IT Outsourcing: What it is, how it works and real cases
“Outsourcing” is a popular method of offering services worldwide, being financially interesting for large and small companies. Today, 75% of companies use IT outsourcing, and 87% plan to use even more.
Outsourcing is the subcontracting of an organization’s services through a specialized company. In this way, it is possible to optimize some operations and reallocate resources that would be invested to maintain its own team.
In a post-pandemic context, in which millions of people work remotely, outsourcing must gain more and more space in different markets.
TYPES OF IT OUTSOURCING
Offshore IT outsourcing is offered by companies located in countries with less taxation, such as India, Malaysia, and China. Since these companies are located in distant countries, communication is more complicated. However, this modality offers a very interesting advantage: the costs of hiring services are much cheaper. According to the 2016 Global Services Location Index, India ranks 1st in this type of offer.
Nearshore is the outsourcing contracting of companies located close to the contractor’s country and with similar culture and languages. For example, the United States is Canada’s largest service consumer.
Onshore is the hiring of companies located in the same country as the contractor.
5 IMMEDIATE BENEFITS OF IT OUTSOURCING
Check out the 5 main immediate benefits of using IT outsourcing in your business:
1. Cost control
Outsourcing converts fixed IT costs into variable costs, facilitating financial planning. If the contractor defines the scope of tasks, he can look for a company that offers at a price appropriate to the budget.
2. Cost reduction
Hiring and training IT teams can be expensive and does not always deliver the expected result. Outsourcing reduces training costs, mitigates costs with failures, and makes the result more predictable.
3. Experience and contacts
An internal IT employee is isolated in the company. An outsourced employee works in a location full of people in the same industry, exchanging experiences and helping out when needed.
4. Risk reduction
The Outsourcing supplier generally assumes and manages a large part of the risks for the company, especially security, updating, and compliance problems. If there is a problem, he solves it.
5. Agility in implementing new features
To implement news in an internal IT team, it will be necessary to train the team, invest in training, and wait for the results. The outsourcing company will do this more quickly, as it is their job to be up to date.
5 STAGES OF OUTSOURCING IMPLEMENTATION
1- Diagnosis and identification of opportunities
Aqui se conhece os pontos fortes da empresa, suas competências-chave, e as oportunidades de mercado.
2- Evaluation of opportunities
A complete description of the opportunities must be developed and an understanding of the performance and the desired result.
3- Identification and choosing a service provider
Know and evaluate a range of suppliers, understanding which are best adapted to the company’s scenario.
4- Implementation of new outsourcing processes
An action plan is drawn up with dates and goals, with carefully created processes and effective communication methods.
5- Performance monitoring and evaluation
Analysis and adjustment of the plan according to the performance obtained.
CASES: IT OUTSOURCING IN DIFFERENT MARKETS
1. Financial services
Citigroup has outsourced its technology operations since 1992. The company manages several offshore locations in India, the Philippines, and Poland. In 2012, Citigroup cut 11,000 jobs at its headquarters, at least a quarter of which related to IT. Most of its IT operations are now conducted offshore.
2. Hotel Operations
The most frequently outsourced functions in the hotel industry are laundry, pool maintenance, marketing, reservation system, creation of keys, support, and loyalty programs.
In Brazil, Zoox was elected the Best Service Provider by Revista Hotéis for 2 years in a row. With Zoox Experience, several points of the guest experience can be outsourced: check-in, check out, payment, concierge, and room services.
With a limited initial budget, Whatsapp turned to Eastern European outsourcing to launch the platform. The company hired developers from Russia because “there are excellent engineers there,” according to the company’s co-founder, Jan Koum.
Slack is another application that was outsourced to develop the beta version. Outsourcing the creation of the logo, website design, and the web and mobile application, the company went from an initial value of 250 million dollars to be worth 7.1 billion in August 2018.