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Three Types of IT Outsourcing and Why it is Beneficial for your Company

Three Types of IT outsourcing - Offshore, Onshore, Nearshoring

One of the most fulfilling aspects of being an entrepreneur is being able to provide capable and deserving candidates with rewarding jobs. But with expansion and scalability, hiring premium resources for every aspect of a companies’ operation is a luxury that not many can afford.

So what can they do?
Let their work suffer?
Pile on more hours?
If they were to ask me, I’d say outsource instead.

Outsourcing not so long ago was limited only to big corporations who wanted to move a stage or the entire process of their production or assembly offshores to cut costs. However, recent advancements in technology have extended that privilege to small and medium enterprises (SME’s) and also expanded the scope of outsourcing to different elements of the work cycle like marketing, development, accounting, IT, etc.

Here we will discuss in detail about IT outsourcing as this is one trend that has picked up momentum ever so rapidly in the last few years.

IT outsourcing is sub-contracting certain IT functions like business operations, application services, and infrastructure services to a third-party company or individual instead of keeping working on them in-house. IT outsourcing may also stretch to several other functionalities like Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-service (IaaS), utility services, cloud-based services, etc.

It is based around a simple ground rule that a party procures IT services from a vendor on a budget that is acceptable to both of them regardless of their geographical boundaries.

Types of IT outsourcing:

There are three different types of IT outsourcing; they are:

  1. Offshore Outsourcing: This is the most common type of IT outsourcing wherein businesses move abroad under the brand name, and they hire locally. This is mostly done to cut costs or make use of favorable business conditions.
  2. Onshore Outsourcing: Onshore outsourcing enables employees to work in their company’s digital workspace without actually/ regularly going to their physical premises. This mostly employed by low-end startups or product-based companies that do not face air-tight NDA’s.
  3. Nearshoring: Nearshoring is the practice of transferring a segment of business to a country or location nearby.

Most commonly outsourced IT services are:

  1. Web application development
  2. Web application design
  3. Web Hosting
  4. Software development
  5. Software design and architecture
  6. Tech support
  7. Database developmentand management
  8. Backend IT Infrastructure
  9. Telecommunications
  10. Website maintenance
  11. Network & Communications
  12. Disaster recovery
  13. Email security
  14. Data Centre management
  15. Threat protection
  16. Fraud detection
  17. Employee screening

Benefits of IT Outsourcing:

  1. Lower Labor Costs: This is the biggest draw for enterprises that seek to outsource IT operations. According to a survey by Deloitte, ‘ majority (59) percent outsourcers do so reduce their production costs. Developing countries have very nominal labor costs as compared to those of the developed ones. Also, once you outsource, you don’t have to worry about other expenses that come with hiring an employee like training, health insurance, employment taxes, retirement plans, etc.
  2. Lets you do what you do best: Being ‘jack of all trades and master of none’ is not commercially viable in today’s marketing scenario. Sticking to your core competency and optimizing it with time is quintessential to survival in the market. With IT outsourcing, you eliminate one big distraction in that regard
  3. Lowers Infra Costs: Both soft and hard components of IT infrastructure like co-axial fire cables, servers, security, storage, and a whole host of other elements are a hefty investment. One of the most significant benefits of IT outsourcing is that it gives you the leverage to transform fixed IT costs into variable costs and then pivot the budget around accordingly or in simpler terms, you only pay for what you use. This will save you a lot of bucks.
  4. Exposure to quality resources: You hire specialists to carry out your IT operations when you outsource instead of making makeshift arrangements. Also, you reap rewards of the expertise of an entire IT setup as opposed to that of an individual. Outsourcing to India helps to gain access to the talent pool, where almost 500,000 engineering graduates pass out every year.
  5. Robust security: Data security and compliance have never as important as they are now. Just take a look at the sheer volume of some of the most infamous data breaches in recent times:
    1. Hackers stole the data from 4.8 million users at V-tech.
    2. There have been as many as 70 millionAttorney-client privileges violations for inmates as millions of call logs, and thousands of call recordings were stolen.
    3. Not even US President Donald Trumps’ hotels were bereft of a data breach as hackers compromised credit card data of thousands of his patrons.
    4. Hackers prized away as information of many as 15 million T-mobile users; the results included missing social security numbers, passport numbers, birth dates, names, and addresses.

    The Facebook-Cambridge Analytica Scandal? Let’s not even go there.

    To safeguard against such armies of notorious hackers, companies have to keep on up’ ing their data security game. While it may be possible for the bigger enterprises to have the resources to do so, SME’s certainly cannot keep up. Hence outsourcing to institutions that regularly keep in touch with the latest norms of the IT industry and with certifications like PDI DSS can help companies avoid the jaws of a data breach.

  6. Reduce Risks: There is absolutely no surefire way of being immune to all the risks that come with business investment. It is due to the aggregation of dynamic policies of the government, technologies, socio-economic scenario, and competitors; however, when you bring aboard an IT organization, more often than not, they are aware of these risks. At least good IT outsourcing firms possess repositories of industry-specific knowledge about security and compliance that you are privy to after entering into a contract along with the services, of course. Also, if god forbid, in case of any mishap, you always have someone to pin the blame on.

Conclusion: Though it may seem risky on the first look to privy someone to your confidential IT data and processes but the perks that it comes with ensure enhanced production and longer sustenance of your business.

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