Change is the only constant – especially when it comes to your business’ IT needs.
In today’s digital age, business conditions are constantly shifting. With new technologies, trends and market conditions, change is inevitable. That’s why it’s vital for your company to have a well-defined IT outsourcing strategy.
Outsourcing is no longer a “one and done” deal with a single vendor. Your business has a wealth of options to choose from. By defining your own outsourcing strategy, you can maximize control and flexibility.
Here we’ll define the best types of outsourcing strategies, so that you can achieve top outcomes. Seize the competitive advantage and meet your dynamic IT needs via outsourcing.
Software outsourcing involves handing off your IT needs to a third-party provider. Often businesses choose to outsource to fill digital gaps on their teams. It’s become a go-to option, especially as the developer shortage has become more critical.
Essentially, companies don’t have to invest in building in-house teams. Instead of locking into expensive talent, you can use outsourcing. It allows you to put experts in charge of your project without incurring overhead.
The right IT outsourcing strategy also can boost efficiencies and get cost savings. Ultimately, this enables businesses to focus on their core competencies.
Outsourcing strategies today are wide-ranging depending on your business goals. It’s important that you create an IT outsourcing strategy tailored to your team’s gaps, budget and so on. You might even use “selective outsourcing” to offload only some IT functions.
Perhaps your company is in the early stages. Or maybe you don't have strategic technology or expertise. In these cases, you may benefit from fully outsourcing your IT needs. These partner-controlled models relieve your business of building digital products yourself.
Often the challenges of these models is getting transparency into the project (such as progress, workflows, etc.). You may also need to lock down pricing and IP ownership to ensure your business is protected in the long run.
As the name suggests, you hand over all your IT requirements to a third-party provider. This may include a range of technical tasks and areas, as your business requires. The “outsource all” model often means you choose a single partner to handle your end-to-end IT needs.
Outsourcing your entire project means a partner will take charge of full-scale development. Typically, a project-based relationship involves a specific scope of work.
With your partner, you’ll define parameters, such as technologies, timeline and budget. From here, your IT partner will complete the work with their own developers and tools.
Similarly, managed services meet your IT needs, but on a more ongoing basis. Often this involves a partner handling daily operations or maintenance of your products.
Managed services usually involve a specific area of expertise. For example, businesses may use this model exclusively for cloud management or cybersecurity.
While you will define needed services, your partner will manage completion of them. Managed services are usually based on an hourly or monthly rate to cover your continual IT needs.
Of course, outsourcing doesn’t have to be all or nothing. These next models let your in-house team retain control of your needs. Instead of signing off the full project, you can supplement your team with extra manpower.
In these cases, you’ll have a core in-house IT team and then outsourced staff to extend your functions as needed. Challenges include integrating your new outsourced experts and managing projects across hybrid teams.
Body leasing is a good option if you’re having trouble finding the experts you need to bring your products to life. With it, you can “lease” developers to work within your IT team. Depending on your needs, this can be done on a full-time or part-time basis.
Often outsourced developers work remotely, but are well-integrated into your teams. This way, you can extend your IT area without giving up control of management.
Sometimes organizations may even hire a group of developers, called a dedicated team. In these cases, the dedicated team is an integral part of your in-house team, even if located elsewhere.
Another option for meeting gaps on your IT team is to hire a developer on demand. This model is slightly different from body leasing in that you reserve the developer’s time.
For example, you may reserve a developer for 10 hours a month and then increase hours in case of a major bug or issue. As you can imagine, resource-on-demand hiring is usually paid by the hour.
What’s more, your business can choose to mix-and-match your options. Selective outsourcing lets you separate IT needs and choose different providers for each.
Companies do this to access the right experts for the job, reduce costs and limit their risk. The biggest challenge is managing multiple providers over time. You may also need to regularly evaluate the long-term feasibility of each IT area.
Special projects, such as a mobile app or members login area, can be tough to carry out with your in-house team. This is especially the case if you don’t have the right experts or your team is already at full capacity.
Companies may choose to outsource for this specific, short-term project. As a result, they avoid bloating teams with developers they only need for a one-time purpose.
You may also build an in-house maintenance team led by your CTO, but outsource development. This win-win option lets your internal team focus on bugs, customer tickets and more.
Meanwhile, your outsourced team will build a new version or product. This separation allows for maximum productivity in both areas. You can keep up top customer service, while also advancing new strategic software.
Outsourcing may also be useful when building up your company’s R&D center. Tech services are a major part of R&D. This is especially true if you seek to innovate beyond current offerings.
You may hire IT outsourcing experts to elevate your R&D efforts without the hefty investment. The most common model here is body leasing or dedicated teams, but this will depend on your R&D center’s set-up.
Finally, you may plan IT outsourcing in concert with your other business areas. With a multi-sourcing strategy, you determine outsourcing according to additional key business requirements. This may involve areas such as manufacturing, processing, new verticals, etc.
Multi-sourcing involves hiring a variety of partners, according to the business area. It’s largely considered a low-risk option to protect your IT needs from massive market shifts.
Finding the right long-tail strategy for IT outsourcing is a high-stakes decision. Before you commit to a model or provider, be sure to consider the following factors:
Though the tech landscape is changing, you can shield your business from unknowns. Start by considering these key areas to define an IT strategy. That way, you can navigate into the future with a solid action plan.
As you get started, it’s essential to unify your IT outsourcing strategy. Here’s how to develop a clear plan that strays away from common pitfalls and gets results for your business.
What does success look like for your organization? Take the time to discuss your company goals, including specific KPIs.
Get feedback from not only your CTO, but also all departments and stakeholders. By having well-defined goals, you’ll be able to tailor your outsourcing strategy in detail.
Outsourcing is most effective for areas that are resource-intensive for your internal team. You may also leverage it when experiencing a lack of expertise or manpower.
It’s important to know your company structure and workflows, so you can identify gaps. Dig into your company’s dynamic IT needs now – and what you suspect you’ll need in the near future.
Ultimately, you’ll want the model that elevates your company’s internal expertise. For example, if your product IP is unique, you’ll likely want to keep that in-house. This way, you can retain a competitive edge in the market.
However, that doesn’t mean that all supportive services for that product have to be handled internally (such as data management, servers, cybersecurity, customer support, etc.). You can leverage hybrid outsourcing models to cover certain non-strategic areas.
Once you know what IT areas to outsource, select the right outsourcing model.
Often the main factor is whether management stays in your hands or your partner's. If you’re keen to keep control of the project, try extending your teams. Options such as body leasing, dedicated teams or resources-on-demand are great here.
Otherwise, traditional or hybrid outsourcing is best to offload IT tasks to a partner.
No matter which type of outsourcing model you choose, you’ll require a trusted partner. Keep in mind that the most desired trait in a partner is transparency – not technical skills.
Vet your partner’s IT know-how by checking past projects, client references and more. But focus most of all on their relationship values. Be sure to evaluate whether a potential partner is demonstrating:
After all, a bug in your product can usually be fixed. But a broken communication line or serious disputes can be very hard to recover from.
Though it's no longer the driving force behind outsourcing, cost is still a key factor. Before you contact a partner, do a full audit to determine a realistic budget for your IT needs.
Keep in mind that building a poor product can be very expensive for your company. Bugs, downtime, customer complaints and more can completely sidetrack your business goals. That’s why you should be prepared to pay for high-quality coding and clear IP ownership.
Clarify your budget concerns and try to:
Your long-tail strategy for IT outsourcing should safeguard your business into the future. As you launch an outsourcing project, create a plan to reduce your risk.
Perhaps the greatest determining factor is your IT partner. Choosing a top software development partner can give peace of mind in all areas. Even so, you’ll want to ensure that:
In addition, you should cover your bases with in-depth market research. Get data about your product idea, as well as the general outsourcing industry. For example, check out our IT outsourcing market report here for a detailed overview.
There’s no such thing as 100% hands-off outsourcing. Once you kick off your IT outsourcing partnership, make sure to track the project in real time.
If your outsourced team is remote, equip them with tools to collaborate effectively. You should also check in with the PM on a weekly basis to get a report on progress and any issues. Keep the communication lines, so that you’re ready to give insights or feedback on the project as needed.
Finally, outsourcing strategies are only as great as the people behind them. Work closely with your IT partner to build a robust relationship. Focus on values such as transparency, clear communication and long-term results.
Miscommunication is the #1 reason why outsourcing fails, so go out of your way to be available. Stay in the loop and build connections with your teams. The more aligned your team members are, the more likely your products will succeed.
Your IT outsourcing strategy shouldn’t just look good on paper. You’ll have to implement it on a daily basis with your teams. Here are some best practices to successfully put your outsourcing strategies into practice.
Chart your own unique path forward by understanding the types of outsourcing strategies. Our in-depth guide to IT outsourcing above will prepare you to meet your long-term goals.
No matter your outsourcing plan, your business requires an elite IT partner to carry it out. Reach out to Netcorp to get a personalized outsourcing consultation. Our skilled developers combine business alignment, technical expertise and transparency for top results.
Outsourcing software enables your business to access top talent on your own terms. Through IT outsourcing, you can enjoy cost savings, flexibility, time-to-market and more. Learn more about the benefits of IT outsourcing in our guide here.
The cost of IT outsourcing varies according to product scope, technologies and more. Typically, outsourcing can significantly cut business expenses. The location of your outsourcing vendor can also impact the price. For example, Eastern Europe, Asia-Pacific and Latin America are usually the most cost-effective.
The best IT outsourcing strategy is the one customized to your business. Follow our steps above to define an IT strategy aligned with your business goals.
Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.
Download the free copy of our "Software Development Outsourcing" e-book now to learn the best strategies for succeeding in outsourcing!
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