Your Project Outsourced #1: The Different Types Of Outsourcing & Benefits For Your Business
By: Przemysław Markowski
Tags: Development, Business Strategy, Outsourcing, Software Development, Technology

Your Project Outsourced #1: The Different Types Of Outsourcing & Benefits For Your Business Przemysław Markowski Follow Jun 8 · 7 min read

In the Your Project Outsourced series, I’m going to cover all the essential information about outsourcing your project to an external partner (like INVO), and key things you need to be aware of when you scale up your team this way. If you’re a founder, a technical lead, or a product manager who wants to create or scale up your digital product, this series is for you! In the first article, we’re going to discuss what outsourcing is, what makes it different from regular hiring, and what are the key benefits of using outsourcing in your business.

All Articles In This Series:

What Is Outsourcing?

So what is outsourcing anyway? To put it simply, outsourcing is essentially moving work from inside your company to the outside. However, there are many different types of outsourcing out there that you can use, depending on your specific needs. The three main types of outsourcing are onshore, nearshore, and offshore. As you may already know, these terms are related to where the outsourced work is done.

Onshore VS. Nearshore VS. Offshore

Onshore outsourcing means you hire a team that’s very close to you, likely in the same city. Nearshore outsourcing means the team you hired is rather close, within the same time zone for flexibility. And offshore means that there may be several time zones and locations involved with the team you hired.

Different Outsourcing Models

Within those types of IT outsourcing, you can also find different outsourcing models. Some companies simply outsource employees with specific knowledge and expertise for the duration of a project and manage them themselves. Other businesses want to outsource the entire project from start to finish (this is where most software houses and agencies come in). There’s also the option to outsource the development of a specific feature or a few functions only. The last model is especially popular among companies who have specific experts on board but are working on other projects and simply don’t have the capacity to develop a certain feature.

Outsourcing VS. Hiring

To outsource or to hire? That is the question! But what is the difference between the two? Technically, it is a matter of who is actually paying the employees. But when we go a bit deeper, there’s a lot more differences. I will give you an example to explain this better.

Hiring An In-House Team

Imagine you’re an entrepreneur who is about to start the development of their product, let’s say a mobile app. So if you go for building your in-house team, you need to assess the scope of the project, choose the best tech stack and decide how many developers, designers, testers etc. you have to involve in the project. Then you need to plan and execute a recruitment process (or hire someone to do it for you), hire the selected candidates and onboard them. All this will already take at least 6 months and the costs are not small. And this is not the end of your expenses, because most of the time you will need to provide your new employees with equipment, software licenses, and some extra perks if you want to make your job offer extra enticing. Considering how many companies are looking to hire IT experts, the competition is really tough and some businesses can really outshine others when it comes to perks and benefits. So generally speaking, the process is pretty complex, and the costs don’t consist of the salaries only, but also include all the side costs as well as your time, which should be your most valuable asset when it comes to building your business from scratch.

Outsourcing

Now, outsourcing is simply hiring some company that has already done this process for you, possibly with much greater experience. So if you see an hourly rate on an outsourcing offer and go: “that’s too much, I could hire some experts on my own and pay them less”. Well, I bet you could. But don’t forget about all the additional costs you have to take into consideration. Also, time is of great significance, because finding experts is not an easy task and requires a lot of effort, while an outsourcing agency might already have the skilled people you’re looking for on stand-by.

Key Benefits Of Outsourcing

I know this all probably sounds like an ad for outsourcing. But from my personal experience I really believe it’s a better choice, especially for new CEOs and startups at an early stage. There are many benefits to working with an outsourcing agency to support software development for your company. For each business the key benefits will be different, depending on what your specific needs are. But some things are true for all types and models of outsourcing. Let’s break them down:

1. Flexibility

Outsourcing provides a great deal of flexibility. It allows you to implement many competencies and include expert employees in your projects without the need to commit to hiring them full-time. This means that your resources are more agile and you can change your team members based on your project’s specific needs at the moment. This is especially great for companies whose main focus is not software development or for startups in the early stage of their development with limited resources.

2. Cost Savings

Outsourcing is a great cost-saving solution. Mostly because you will avoid the costs of having staff in-house. Depending on the model of IT outsourcing you go for, you can also save a lot of money on infrastructure, employment costs as well as software and tools. Outsourcing companies also offer a level of expertise and experienced technical staff on-demand, which means you can reduce recruitment and onboarding costs. Often those two processes can be the biggest expenses, take the most time and can also slow down your development.

3. Access To Skills And Knowledge Outside Of Your Location

Staying on the topic of finding employees, it can sometimes prove to be very hard to find specific experts within your local area. Especially when it comes to the software development industry, the market is very competitive, and in some cases finding the person with the right expertise and experience can take several months. I can tell you from our experience at INVO that especially when it comes to experts in new, emerging technologies like Flutter, the recruitment process is very long. With outsourcing you gain access to specific experts who fulfill your requirements while it’s the agency’s job to find them. You also will be able to access people from different locations, meaning if there are no competencies in your specific region, you can find them elsewhere.

4. Better Manage In-House Resources

Another great benefit of IT outsourcing is that when you outsource some of the work to outside service providers, you leave more room for your in-house team to focus on their tasks. It’s especially important when it comes to your operations and management staff whose tasks are crucial to reaching the company’s goals. In this case, outsourcing some of the functions will be a great strategic move for your business. For example, most companies actually outsource accounting tasks to free up the C-level management.

5. Accelerate Business Processes

Most of the outsourced work is related to information technology and software development, however, the next top outsourced functions are business processes. Those operations can slow down your business and leaving them to external providers can be a big relief. Outsourcing companies have more expertise in-house, they have a bullet-proof infrastructure and tested management processes. This means that they can come in and change the way your business operates, reduce costs and relieve your internal staff from some of the functions.

6. Share The Risks

Most of the time, especially when it comes to IT outsourcing, your partner will share the risks and responsibilities associated with the project. It will be just as important to your external provider as it will be to your internal team to deliver a product that users and clients appreciate. This will take some of the burden off of you and your in-house team, leaving you to be more focused on delivering an excellent product for the users.

7. Fast Scaling

The last key benefit of teaming up with an external IT outsourcing company is how fast you can scale your business using those services. Without outsourcing, scaling this fast is almost impossible. Especially when it comes to software products and projects. Outsourcing gives you the ability to control your infrastructure and make changes quickly to adjust to the market and industry trends. It is something that will make managing your business and staying competitive on the market much easier. Having this kind of control over your infrastructure enables you to be more free and work quicker.

Making the decision whether to use outsourcing is a big one and you shouldn’t rush it. However, I hope this series provides you with some insight on how outsourcing works and what are the two sides of this coin.

If you’d like to talk to me about building your digital product — write me an email at p.markowski@invotech.co. Or you can contact us via our website to get your project started.