In today's globalized economy, offshore outsourcing has become an increasingly popular business strategy for companies looking to reduce costs, increase efficiency, and access a wider range of expertise.
The practice of offshore outsourcing has been around for several decades. But with the advent of the internet and advancements in communication technologies, it has become easier and more affordable for companies of all sizes to engage in this business model.
According to research, the worldwide IT offshore outsourcing market is projected to surpass $430 billion in 2023.
In other words, Offshore outsourcing has become a critical component of many companies overall business strategy, enabling them to remain competitive in a global marketplace.
In this blog post, we will delve deeper into the world of offshore outsourcing, exploring what it is, its benefits, and how to take advantage of it.
Offshore outsourcing in software development refers to the practice of contracting a third-party company located in a different country to perform software development services. This can include services such as software design, coding, testing, and maintenance.
The third-party company can be located in a country where the cost of labor is lower than in the home country of the outsourcing company.
Offshore outsourcing in software development has become increasingly popular due to the specialized skills and expertise offered by software developers in other countries as well as the cost savings that can be achieved through lower labor costs.
Offshore software development teams can work remotely and collaborate with the home company's team through communication tools such as video conferencing, email, and instant messaging.
This allows the home company to leverage the specialized skills and expertise of offshore developers while still maintaining control over the development process.
Offshore outsourcing in software development process can be a cost-effective way for companies to access skilled talent and scale their development operations, especially for small or medium-sized companies that may not have the required capital to hire a full in-house software development team.
Software products have exploded onto the market, igniting the IT industry with a blaze of demand. Mobile technologies, like Android and iOS, have rapidly increased their market share and have forced the software development industry to adjust to new market conditions at an even faster pace.
Despite having a great idea and the funding to support it, finding the right developers to bring your idea to life can be a major hurdle.
So how can you keep up with the competition and turn these conditions into an opportunity?
You could look into local custom software development services, but often these companies simply don't have enough available developers to meet your needs. That leaves you with three options: wait, pay more, or outsource.
But let's be real here, waiting around for something to happen is not a viable solution for any business. As the software market continues to evolve, time is money, and wasting time is the last thing any company wants.
While paying more to attract talent may seem like a good option if your investment plan foresees a good return on investment and high profits, it's not always feasible or sustainable in the long run.
That's where offshore outsourcing comes in as a viable solution that can help you derive maximum benefit from the current market conditions.
But if you’re not fully convinced about the offshore outsourcing model, the following benefits will definitely change your mind.
Here are 5 key benefits of offshore outsourcing that make it a worthwhile investment.
One of the primary reasons companies choose to outsource offshore is to reduce costs. Labor costs in other countries, especially in developing countries, are often much lower than in developed countries.
This means that companies can get high-quality work done at a fraction of the cost they would incur by hiring in-house employees.
For example, a software development company in the United States may pay $100,000 or more per year to a software developer, whereas an equally skilled developer in India may cost around $25,000 per year. The cost savings can be substantial, especially for large-scale projects.
Additionally, offshore outsourcing can also help companies save money on overhead costs associated with in-house operations. For instance, the company may not have to pay for office space, utilities, and equipment as these are provided by the offshore service provider. This can further reduce the company's expenses.
Offshore outsourcing can give companies a competitive advantage by enabling them to access a broader range of resources and skills. This can help companies gain new capabilities and offer innovative solutions that can set them apart from their competitors.
For example, a software development company in the United States may not have the expertise or resources to develop applications for smartphones.
By outsourcing the project to a service provider in India or Eastern Europe, the company can access highly skilled developers who are experts in mobile app development.
Offshore outsourcing also provides access to a larger talent pool, especially for specialized skills that may be hard to find in the home country. This means that companies can tap into a diverse range of skill sets and expertise to complete specific projects or tasks.
For instance, a company in the United States may require specialized IT support services that are not available locally. In such a case, a company can outsource its requirements to an offshore service provider in India where there is a larger pool of IT professionals with the required expertise. As a result, it can help the company get the job done faster and with higher quality.
Outsourcing offshore can often result in faster turnaround times for projects. This is because the offshore service provider may be operating in a different time zone, allowing work to be completed around the clock.
Furthermore, offshore service providers often have more flexible working arrangements, which means that they can scale up or down quickly depending on the project's needs.
For example, a company in the United Kingdom may need to develop software quickly to meet a tight deadline. However, the UK company can simply outsource its project to an offshore software development company. In return, the UK company can benefit from the time zone difference and have the work completed overnight.
Finally, offshore outsourcing can allow companies to focus on their core business tasks while delegating non-core activities to the offshore service provider.
For example, a small business owner may spend a significant amount of time on administrative tasks such as bookkeeping and payroll.
But, if the same business owner outsourced these administrative tasks to an offshore service provider, he can focus on product development that the business offers or simply invest more time in marketing his business to attract more customers.
Now that you learned about the key benefits of offshore outsourcing, let’s look at some important considerations to take full advantage of it.
Having a clear objective is essential to outsourcing success. Before you start looking for an outsourcing partner, you need to define your goals and understand how outsourcing can help you achieve them.
Ask yourself what you hope to achieve through outsourcing, such as reducing costs, expanding your capabilities, or accessing specialized expertise.
Having a clear objective will help you stay focused and make informed decisions when it comes to selecting an outsourcing partner.
Building a strategy is the next step to taking advantage of offshore outsourcing. Your strategy should outline your goals, the resources you'll need, and how you'll measure success.
Ideally, you should start by assessing your current capabilities and identifying areas where outsourcing can help you achieve your objectives. Furthermore, also consider factors such as cost, quality, and speed of delivery.
Finally, develop a detailed plan of action that takes into account potential risks and contingencies, and establish a timeline for achieving your goals.
Choosing the right outsourcing business model is crucial to achieving your outsourcing objectives. There are several outsourcing models to choose from, each with its own advantages and disadvantages.
Staff augmentation, for example, involves hiring individual workers to supplement your existing team. Project-based outsourcing involves hiring a team to complete a specific project. Managed services outsourcing involves hiring a team to handle a specific business function, such as IT support or accounting.
When choosing a business model, make sure to consider factors such as cost, scalability, and the level of control you want to maintain over the outsourcing process.
Effective collaboration is essential to the success of offshore outsourcing. To ensure smooth communication and collaboration with your offshore team, it's important to use proper tools and technology.
This may include project management tools, communication platforms, and video conferencing software. These tools help to facilitate collaboration, streamline workflows, and ensure that everyone is working towards the same goal.
Before you hire an offshore outsourcing partner, make sure to establish clear lines of communication and set expectations for how often you'll communicate to ensure that everyone is on the same page.
Setting measurable KPIs (Key Performance Indicators) is essential to ensuring that you're achieving your outsourcing objectives.
KPIs should be tied directly to your business goals and should be measurable, relevant, and time-bound. For example, if your objective is to reduce costs, you may set a KPI to reduce costs by a certain percentage over a specific period of time.
The point is that you must set and review your KPIs regularly to ensure that you're on track to meet your objectives and adjust them as needed.
Communication is key to the success of offshore outsourcing. Regular communication with your offshore team can help build trust, maintain accountability, and ensure that everyone is aligned on goals and expectations.
That’s why, if you're outsourcing to an offshore partner, you must schedule regular check-ins with your offshore team to review progress and provide feedback. Use these check-ins to discuss any issues or concerns and to make any necessary adjustments to your outsourcing strategy.
By communicating regularly, you can ensure that everyone is working towards the same goal and that your outsourcing project is on track to achieve your objectives.
Offshore outsourcing can provide businesses with a variety of benefits, including cost savings, access to specialized talent, and a competitive advantage in the market. However, it's essential to approach outsourcing strategically and take the necessary steps to ensure success.
Thankfully, if you follow the above steps, you can most certainly take advantage of offshore outsourcing and achieve your wildest business objectives.