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Using IT Outsourcing to increase business efficiency

Using IT Outsourcing to increase business efficiency

Using IT Outsourcing to increase business efficiency

In an increasingly specialized world, starting at a countries level, narrowing to the level of companies, and ending at the level of professionals, specialized IT outsourcing services have and will have an increasingly important role for businesses and economies.

Outsourcing IT services can benefit both small and large businesses. Small companies gain the ability to compete on a global scale while remaining agile, light, and competitive. Large companies can opt for outsourcing to reduce costs and obtain highly specialized knowledge, from anywhere in the world, starting with Portugal!

Regardless of the size of a company, it is important to maintain competitiveness, innovation and optimized financial management to ensure good business margins and thus increase the ability to invest in the future.

So, what does an IT outsourcing service consist of? IT outsourcing refers to the hiring of an external consulting company to carry out the tasks – of part or them – in a technological project such as a software development project. Software development tasks can, of course, be completed in-house, however, through outsourcing, a dedicated specialist company can make your operations more efficient and scalable.

There are three options for outsourcing approaches depending fundamentally on the location of the service provider:

  1. The Onshore Outsourcing model: Scenario in which the company providing the outsourcing service is located in the same country. This model may offer a greater degree of control and responsiveness, but not necessarily. These two years of the pandemic have shown us that we can achieve very high levels of productivity with geographically distributed teams.
  2. The Nearshore Outsourcing model: Scenario in which the company providing the outsourcing service is located in a culturally close country, but also in a close time zone (1-3h). This outsourcing model may be more economical due to slightly lower labor costs, while maintaining the same levels of delivered quality.
  3. The Offshore Outsourcing model: Scenario in which the company providing the outsourcing service is located in a distant country, offering access to a larger pool of talent with lower labor costs. It is important to bear in mind that this potential cost reduction often means a lower quality of delivery as well as potential communication problems resulting from significant cultural differences.

Each of these outsourcing models serve different purposes, and as a business or team leader you should carefully assess what best fits your company.

The typology of outsourcing services may also vary. It may be focused on the total or partial development of new solutions – IT consulting services; or it may be focused on managing and supporting existing applications or products – IT managed services. Within these two types, the customer may want to take over the direct management of the supplier’s teams (team extension model), or share this management using methodologies such as Agile, Scrum, Kanban for example (team replication model).

What are the global benefits of software development outsourcing?

My experience has shown me that a large majority of companies have outsourced part of their operations for the benefits of optimizing variable operating costs. In recent years, the lack of qualified technical resources at a global level has also led many companies to opt for this type of service in part or in whole. But the resulting global benefits go far beyond economics or talent shortages. I would like to mention a few that are essentially focused on Portugal as a key destination for contracting outsourcing services:

  • Greater efficiency. Optimized resource allocation.
  • Greater flexibility. Ramp up and agile management of teams and people.
  • Higher quality in the delivery of software through the quality of the teams.
  • Quick access to highly qualified resources.
  • Faster lead times for new products and services to market.
  • Greater ability to innovate while maintaining competitive advantage.
  • Better access to technological innovation and project management methodologies.
  • Long-term operating cost optimization derived from fast cultural integration processes and easy communication.
  • Return on investment resulting from social stability ensuring long-term initial investment.

If you want to opt for an IT outsourcing service for your software or product development operations, in order to increase efficiency and reduce operational costs, I suggest the following approach:

  1. Start by clearly defining the scope and objectives:

The first step in the outsourcing process is to clearly define your goals. Your management team must determine which projects or tasks should be developed internally and what should be outsourced. Once the objectives are defined, you can then start looking for the IT services company that best understands and responds to your needs.

  • Diversify outsourcing models:

To guarantee the viability of your operations in the long term, maintaining quality levels, invest in different outsourcing models, between onshore, nearshore, and offshore. Some companies focused excessively on a single model, which turned out to be counter-productive and costly, in the event of a global crisis such as Covid-19. As with the stock markets, diversification will always be the best strategy.

  • Research the best companies for your needs:

Finally, you should research the company(ies) that would better suit your project or needs. Look for companies that have experience in software or product development, ask what their customers say about them, ask what their employees say about them, validate their growth levels in the last decade, their turnover, for example. This research and selection phase is essential, as this is certainly a long-term relationship, and you do not want to leave your company’s operations in the hands of third parties with little experience, wavering trust or culturally misaligned.

See Also
Digital Transformation as a means of survival

In conclusion, choosing a technological, experienced, culturally aligned, and reliable consulting company is vital, because more than an IT service provider, it has the potential to become a strategic partner for the growth of your business and reputation. The “secret” to successful outsourcing starts with the right partnership.

If you want to know more, please contact Affinity to further discuss how we can help you.

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