Unlocking Business Success: The Key Benefits of IT Outsourcing services for Cost-Effective Solutions

08 Jan 2024

In the fast-paced world of business, where innovation and efficiency are paramount, organizations are constantly seeking strategies to optimize operations and reduce costs. One such strategy that has gained prominence is IT outsourcing. According to a survey by Deloitte, 63% of businesses view cost reduction as the primary motivation for outsourcing IT services. This article explores the key benefits of IT outsourcing and how it can be a game-changer for businesses seeking cost-effective solutions.

I. Understanding IT Outsourcing services

Defining IT Outsourcing:

IT outsourcing involves entrusting specific IT functions to external service providers rather than managing them in-house. This section provides an insightful overview of the concept, emphasizing its relevance in today's business environment where specialization and efficiency are paramount.

A strategic decision in IT outsourcing involves selecting the most suitable model—offshore, nearshore, or onshore. According to a report by Statista, offshore outsourcing revenue is projected to reach $104.6 billion by 2024, showcasing the global prevalence of this model.

IT outsourcing revenue worldwide | Source: Statista Market Insights (update: Dec 2023)
IT outsourcing revenue worldwide | Source: Statista Market Insights (update: Dec 2023)

II. The Cost-Saving Advantage

IT outsourcing offers numerous advantages, making it a strategic choice for businesses looking to reduce costs and enhance efficiency. One of the primary benefits of IT outsourcing is cost-saving. 

Labor Cost Disparities:

Outsourcing to countries with lower labor costs is a proven strategy for achieving significant savings. This section delves into how organizations can capitalize on labor cost disparities to maximize their budget without compromising on quality. According to the International Association of Outsourcing Professionals (IAOP), 59% of companies outsource to cut costs.

Flexibility in Scaling:

One of the inherent advantages of IT outsourcing services is the flexibility it offers in scaling operations based on business needs. We will explore how this adaptability contributes to overall cost flexibility, allowing organizations to navigate changing demands seamlessly. A study by KPMG reveals that 85% of IT leaders believe outsourcing enhances their organizational flexibility.

III. Specialized Skills and Expertise

In addition to cost savings, organizations can leverage the benefits of IT outsourcing services to access specialized skills and expertise. This is particularly crucial in Specialized Skills and Expertise.

Access to Talent:

Harnessing the expertise of specialized outsourcing providers is a cornerstone of successful IT outsourcing. This section will illuminate how businesses can tap into a vast pool of skilled professionals, ensuring that specific tasks requiring niche skills are handled with precision. According to a survey by PwC, 90% of businesses believe outsourcing provides access to quality talent.

Access to certified talents of MOR Software JSC, which is one of the leading IT outsourcing companies
Access to certified talents of MOR Software JSC, which is one of the leading IT outsourcing companies

Focus on Core Competencies:

Allowing in-house teams to concentrate on core business functions is a strategic benefit of outsourcing specialized tasks. We will discuss how this division of labor optimizes efficiency and contributes to overall business growth. The Harvard Business Review notes that 74% of businesses believe outsourcing allows them to focus on core business functions.

IV. Mitigating Challenges

Moreover, the benefits of IT outsourcing services extend to mitigating challenges, including security concerns. By implementing robust strategies, businesses can address potential risks such as:

Addressing Security Concerns:

Entrusting sensitive data to external service providers raises valid security concerns. This section provides actionable strategies to mitigate these concerns, ensuring the confidentiality and integrity of critical business information. According to a study by Accenture, 78% of executives believe that outsourcing providers are critical to their cybersecurity strategy.

Effective Communication:

Communication challenges and cultural differences can pose hurdles in a globalized outsourcing landscape. We will explore practical approaches to foster effective communication and collaboration between in-house teams and external service providers. A survey by Deloitte found that 53% of companies outsource to improve communication.

V. Common types of IT Services to Outsource

Three common types of IT outsourcing models include:

1. Offshore Development Center (ODC):

  • Definition: An Offshore Development Center (ODC) is a specialized team of developers located outside the client’s country, providing comprehensive IT services. ODCs are typically established by companies seeking to outsource their IT requirements to a remote team of skilled and experienced developers.
  • Features: ODC teams often work exclusively for a single client, functioning as an extended arm of the client's IT department. The client is relieved from additional responsibilities like employee benefits, salaries, and working conditions, with payment made as a service fee to the outsourcing vendor.
  • Key Concerns: Security is a primary consideration when engaging with ODCs. Reliable ODC teams implement stringent security protocols, including segregated workspaces, limited access, and advanced security measures such as firewalls and encryption to safeguard client data.

2. Project-Based:

  • Definition: The project-based outsourcing model is tailored for a specific project with a predefined scope, timelines, and budget. This model allows flexibility for team members to be assigned to various projects over time.
  • Features: Ideal for companies with a need to outsource components of a larger project, the project-based model is result-oriented and operates under time constraints. It provides a suitable solution for clients aiming to achieve the final project output swiftly.
  • Characteristics: The project-based outsourcing model offers a loose control structure while emphasizing achieving project goals within a specified timeframe.

3. Dedicated Team:

  • Definition: Similar to an ODC, a dedicated team consists of members working exclusively for a client. The key distinction is that all team members operate on-site at the client's business office.
  • Features: Many companies favor the dedicated team model due to its benefits in communication, workflow sharing, and alignment with the client's working culture. This model is particularly suitable for clients who prioritize close collaboration and seamless communication.
  • Considerations: While a dedicated team offers advantages in communication, it may involve higher costs associated with on-site presence. In contrast, ODC teams are more flexible, capable of remote operation, and easily scalable in a short period.

In short, the choice between these IT outsourcing models depends on the specific needs, communication preferences, and budget considerations of the client. Each model offers unique advantages, addressing different aspects of project scope, duration, and collaboration dynamics.

VI. Selecting the Right Outsourcing Partner

Examining specific benefits of IT outsourcing, such as access to talent and flexibility in scaling, highlights how organizations can strategically position themselves for growth.

Evaluating Expertise:

Selecting the right outsourcing partner begins with assessing their skills and experience. This section provides valuable tips for businesses to evaluate the expertise of potential outsourcing providers effectively. According to a study by HfS Research, 79% of companies believe that the expertise of their outsourcing partner is a critical factor.

Checking References:

Obtaining feedback from other clients is a crucial step in gauging the performance of outsourcing providers. We will explore the importance of references and how businesses can leverage this information in their decision-making process. A survey by Clutch found that 83% of businesses consider client references a critical factor in choosing an outsourcing partner.

MOR Software always has the utmost dedication to providing high-quality services. We believe that customer reviews play a crucial role not only in evaluating our performance but also in continuously improving our services. Here is an example of obtaining customer feedback: Cydas Inc., a joint venture software company from Japan, has been a partner with MOR for 7 years to develop CYDAS PEOPLE - an HR management. 

Ensuring that outsourcing arrangements comply with legal and regulatory requirements is imperative. This section will guide businesses in navigating the legal landscape associated with outsourcing, mitigating risks, and ensuring compliance. According to a report by IAOP, 61% of companies believe that legal compliance is a top concern in outsourcing.

>>> Read more: Top IT outsourcing companies

>>> Read more: Why Outsourcing to Vietnam is a Wise Move?

VII. Case Studies and Success Stories

A case study by Infosys showcases how outsourcing helped a Fortune 500 company achieve 25% cost savings in IT operations. Sharing specific instances of cost savings and improvements in efficiency experienced by organizations. Quantifiable results underscore the tangible advantages of embracing IT outsourcing services as a strategic business initiative. According to a study by ISG, 67% of companies reported cost savings of 20% or more through outsourcing.

One of MOR's customers also mentioned about value of IT outsourcing. It is from an interview between representatives of Team Spirit Co., Ltd. and MOR. TeamSpirit is a Salesforce AppExchange app and has already been deployed by more than 1,700 companies as of the end of February 2023. 

Mr. Kenji Teshima - Service Development Division, Team Spirit Co., Ltd.
Mr. Kenji Teshima - Service Development Division, Team Spirit Co., Ltd.

>> Read the full interview about the collaboration on an IT outsourcing project between Team Spirit Co., Ltd. and MOR.

 

Sharing with us about the decision to start outsourcing IT tasks and collaborate with MOR Software, Mr. Kenji Teshima said:

"Since joining Team Spirit, as a CRE (technical support) manager, I want to make improvements in response to customer inquiries and requests! However, the development team's priority was to comply with high-priority laws, develop new features, and fix bugs, and they were unable to do so.

 When I realized that 'Small improvements can deliver great value, I started thinking about doing something about it. Therefore, I suggested to my superior the idea of ​​offshore development in Vietnam, which I had also used in my previous job.

TeamSpirit had previously considered offshore development, so the suggestion wasn’t entirely new. This time I promised to take responsibility, so I decided, 'Let's do offshore development!'."

Conclusion

Summarizing the key takeaways, this section underscores how IT outsourcing, when implemented strategically, emerges as a powerful tool for businesses looking to optimize costs, access specialized skills, and achieve sustained success in today's fiercely competitive market. With the numerous benefits of IT outsourcing services showcased, organizations are poised to unlock unparalleled opportunities for growth and efficiency.

Encouraging businesses to explore IT outsourcing services as a viable strategy, this section provides resources for further information and assistance. By leaping strategic IT outsourcing, businesses can unlock unparalleled opportunities for growth, efficiency, and sustained success. As the statistics suggest, those who strategically embrace IT outsourcing are positioned for a future of enhanced productivity and cost-effectiveness.

 

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