- Business
IT Outsourcing — Definition, Types and Benefits of This Solution
IT outsourcing helps companies reduce costs and gain a competitive edge, as long as they find the right partner to work with. What are the types of outsourcing, and what are the benefits of hiring external companies?
Both large companies and young startups look for assistance in implementing, managing and maintaining software used in modern IT environments. Working with an experienced software house results in a product tailored to the needs of users, which is significant in a specific market.
It’s estimated that the global IT outsourcing market will grow by $98 billion between 2020 and 2024, averaging 5% growth annually. Poland is a strong player in this market, ranking among the top three most popular countries for IT outsourcing, mainly due to having high-quality services at reasonable prices and some of the best programmers in the world. According to the Poland 2025: Europe’s new growth engine report, Poland is ahead of Central and Eastern Europe and India in outsourcing growth rate.
IT outsourcing definition
Outsourcing is the business practice of using third-party providers to complete a given project. In the IT industry, for example, this means outsourcing complex application building, product monitoring, and development. In fact, it’s one of the best ways to take advantage of professionals who can comprehensively handle the process of creating and bringing a product to market.
Among the most popular reasons for using IT outsourcing is value for money and access to skills and time that you and your own team lack to tackle the process. It’s also an easier solution than hiring in-house specialists. But the key to success is finding the right partner to work with.
Types of outsourcing
Outsourcing can be performed inside or outside the country, and the particular forms of outsourcing are mainly differentiated by location
Offshoring
Offshore outsourcing means outsourcing IT services to another, much more distant country. Offshoring is usually the most cost-effective form of outsourcing, as it allows you to benefit from favorable price conditions due to lower labor costs, profitable economic conditions or greater access to talent in a given country.
This type of relationship is often associated with significant time differences, but this doesn’t have to be an obstacle to effective cooperation. Time differences allow a company to provide non-stop technical support. An experienced company will easily provide its services in different time zones and avoid the risks associated with IT outsourcing.
An example of offshoring is when a company from the United States delegates tasks to an outsourcing company in Poland.
Nearshoring
Nearshore outsourcing, as opposed to offshoring, involves assigning work to neighboring countries with the same or a similar time zone. This allows for maintaining seamless communication facilitated by a similar culture or work ethic.
Another advantage of this type of cooperation is improved security of data provided by the ordering party. For example, by outsourcing software development within Eastern Europe, you receive services that comply with the standards, regulations, and laws of the European Union, which are strongly emphasized in Poland – a country that places great importance on data protection.
An example of nearshoring is a German company that employs a team of programmers in Poland.
Onshoring
Onshoring, also known as homeshoring, involves hiring professionals within the ordering party’s own country, usually from the same city or surrounding area. This option makes it easier to control the work and receive quality service at a reasonable price.
In addition to cost factors, companies may also opt for onshoring due to the shortage of specialists in their particular locations.
An example of onshoring is a company from Cracow hiring IT security experts from Wroclaw.
IT outsourcing benefits
Choosing the right software house to carry out your IT project can speed up time-to-market and reduce the cost of implementation. What are some other IT outsourcing benefits?
Access to proven specialists
Outsourcing allows you to reach specialists who may not be available locally. So if a company lacks programmers with the experience and skills necessary to develop a certain product, it’s worth outsourcing to a software house with the right expertise.
Searching for specialists on your own or developing skills within your team isn’t a bad solution, but it may take months or even years. The company you outsource a project to may be available right away and provide you with access to professionals who already have the knowledge and skills you need.
Creating a quality product
When you outsource a project, you have to define precisely what you need, which definitely increases the chances of creating a quality product. The company you outsource to focuses solely on your project at any given time, unlike an in-house team, whose priorities may change.
If you choose a company with an extensive portfolio and up-to-date knowledge, you’ll get a product built with the best technology and tools tailored to your application. An added benefit is the ability to track the progress of the project on an ongoing basis, especially if the team uses Agile methodology in their work.
Trial period
Another IT outsourcing benefit is the trial period, during which you can check whether the company or the proposed form of cooperation actually meets your needs. You can make the final decision about continuing or hanging up the work after a certain amount of time, e.g., a month. When signing a contract with a software house, pay attention to the option of signing an NDA and make sure that you get the code on your own.
Cost reduction
Typically, outsourcing is more cost-effective. This is often due to lower labor costs or cheaper infrastructure in the countries to which you outsource programming work. Outsourcing is certainly less expensive than recruiting and building your own development team. When you work with an external team, you only pay for the time they spend working on your product.
It’s common for companies to outsource data storage as well, as this is often cheaper than buying and maintaining your own infrastructure.
Significant time savings
IT outsourcing gives you the opportunity to focus on your business’s core needs while others work on your next project. Project development can start right away, and you don’t have to spend weeks training people and months handling a project internally.
By outsourcing, you significantly reduce the time spent getting your product ready for release, so you can get feedback faster and bring a profitable product to market.
Scalability
An external development team can change as the needs and goals of the project change. It’s much easier to adjust the number of external programmers than to recruit new ones during a project.
Knowledge sharing
A competent outsourcing partner, apart from delivering a high-quality product, is also a treasure trove of knowledge about the processes, methodologies, technologies or tools used. By working with them, your team can broaden their own skill sets and gain experience that may be useful in future projects.
5 major IT outsourcing trends in 2022
Staying competitive in the marketplace and creating the best products requires keeping up with trends that change year to year. What will IT outsourcing be like in 2022?
- The rise of cloud services
Cloud services are growing in popularity because of their flexibility, scalability, and relatively low cost. The prevalence of remote working also imposes the need to collaborate on a given application using different devices, so the desktop-first approach will need to change.
Companies are increasingly partnering with vendors that offer cloud-based software services or can help move their existing infrastructure to the cloud. Doing this allows companies to outsource their data or application storage and management and helps them recover data quickly, so the company avoids downtime and can continue processes smoothly.
- The increased role of artificial intelligence
Artificial intelligence automates processes and enables data-driven decision-making, so more and more companies are incorporating AI into their products and services. Its popularity is growing mainly due to its ability to deliver high-quality services faster, with fewer errors and lower costs.
The increased focus on AI and automation technology is an opportunity for outsourcing service providers. For many companies, developing their own AI tools isn’t cost-effective, or they don’t have the expertise and resources in place. Hence, it’s much easier to outsource the development of AI-based projects to an external company.
- Security and privacy at the forefront
While building secure applications is nothing new, there are new threats emerging as technology evolves. It’s estimated that cybercrime has increased by more than 600% since the COVID-19 outbreak, so companies need to prepare to protect data even more effectively.
Companies are moving more and more operations to the cloud, so the need for cybersecurity professionals will continue to grow. This is an opportunity for outsourcing providers offering cybersecurity services, especially since 2022 will be geared towards implementing multi-level security.
- Growing demand for full-stack developers
The knowledge of a full-stack developer covers the entire technology stack. They know all the stages of creating an application, from the front end to the databases. Full-stack developers can move efficiently between different elements of the project, so they’re much more flexible and agile. Typically, developers become “full-stack” through years of experience, so they’re valued for their broad application and development knowledge and familiarity with the entire process.
- Rising need for specialists
Outsourcing increases access to highly qualified specialists in specific fields, with technical know-how and experience in software development. Even the best team of programmers in a given company may not be able to keep up with the field’s constantly emerging technological innovations, and hiring more team members may significantly exceed the cost of outsourcing.
It’s expected that the demand for outsourced services covering specific specializations will continue to grow, and 2022 will be marked by greater demand for experts in narrow fields. Outsourcing is a solution that will allow companies to quickly gain a competitive advantage.
Wrapping up
As you can see, IT outsourcing allows you to focus on your core competencies and leave other tasks to an external company, which increases the chances of maintaining a competitive advantage. The success of this solution lies primarily in finding the right partner – a software house that knows IT outsourcing trends focuses on close communication with their clients, and makes it easier to control all processes.
Are you looking for an experienced software house to outsource your IT project with? Contact us – we’ll be more than happy to help.
