According to the “Share & Trends Analysis Report” by Grand View Research on Business Process Outsourcing Market Size, the global outsourcing market size of 2022 was USD 261.9 billion and is projected to expand at a compound annual growth rate of 9.4% from 2023 to 2030. The demand for IT Outsourcing (ITO) is undeniably high and constantly growing due to its profound implications on business operations and performance.

The debate over whether companies should self-manage their technology or outsource it to specialists has been going on forever. The trend favors the latter option as more organizations shift away from in-house IT management, as the figure speaks for itself. In today’s blog, we shall explore both paths’ pros and cons to uncover why ITO is on the rise.

What is IT outsourcing?

Outsourcing IT means hiring a third party to handle specific technological tasks for a business. A business can have multiple outsourcing vendors serving various IT tasks and services, tailoring them to their particular needs and preferences. It can be anything from maintaining and updating the company’s computer systems to developing new software applications.

ITO has excellent advantages that organizations find tempting to turn down the offer. Here are a few of the upsides of IT Outsourcing:

The benefits of ITO

Cost saving

It is the primary motivator for businesses to take on the outsourcing IT services journey. By outsourcing technology-related tasks to specialized partners, companies can reduce overhead costs associated with personnel and hardware. ITO can be especially beneficial for small businesses (SMEs) that may not have the capability to hire in-house IT staff or resources to purchase expensive equipment. For companies to step up budget saving mission further, they would outsource IT tasks to countries with lower labor costs, providing an even greater cost-cut, such as vendors from Asia-Pacific, where the IT labor cost remains lower than the mean, based on a study done by Mordor Intelligence 2021.

Improving Efficiency

With a reliable external partner, you no longer have to worry about hiring, training, and managing an internal team. Outsourcing saves companies time and energy that would be better spent on other core business tasks and activities. Plus, with a dedicated team from a third-party service provider working on your project, you know they will do the work quickly and efficiently without compromising quality.

Additionally, outsourcing allows companies to focus on their core competencies by removing the burden of managing technology from internal staff who may need more expertise or time, resulting in faster time to market your product.

Scaling staff

When using an outside contractor for your IT needs, it becomes much easier to scale your staffing. Rather than having to hire new full-time employees as demand increases or decreases staff when workloads lighten, you can expand or contract the number of hours purchased from your external partner as needed. This allows you to keep operations running smoothly while avoiding unnecessary staffing costs.

Accessed to expert resources

It may be costly to acquire a team of professionals to cover various areas, from software development and cloud computing to data security. The professionals, with years of experience in the industry, possess extensive knowledge in various areas like software engineering, software quality testing, cloud computing, data security, and more – knowledge that might otherwise be difficult or costly to acquire in-house can handle the outsource tasks for you, resulting in better outcomes and fewer problems.

While IT Outsourcing has become an ultimate and effective solution for reducing costs, improving efficiency, and gaining access to specialized expertise, there are also some drawbacks to consider.

The cons of ITO

The communication chaos

Companies might have to work with a remote team in another country. Communication can be tricky due to language barriers, cultural differences, and time zone differences could cause delays, unclarity, or misunderstandings. It is challenging to set up effective communication with their outsourced teams. As such, detailed processes need to be implemented to ensure everyone is on the same page regarding expectations and tasks. This requires an investment of time and resources that should be considered when evaluating outsourcing solutions.

Quality control

The company must establish and communicate clear standards and expectations to vendors before work begins. The product outcomes will be affected when the quality standards are not adequately communicated or followed by the remote team.
Be conscious, and do your research in selecting a reputable vendor who has experience working on similar projects. Otherwise, the results may not meet your standards or expectations, leading to costly delays or unsatisfactory products, services, or solutions that poorly reflect your business reputation.

If you are looking for a prestigious IT outsourcing company with extensive experience in Software Development and Software Quality Assurance services, look no further than SHIFT ASIA. We provide excellent dedicated engineer teams, and full-stack developers, 24/7 support on all services.

The management control trade-off

On top of that, companies are losing management control of the respective business functions while outsourcing specific IT tasks since they will no longer be handled internally. Companies might not have complete visibility into day-to-day operations or be able to respond quickly if production problems arise. It’s best to acknowledge this matter and settle with it before making the “decision” about outsourcing particular tasks.

Security breach

Finally, there are potential security risks associated with outsourcing that cannot be ignored. Working with third-party vendors introduces additional people into your system who could access confidential data such as customer data, financial records, other sensitive documents, and so on.

These could be vulnerable if not appropriately handled by the outsourced team. It is crucial for companies to thoroughly vet potential vendors before entering into any agreements to minimize these risks as much as possible.

All that takes into account by offering cost-effective solutions, greater flexibility, scalability, and access to the latest technologies, as well as specialized expertise at a lower cost than it would take in-house, IT outsourcing has quickly become one of the most popular trends among companies of all sizes: from SMEs to big corps. It enables organizations to focus on their core activities and stay competitive. IT outsourcing also allows businesses to improve their IT processes faster, freeing up IT resources and leading to more efficient operations. With IT outsourcing, companies can benefit from on-demand IT services and reduce IT costs significantly.

Many IT outsourcing types are available with various IT services for businesses to choose from, depending on each organization’s IT Outsourcing models. What is the proper fix for your business? Come back here to check out our next blog, where we’ll be breaking these down in detail. Meanwhile, if you are looking for IT Outsourcing consulting services, contact our team today! SHIFT ASIA – a leading Software Quality Assurance company, is here at your assistance.