Why IT Outsourcing Is A Good Option In A Crisis?

Konrad Rotkiewicz
01 June 2020 · 6 min read

COVID-19 has dramatically reshaped the way business is conducted around the world. Firms have had to do their best to keep up with and adapt to the rapidly changing landscape around them caused by the coronavirus. In many places, non-essential businesses are shut and people are having to make due working from home.

Devang Bhatt, from brokerage ICICI Direct, said that “in the near future, IT companies could feel the heat of pricing pressure, revenue loss due to lockdown, client bankruptcy and slower client decision making led by lower discretionary spends” this list represents just a few of the pressing issues companies are facing right now.

Businesses are going to need to be smart to get through this emergency. One invaluable tool that companies can tap into is outsourcing. It can help your business save on costs, adapt to new technologies and innovations, tap into superb talent pools, and increase speed and flexibility. In times of uncertainty, outsourcing is the lifeline that your business needs.

How outsourcing can help you in a crisis?

  • Cost saving aspect in software development

One of the top reasons companies choose to outsource is to cut costs. Right now many businesses are facing zero or low sales numbers while still paying for overhead (rent, salaries, etc.).

With potential bankruptcy looming for many firms saving costs in a time like this is more important than ever before and outsourcing will help you do it.

Outsourcing allows you to get work done at a low cost in an efficient manner. It allows you to take advantage of the cheap cost of living and low salaries. The difference in wages can be passed on as savings to your company. Talented developers can be found all across the globe who will work for less than native ones and deliver an equal or greater quality of work. Compare the software outsourcing costs in different countries, the differences may surprise you.

In addition, businesses save by not having to pay the overhead for outsourced employees. You don’t need to pay for office space, paid sick days, healthcare, or equipment. These savings are called “indirect cost savings.” According to Aspector, a human resources consultancy company, indirect cost savings make up 19% of the total cost savings that come from outsourcing. In a whitepaper, Aspector outlines how “the majority of the savings [from outsourcing] appear in the finance department, HR and the procurement department, but significant savings can often also be realized in IT, CRE [Commercial Real Estate] as well as in the legal department.”

In Deloitte’s Global Outsourcing Survey 44% of respondents cited reduced delivery costs as the top way innovation creates value in outsourcing relationships. Nearshoring or offshoring gives you increased budget control and visibility due to clearly delineated scopes of work. You’re also not paying for development downtime. When you need to save on the cost of a software project during an uncertain times, outsourcing can come in handy.

  • Opportunity to adopt new technologies and innovations

A crisis is a tumultuous time for businesses. However, that doesn’t mean it has to be time wasted. It may be an opportunity to adopt new technologies and innovations.

The Wall Street Journal cites that in a survey of 500 business executives 70% of respondents believe their outsourcing provider has a reasonable or advanced ability to implement disruptive solutions. In the same survey, 71 percent of executives said their organizations are encouraging outsourcers to innovate rather than just improve back-office functions. 43% of respondents reported motivating outsourcing providers by making innovation a major component of their contract.

Outsourcing also gives you access to diverse technologies. Vendors generally focus on particular services and deal with a large volume of projects. Running their businesses like this allows vendors to keep themselves up-to-date on the latest technologies required to implement their services. You can avoid technology obsolescence and in addition leverage your vendor’s access to advanced and diverse technologies.

  • Flexibility

During a crisis, your business needs the flexibility to adapt to its rapidly changing environment in order to survive. An outsourcing customer can change vendors if required. For example, in the event of poor delivery, it is simpler to switch providers than fire and rehire for a position internally. A great many IT contracts integrate conditions for a change in requirements which ensures flexibility of the project.

Part of flexibility is scalability - you can scale up or down as needed in a times of uncertainty. If a project needs to be scaled back you can downsize it with ease. In the event you need to scale up, IT providers are ready with expert personnel to fill new gaps as they arise. Recruitment of developers is for software development companies the most important processes so you might expect excellence in selecting the best team members for your projects.

When you have cyclical demand (or increased demand in an emergency) outsourcing can help you bring in additional resources as they are needed. When things slow down later the IT service provider can be let go. This maintains a company’s flexibility.

  • Talent pool access

Another great thing about outsourcing is that it gives your company immediate access to some of the world’s top talent. Acquiring an internal hire who is top of their field can be a large struggle and who knows if you can even find one who lives within commuting distance of your office.

Outsourcing gives you access to top-class professionals whom you would otherwise never have the opportunity to work with. Not only that but you’ll also be able to hire them for a fraction of what it would cost to hire them on as a full-time employee. Outsourced employees can be contracted much quicker than internal hires, which is especially useful in an uncertain times.

Some markets like London are drained of available professional talent. Outsourcing gives you access to parts of the world where talent is abundant, like Poland. Companies that outsource software development to Poland can save up to 50% on their costs and the Polish IT industry is characterized by the superior quality of its services. Many global players have outsourced their research and development centers in Poland.

  • Speed of development

When a crisis hits you want your business to be able to adapt and move quickly. IT outsourcing can help your company do just that. Nearshoring or offshoring to vendors in different time zones can mean your project is worked on 24/7 and this can help reduce its time-to-market. In addition, the country you outsource to may have different holidays or workweeks, potentially allowing your project to be worked on through statutory holidays and weekends. Often the vendor you outsource to will have specialized skills or expertise that your company lacks internally. These skills and expertise can result in massive time savings on your project.

There is also less ramp-up time and quicker progress made when outsourcing due to the vendor’s familiarity with similar projects as well as the efficient and proven processes they have developed. In addition, working with software development company enables quicker start-up, development, and scalability for new operations.

Conclusion

COVID-19 has changed the rulebook and brought about unique risks and challenges. Many companies have been forced to slow operations and cut costs and others have had to shut down their offices entirely. While others have seen a sudden surge in demand and are having difficulty keeping up. Businesses are all struggling to keep their costs down and their projects rolling. Outsourcing can be a lifeline for companies during an uncertain times.

Many businesses are starting to rethink the value of offshoring. As more and more employees work from home the difference between offshore and onshore is negligible. Businesses need to push through these tough times so they can emerge in a strong position after. An article published by McKinsey & Co. stated that during this crisis “CIOs have an opportunity to accelerate programs and push priorities that can help position the business to succeed when the downturn ends. There’s no point in winning the battle but losing the war.''

If you want to learn more about outsourcing and how it can help your business, subscribe to receive a free informative ebook.

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