How Startups Can Leverage IT Outsourcing To Grow Better? (With Examples)

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When you run your startup, there’s a number of things that you’d have to take care of.

Managing the processes. monitoring them. initiating new processes. bringing new ideas to the table and so on! In times like these, an extra hand can always be useful.

IT Outsourcing can be your extra hand.

One of the biggest technology challenges faced by the startups is the rapid rate at which the technology is evolving. With almost every second company outsourcing its IT services, the global outsourcing market is expected to grow by 98 billion USD by 2024, with a Compound Annual Growth Rate (CAGR) of 5%.

And then most of these businesses find IT outsourcing a highly profitable and effective way to improve their business. 

This simply means that IT outsourcing works. The question of concern is what exactly can a startup do to leverage IT outsourcing to grow better?

To start off, here is a comprehensive blog revealing everything about IT outsourcing, and its importance.


First Thing First, What Is IT Outsourcing?

According to Gartner, IT outsourcing is the use of external service providers to effectively deliver IT-enabled business processes, application service and infrastructure solutions for business outcomes.

You basically hand over task implementation to your technology partner and keep an eye on things. IT outsourcing can be implemented both ways: outside or within the country. By outsourcing, startups can get their hand on the best talent without being bound by geographical or economic boundaries. You can hire AI engineers, blockchain experts, chatbot, mobile app developers, React devops, and other developers for various new software development frameworks and libraries unhindered. Startups need not worry about the technology front of things in their digitization initiative as long as they outsource. 


How IT Outsourcing Is Different From Onshore And Offshore Outsourcing?

Knowing the meaning of IT outsourcing only isn’t enough for a successful business venture. It is imperative you have a clear understanding of what strategy you want to adopt for your software development.

Right at the mention of outsourcing, thoughts start hopping from IT outsourcing to Onshoring To Offshoring. There is a slight difference between them to get your work done anywhere but not in-house.

Are they the same or is there any difference between the three? 

Let’s break down the three for a clearer understanding of these terms. 

Onshore Outsourcing refers to partnering with an outsourcing development company in the same country.

Offshore Outsourcing refers to hiring an outsourcing partner from a different country with a different time zone. It allows you to hire expert professionals for a fraction of the price that you would have to pay if you would hire full-time in-house employees.

Now that you've a clear understanding of each of the terms, let’s look at their advantages to understand better.

Advantages Of IT Outsourcing

There are many reasons why a startup may choose to outsource its IT process. Some of the recognized benefits of outsourcing include:

  • Focus On Core Business Activities

IT Outsourcing can free up your business to focus on its strengths, allowing your staff to concentrate on their main tasks and on future strategy.

  • Increased Efficiency

Choosing an outsourcing company that specializes in the process or service you want them to carry out  can help you achieve a more productive, and efficient service.

  • Cost Savings

Startups can achieve cost savings by outsourcing and can help them release capital for investment in other areas of their business.

  • Increased Reach

IT Outsourcing can give you access to capabilities and facilities otherwise not accessible or affordable.

  • Greater Competitive Advantage

IT Outsourcing can help you leverage knowledge and skills along with your complete supply chain.

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Advantages Of Onshore Development

  • Communication

 The most obvious advantage to onshore outsourcing is communication. Working with developers who speak the same language enables more efficient conversations.

  • Time Zone

 In addition to smoother communication, onshoring IT outsourcings enable you to work with developers in your same time zone. 

  • Cultural Norms

IT  Onshore outsourcing simplifies the alignment of cultural work norms and enhances contextual understanding of some client products.

Advantages Of Offshore Development

  • Rates

 Favorable rates remain the biggest reason U.S. and other European companies turn to offshore development, where rates remain significantly lower than those in their country. India provides the largest outsourcing market with different outsourcing models that businesses can choose from. 

  • Talent Pool

 Tapping into the global talent pool allows you to shop for the best rates and find an outsourcing partner with experience in your industry or the specific technology your business needs. India has the largest professional and technical pool of talent throughout the globe.

  • Long-term Maintenance

 Hiring in-house devs to maintain software falls outside the budget for most companies. Outsourcing to offshore companies, like Classic Informatics means your software stays up-to-date without overpaying.


How Startups Can Leverage IT Outsourcing Today To Grow?

IT outsourcing allows you to expand capacity without having to formally hire large numbers of new staff; without investing in new capital equipment, without leasing a larger commercial space; and without having to invest in development costs for non-core parts of your business.

Below we have discussed the top ways you can leverage IT outsourcing to scale your business.

  • Helps In Focusing On Your Basic Tenets

Outsourcing your non-core functional areas will spare time for managing your company's core functions. Monitoring of non-core tasks such as IT services is delegated to IT Outsourcing partners.

Also, startups enjoys the benefits of the strategic utilization of economic, individual, and operation resources to enhance service delivery effectiveness and efficiency.

  • Helps You To Grow Faster

Many companies are set to enter new markets, or expand their product/service offerings, implementing change in your services may take too long, leading to missed opportunities to acquire and engage customers.

Partnering with an Offshore IT outsourcing agency has numerous benefits as it helps you to scale your business with less time.

For example- If you want to build a mobile app, hiring a dedicated team or individual developer to be a part of your team can help you streamline your go-to-market strategy and connect with your target audience quickly.

software development frameworks

  • Helps To Use Agile Methodology For Your Development

With  Agile methodology, your outsourcing partner prepares a plan for an iteration of 2-6 weeks, delivers a part of a solution’s functionality and then plans a new iteration.

 They can better analyze the results of each iteration, and regularly assess project progress.It helps businesses to make improvements as required, and make an attempt to overcome them in the next iteration. 

  • Helps To Access A Bigger Talent Pool

The foundation of every successful business is a rock-solid team.

Having skilled resources on your side is like having the right ammunition in a war. It will help you maximize the odds of hitting the targets, and winning the battle.

Although relying on in-house talent is a good strategy to build, scale, and grow a business, it can be limiting to access talents across the globe.

For example, if you're  building an ERP software solution for the healthcare industry, it’ll be a lot easier and faster to work with talents who have prior experience.

This way, you can get the work done in the timeframe required to attract more clients. In simple words, outsourcing opens up a bigger and more diverse talent pool for startups who want to expand their reach in terms of working with skilled people from across the world. Startups get a complete package of expert and experienced professional team that works on your product development from end-to-end.


  • Helps You Save Money

The chief factor of IT outsourcing is to help startups and enterprises save money. Based on this objective, it can provide short-term to long-term perks. Beginning with the potential to scale your business  activities that it provides, it allows your business to grow. It simply means lowering capital and at repetitive costs. It saves money due to lower wage costs, price stability, and generous tax breaks, and has the potential to enhance your digital customer experience. Having a pool of extreme talent and rich industry experience, you can achieve everything that you can expect from a top-notch offshore development company.

  • Helps To Use New Tech Stacks

Enterprises and big business firms need to use new tech stacks to be in this competitive market. Apart from saving costs, IT outsourcing enables you to use the best talents who are experienced in new technology to suit your client’s requirements and standards. 

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What Are The Strategic Ways To Outsource IT?

IT Outsourcing is an important business decision that can have a very significant impact on the business. However, not all businesses that outsource have been able to successfully do it. Many have experienced failure in outsourcing owing to many reasons. 

 However, just some strategic steps, and you could move beyond the breaking points and become one of the outsourcing success stories. So, here’s some valuable points to some strategic ways to make outsourcing work for you. 

  1. Identify The Right Approach

The most crucial time for outsourcing is the very beginning. This is the part where you identify the right approach to outsourcing. As discussed in the situational examples, there are several situations when companies outsource and so are the approaches that companies take. To know this, here are some things to consider:

  • Are you looking to plug technology gaps?
  • Are you looking to cut costs?
  • Are you looking to hire a specialist?
  • Are you clear about the scope of your project?

Once you have answered the following questions, you can easily identify the approach that you should be taking for outsourcing software development. 

  1. Go The Hybrid Way

A strategic way to outsource web development is to take the hybrid route. 

Many people are apprehensive about getting the development work from someone whom they’ve never met. Many even feel that there is a strong language barrier which could lead to misunderstandings in the project. This is where a hybrid approach to outsourcing can significantly help. 

In this approach, you have a point of contact who would listen to all your specific requirements. He/she would act as the Account Manager who would understand your project and would meet you in-person. The development would happen on the offshore site. This way, you can be sure that there is no miscommunication or unsaid assumptions.  


  1. Choose The Right Engagement Model

As important as it is to identify the right approach to outsourcing, choosing the right engagement model is also important. There are different engagement models that companies follow to get their work done. Let’s see some situational examples of how companies take different approaches to outsource their business operations to understand the engagement models better. 

Hiring a Single Developer: Company A is working on a project. It seeks to create a new screen for its mobile app using the latest technology. However, it is not feasible nor easy to find the latest technology in your geographic location. So, you look for a remote developer that will work on your project to plug the technology gap. 

Setting Up A Remote Team: Company A is scaling up its operations or working on a project. It has a strong-hold in a particular part of development, say front-end. You need experts for other tasks but expanding your infrastructure and the cost of the in-house team would be extremely high. So, you get in touch with an outsourcing vendor to set up a dedicated team of back-end developers, graphic designers, QA, and others. 

End-To-End Product Development: Company A has a new product to develop but not sure where to start. It joins hands with an outsourcing company to get everything done from ideation and development to marketing, analysis, and scaling. The software outsourcing company helps from the beginning to the end to help your product become successful through the managed project approach. 

Finding Technology Partner: Company A seeks to digitize and adapt to digital transformation. It doesn’t have the expertise required to digitally transform. It joins hands with a technology partner who will help the company automate and become more advanced in the realm of technology. It would help them adapt to new technologies and create software that could digitize their operations. 

Depending on the requirements that you have, you can choose from the engagement models and ensure your business is able to succeed with outsourcing. 

  1. Have A Clearly Defined Scope

While most people say you need to set realistic goals for outsourcing, having a clearly defined scope of the project is a more strategic step. 

Just knowing your goals isn’t enough. You also need to have a clearly defined scope of the project. It should specify everything that you are expecting the outsourcing software development company or the remote developers or the dedicated team to accomplish. Define everything upfront from the tasks in every sprint to the number of hours dedicated to the technology used to the price and everything. You should also have a clear scope for your project in the beginning to ensure you achieve success in outsourcing.

  1. Leverage the Time-Zone Difference 

Most of the companies believe that the time zone difference is a set-back in their development task. But if you think strategically, you can leverage this time-zone difference to your advantage. How?

Well, for starters, you have a team working undisturbed on developing your software. The most important thing when you talk about the time-zone gap is that you can use this gap to ensure your operations are running 24X7. 

Choose an IT outsourcing company that has an overlapping time-zone of at least an hour or two in the day. It could be in the morning or during the evening. This way, you will have the time to collaborate and communicate with the team for the project. The rest of the time, the outsourcing company works on your project to ensure the work carries on 24X7.


Top Worldwide Startups Who Won From IT Outsourcing

Also known as the eBay of China reached a record 583,000 orders per second at the peak of its 2020. Jack Ma is the co-founder and former executive chairman of Alibaba Group. The Inside Story Behind Jack Ma and the Creation of the World's Biggest Online Marketplace is that the startup had outsourced some parts of its development as early as 1999 by hiring remote developers from the United States. With the outsourcing approach, Alibaba has 674 million annual active subscribers and has a 60% share in the Chinese eCommerce market.

Who doesn’t use WhatsApp these days? The free, cross-platform messaging and voice-over tool is owned by Facebook. It now has 1.5 billion users in 180 countries. WhatsApp founders Jan Koum and Brian Acton started the startup with a small amount of cash and were determined to save costs but at the same time didn’t want to compromise on quality. They outsourced  their web development to app developers in Russia to minimize operational costs. Now, WhatsApp is the third most downloaded Android app in the world.

The cloud-based instant messaging platform has become increasingly popular. Slack is a chatroom for employees designed to replace email as a primary means of communication. The instant messaging platform is known to outsource its product design to a web designing company. It is now used by 10 million active users and has earned $401 million revenue in 2019.

The telecommunications application specializes in providing video chat and voice calls between computers, tablets, mobile devices via the Internet. Skype has outsourced its software development work to European web developers which gave Skype a tremendous success that it was acquired by Microsoft. Skype now has 300 Million monthly active users and almost 1 billion downloads.

GitHub is a subsidiary of Microsoft, and provides software development version control using Git. But it might come as a surprise that GitHub actually outsourced its MVP. Today GitHub has 40m+ developers with 44m+ repositories created as per last 2021, and hosted 100 million+ repositories, in total. 


Wrapping Up

IT outsourcing  is proven to help companies cut costs, improve business processes, make in-house teams more efficient, and add value to the project. However, simply rushing to delegate your business operations to an outside company can lead to failure. You need to understand the importance of outsourcing for your business to succeed.

So, if you are also planning to outsource your IT operations, partnering with a leading IT outsourcing company like Classic Informatics can offer customer-centric development services along with standardized services to suit the needs of your clients.

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Topics : Outsourcing, Startup Solutions

Nivedita Nayak

Written by Nivedita Nayak

Nivedita Nayak is a technical content writer in Classic Informatics, a leading web development company . She is a passionate writer, and loves to write for IT Industry.

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