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IT Outsourcing: A Popular Global Trend

Although outsourcing primarily started off as a cost-cutting measure, companies who continuously focus on creating real sustained values have been enjoying multiple benefits by employing this process. Research shows that more than 80% of companies who lack in-house resources and depend on outsourcing to gain or strengthen their capabilities, often use outsourcing strategically for almost everything, be it facilitating business model innovations or nurturing rich talents or launching new products and services faster.

Why Companies Outsource?

Cost saving is an important but not the sole purpose behind outsourcing IT projects. A variety of other factors also propel businesses to opt for outsourcing.

• Controlling operating costs – Outsourcing lets you cut the costs involved with hiring a dedicated employee like employment taxes, health insurance, training, retirement policy, etc.

• Increasing company focus – One of the simplest reasons behind getting an IT project outsourced would be to focus more on the company’s core competencies rather than wasting time on developments outside your knowledge area.

• Unavailability of internal resources – There may be lack of internal resources who can manage the company’s IT requirements and hiring one may involve excess expenditures. This is when outsourcing comes across as a feasible option.

• Accessing exceptional capabilities – When you outsource your IT project from a firm that specializes in your area of requirement, you are most likely to benefit from the collective experience of the specialized team of professionals of your IT vendor.

• Making capital funds available– As a part of their potential cost benefits, many companies outsource non-core business operations so that they can spend their capital funds on items directly linked to their services/products and customers.

• Lowering risk – Since professional outsourced IT providers have to follow the industry’s best practices, they know what is right for you. Hence, the chance of a client implementing an expensive wrong decision is lessened.

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Possible Risks and Their Solutions

It has been almost a decade since the IT outsourcing trend started gaining massive popularity. Outsourcing of different IT services from foreign vendors resulted in major growth of the sector but not without the possibility of some potential risks attached to it. However, keeping a few simple things in mind can always help clients avoid such unpleasant circumstances.

• Not losing personal touch – On several occasions critics have argued over the level of control a company would have on its own employees and that of other employees. Although some believe that IT outsourcing can never have that amount of ‘personal touch’ that can be established with an in-house IT specialist, as a client you can always keep a track of your project status by asking your vendor to provide you with daily work reports. Scheduling weekly video calls and exchanging frequent emails will also keep you updated on the activity.

• Security protocol concern and verification – Confidentiality of data and disaster recovery is an important area that needs to be checked before clients finalize on their outsourcing partner. While almost every company that offers IT outsourcing services has tight security protocols, nonetheless it is a must for clients to check the vendor company’s security standard background and get a NDA document signed by vendor before assigning work to them.

• Time-bound contracts – Not all but some IT outsourcing providers ask clients to sign time- specific contract which could be an issue. This should be clearly understood and how it works for you / your organization. While this can be a double-edged sword, so care should be taken to consider with this arrangement works for you and for the particular project.

• Project documentation – If the vendor company does not document their work, it can give rise to maintainability of the project / application. It is absolutely essential that project documentation as well as code commenting is maintained as per standards agreed.

• Communication & cultural issues – One of the keys to success of any project is a non technical aspect which often times gets ignored till after the project is initiated. It is absolutely essential that the vendor (or vendor employees) has good communication skills. This means good language skills in the language of choice. It helps to have an appreciation of the others’ culture to build a deeper relationship.

It is best that clients avoid situations like the ones mentioned here and choose partners who are transparent and have a record of successful delivery.

In sum, it would be prudent of most to outsource work for skills that are not available in-house. It allows the organization to focus on their core business and helps to contain expenditure.

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