How Does Outsourcing Work? – 6 Main Things to Consider

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Businesses and startups have increasingly succeeded thanks to software (SW) within the last couple of decades. They constantly need programmers and automation specialists to launch new projects. This strive for growth stipulates the need for qualified professionals.

Some companies have on-board development teams focused on the creation of new SW and support of the existing systems. Yet, many businesses need temporary involvement teams of a trustworthy IT outsourcing company to streamline their operations. In response to this increasing demand, more companies on the market provide IT services on an outsource basis. 

What Does Outsourcing Mean?

The word comes from an amalgamation of the words outer-source-using. The term itself means attracting resources from outside the company. In other words, it is the involvement of outside specialists paid to carry out any non-core functions.

Outsourcing Explained Step by Step

Step 1

The first step is case analysis. Here, one needs to analyze the goals of the organization and the competitive environment and choose strategic priorities. During this stage, one also identifies problems and outlines work that can be outsourced.

Step 2 

After the first step, it is time to calculate the cost of implementing the idea by the company’s forces. 

Step 3

At this stage, the company managers analyze all pros and cons, opportunities, and risks.

Step 4

During the fourth stage, the managers choose a company to work with. Selecting a partner is a critical step in the transition to outsourcing. If the selected contractor fails the task, the company will have to switch to another outsourcer, and, consequently, repeat a rather exhaustive process of adjusting to workflow under new conditions.

There is no single database of outsourcing companies. But as you know, recommendations are the best way to choose an outsourcing partner. After formulating the TOR and deciding on the budget, ask your friends, partners, or acquaintances on social media if they can recommend someone. As a result, you will get a list of several verified companies.

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Step 5

When the contractor is selected, the companies start working on the development of the contract terms.

Step 6

The next stage begins with the transition to a new format of work. When switching to outsourcing, managers should take into account both business processes and psychological aspects of team management. The employees need to be ready to work as a team with people outside their company and even their country.

Step 7

This step is about the project operation at the reporting stage. By this time, there will be no need for coordination. The key contractor’s person will be the representative who supplies the reports.

How Is It Different from Other Cooperation Types?

  • The outsourcing agreement is valid for a long time (the validity term is defined in the contract).
  • Contractors perform only secondary operations (website creation, advertising, premises design, testing, etc.).
  • Unlike temporary contracts with certain professionals, this type of joint work may also include responsibility for various business events (recruitment, maintenance, accounting, etc.).

Types of Outsourcing

At the initial stage, when choosing forms of interaction, the customer should clearly understand and evaluate the degree of their participation in the process. It is essential to discuss to what extent the client will be able to control and coordinate the activities of third-party performers. Based on this information, one determines the degree of immersion of the outsourcing company in the customer’s business project. 

Thus, outsourcing services can be divided into five types.

  1. Full. In this case, almost all areas of the customer’s work are transferred under the control of the contractors.
  1. Partial. As the name suggests, only a part of the work performed is entrusted to a third-party organization (this can be the production of individual components, maintaining a website, providing accounting support, and so on).
  1. Joint. It’s a partnership with an equal or proportional degree of responsibility.
  1. Temporary. The services of a third-party company are used for a short time. For instance, an accountant falls ill, and their work is performed by specialists of an outsourcing company for the duration of the employee’s sick leave.
  1. Transformational. This type is used when a company needs consulting services or the involvement of mediators, facilitators, and Agile or SCRUM coaches. 

Why Choose Outsourcing?

Outsourcing becomes one of the most popular ways to manage IT aspects of a company’s business processes. For instance, this may be a smart move if a business needs a tailor-made CRM system and tech support. If there is no IT department in the company or no programmers specializing in this kind of software, the best decision is outsourcing.

Today, many companies choose to outsource the IT aspects of their businesses over getting on-board teams. Here are practical considerations behind this.

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  • Only specialists who own relevant technologies handle the digital product.
  • The company’s IT team (if there is one) can focus on core tasks instead of tech support and minor issues.
  • By outsourcing development, as well as tech- and SEO support, to professionals, big companies and startups reduce the time necessary to market the product.
  • The option in question also saves a lot of money on hiring a team and keeping these people on board when the project is over.

Many companies find it challenging to outsource some of their tasks, but delegation stimulates growth. And growth is a boon for businesses in a dynamic market. 

When looking for a comprehensive solution, immediately abandon the idea to hire different freelance programmers offering key management of the company’s business processes. Jacks-of-all-trades are suitable only for solving local, targeted tasks. It’s better to choose those outsourcing providers who are ready to offer an integrated, full-fledged team of programmers and lead a project of any complexity.

Questions to Ask Your Contractor

Upon making the list of potential contractors, consider the following parameters of their work before making the final decision.

  • How long has the company been on the market?
  • Do they offer dedicated teams?
  • Do they work with Agile projects? In some cases, this question may be about the waterfall method.
  • Does the potential contractor provide a speedy response to requests and remote administration or consultation?
  • What services are included in the contract and excluded from the scope of work?
  • How does the outsourcing company control its employees?
  • What is the interaction with the outsourcing company in case of force majeure?
  • What is the qualification level of the potential partner’s employees?
  • Do they have a procedure for terminating the outsourcing services contract?
  • How does the security system work in the outsourcing company?

Final Piece of Advice

When solving IT problems, businesses always have two options: hire new employees to the core team or use the services of experienced programmers. Many companies like Github, Skype, and Slack have delegated tasks to outsourcing partners. This decision allowed them to focus on other aspects of their development.

If you are still choosing between outsourcing functions to a contractor and performing them in-house, feel free to ask questions to find out more about a potential partner. Most importantly, do not sign any contracts until you find your dream team. We wish you luck in finding a reliable partner who will help your business thrive.

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