated tasks.

 

What are the Benefits of an Outsourcing Strategy?

 

There are plenty of advantages of an outsourcing strategy. To begin with, having an outsourcing plan prevents you from making unreasonable business moves. In essence it implies no wasted money with time-saving and cost-effective solutions. It ensures systematic steps on the way to achieving specific goals. In addition, you can track results, see your progress, and identify trends in getting the work done. Outsourcing strategy enables you to evaluate the risks and make an informed decision as regards the vendor’s selection.

 

Apart from that, by examining all the available data, it’s possible to define your market position and develop a plan for the future. Accordingly, strategic outsourcing has the potential to relieve your pains, maintain high-quality standards, and boost competitiveness. 

 

5 Tips on How to Develop IT Outsourcing Strategy

 

Once you have decided to delegate your business tasks to external contractors, make sure that you have built an effective outsourcing strategy. Here is the list of outsourcing best practices to include in your plan.

 

it-outsourcing-strategy

 

  1. Find Out When to Outsource 

    Choosing the right time to outsource is an important business move. Sometimes IT companies try to cover all the time-consuming operational processes on their own. Consequently, too much attention is paid to collateral tasks. You should notice the first signs of the necessity of external help when your administrative activities get out of control. Another hint is an increase in the client’s requests, as well as the number of projects you cannot cope with; then it’s better to admit that you need a hand and outsource your non-core business functions.

  2. Decide What to Outsource

    In case you experience a lack of time, try to make a list of your daily tasks, and ask your colleagues to do the same. Go through them and see which of the duties are the most time-consuming. For example, if you spend too much time reviewing lease agreements, then consider outsourcing real estate services. The second type of functions worth outsourcing are specialized ones you can’t do by yourself, such as accounting and legal compliance. As soon as you get rid of these collateral tasks, you’ll get the chance to focus more on your product – which is the core.

  3. Define your Objectives

    Your company may also need IT outsourcing in case of establishing new services to attract more clients, or expanding the existing ones for your loyal customers. Obviously, these business aims imply different KPIs. Therefore, as soon as you come up with the actual reasons why to outsource, it’s crucial to identify measurable and quantifiable goals. No doubt, the company that outlines precise targets has a greater opportunity to develop a cost-effective and useful outsourcing strategy.

  4. Choose an IT Outsourcing Engagement Model

    You should choose the IT outsourcing engagement model according to your business requirements. There are three most popular outsourcing plans. The most common one is called staff augmentation. It means having external employees who take care of specific tasks while following all your directions. The second one is a project-based model when outsourcing companies have full control over a specific project from start to finish. The last one is a dedicated team model, which implies engaging outside personnel to extend in-house team capacity. You don’t have to worry about delegated processes because they are fully managed by your external co-workers.

     

    There is one more alternative model – your own offshore R&D center – that merges full control over your corporate policies, an opportunity for scaling, as well as quick and quality recruitment. There are no third parties when it comes to employment, so as a result you receive the dedicated staff with necessary skills. Visit this page to see more details.

  5. Plan your Budget

    Another tip is to calculate the financial costs of desired goals carefully. In fact, haphazard outsourcing may result in even higher costs than in-house services. Thus, to reduce the risks of frittering away the budget, it’s highly advisable to be prepared for both estimated and unexpected expenses. Sometimes the service providers introduce “hidden costs” which may include the management of outsourced production, unplanned logistics, new requirements on IT infrastructure, and so on. A reputable mediator can help a company to uncover the hidden costs and find a balance between affordability and excellent results. The best way out is to switch your engagement model to a comprehensive business solution with a crystal clear pricing method.

 

 

Final Thoughts

 

All in all, writing an outsourcing strategy helps you to overcome all possible challenges and get some successful experience while transferring your internal operations. When you select a specific strategy, outsourcing is performed in a more gradual and organized manner. For sure, it’s quite useful to have a detailed outsourcing plan you can turn to in case of an emergency.

 

Nevertheless, software development outsourcing appears to be problematic for various reasons. Therefore, Alcor advises you to delegate only secondary business processes – which we will be happy to take care of.

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