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Why Is IT Outsourcing So Important in the Digital Era?

Why Is IT Outsourcing So Important in the Digital Era?

Published on: 21 Jan 2022

10 benefits of IT outsourcing

The IT outsourcing market is expected to be worth nearly $400 billion by 2025, according to Business Wire. But what are the reasons behind the mighty rise of the remote software development center, and is it that beneficial to relocate selected business processes offshore?

Indeed, 70 percent of the surveyed enterprises that have chosen to employ development teams abroad consider cost reduction to be at the root of their decision. Flexibility at 40% and speed to market at 20% are also deemed significant as they complete the top 3. And then there is agility and access to tools and processes not too further down the chart.   

Statistics don’t lie, and various factors motivate IT businesses to look overseas for solutions in their pursuit of digital transformation and staying relevant in the competitive and rapidly evolving world of modern technology. 

1. Cost Reduction

In-house software development requires constant onboarding, staff augmentation, and ridiculous expenses for qualified personnel, IT infrastructure, and HR services. Add the rent of vast office spaces plus social insurance taxes and healthcare insurance for hundreds of employees, and you get the whole picture. It costs an arm and a leg, and it is high maintenance, so no wonder companies would rather save energy and resources for their core competencies and concentrate on what their business is essentially about.

2. Rich Talent Pool

An offshore development center could easily guarantee the same or even higher quality of execution for an optimized budget due to the lower cost of living in particular regions of the world. Established local enterprises have full access to a much broader talent pool and top pros with a proven track record.

Software engineers, project managers, UI and UX analysts and designers, content creators, sales and marketing specialists, QA staff – you name it, they have it.

 

3. Scalability

Scalability is one of the significant challenges for most companies, as any HR department can confirm, and an offshore provider gives the flexibility to scale up and down when necessary. Remote teams also help explore potential new markets and destinations that might prove a wise investment for the future expansion of your core business.  

4. Shared Costs and Risks

Another massive competitive advantage is that most operational costs of the remote development center, including resources, technology, and infrastructure, will be the external partners’ responsibility, too.

These are typically precalculated and included in your contract agreement. Even if dealing with companies that are based thousands of miles away might seem risky, it usually works the other way around – such cooperation will bring an experienced business partner to share the risks with and hold accountable for fulfilling deliverables and KPIs.

Of course, one should always be alert to potential security issues, but remote access to sensitive data can easily be restricted so that it is not compromised. 

5. Speed to Market

Higher speed to market is another factor in favor of outsourcing business overseas. It is not uncommon to have your new product delivered well before agreed deadlines, which gives you the chance to have the upper hand over competitors when it comes to simultaneous releases of new functionalities or updates. Acceleration means more time for new services and products, hence an expanded portfolio. And with more time to spare, your own company’s productivity will increase, and your internal business processes will improve drastically.  

6. Flexibility

Flexibility is also crucial, and a remote software development center gives you the luxury to cherry-pick the ultimate business model based on your priorities and strategies and fine-tune it in accordance with budget and schedule.

What’s more, IT providers would always let you check the quality of their products by examining test versions before deciding whether to invest in a particular project. 

 

7. Technology

Modern technology is never reasonably priced, and with remote development centers, you get access to the latest tools and processes as part of the package. This means it is more likely to acquire state-of-the-art products delivered by top developers at a more minimal cost than if you build an in-house software development unit. 

8. Extended Business Coverage

Round-the-clock customer support is difficult to maintain, and after-hours labor is another expense you could do without. However, the modern age of non-stop access to products and services has established new customer service standards that make 24/7 coverage a must. IT outsourcing seems to be the logical solution here, as companies utilize different time zones to effectively cover the night shifts at their native locations by hiring overseas.   

9. Tax Benefits

Numerous countries grant tax benefits and financial incentives to foreign enterprises in order to attract investments. The purpose of such government policies is to improve employment rates and promote sustained economic growth in the country. They also help investors gain substantial profit, not to mention that incentives and tax exemptions make the relocation much more straightforward.

10. Location

These are some of the reasons Eastern European countries have been among the most popular destinations for offshore outsourcing in the past decades. And there are a few others beyond the obvious gap in the standard of living.

Time zone-wise, it is an ideal longitude to cover night shifts in the US. At the same time, geographical proximity and cultural resemblances make the region very suitable for onshore and nearshore outsourcing by German and UK companies.

Language proficiency has also improved significantly, while the local IT specialists’ reputation has been impeccable for quite a while. 

 Contact Scalefocus and discover more.

Key Takeaways

In conclusion – the pandemic situation has affected all aspects of life and business, and the IT industry is no exception. Remote work makes people spend additional time online and use more technology than ever, which has forced enterprises to increase their investment in software development. Reduced cost, agility, scalability, modern tools and processes, and improved time to market – these are some of the competitive advantages that have led numerous companies to start collaborations with remote software development centers.

Scalefocus is a prime example of an offshore provider of digital solutions that can spare their partners the time and resources for in-house software development. And without that distraction from their core competencies, they will have the energy to perfect their main products and services. Regardless of whether they are small start-ups or massive corporations, this is what really matters at the end of the day.