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The state of the art in technical outsourcing

Outsourcing is a practice that a lot of companies have adopted during the 70´s and 80's since well known and large companies like Kodak, IBM, General Motors, Nike, Dell implement this practice.
The primary objective of technical outsourcing is cost reduction. Companies are constantly on the lookout for reliable technology partners to add value to their projects. Nowadays companies have various additional motives for implementing this practice.

IT Outsourcing Management

Information Technology, IT, has been increasingly present in a society's everyday life, especially in the productive and support processes of organizations, whether they are for profit or non-profit. This connection of operations and strategies of organizations with IT refers to a consensus that future prosperity of organizations depends on the quality of their information system. Consequently, this view of how essential IT is for organizations suggests the complexity of defining, implementing, changing and improving it; that is, addressing the whole life cycle of IT solutions.

Tight budgets and the growing demand for changes in complex organizational environments result in a pressure for results which is difficult to manage. This complexity, associated with increasing pressure for organizational efficiency, has led many managers to adopt IT Outsourcing, ITO, with the purpose of reducing costs of IT operations. In this regard, ITO management has become a critical asset for organizations.

It is possible to define ITO as the contractual provision of services and goods to client organizations by an external organization. By considering the fact that the relationship between clients and suppliers is a critical connection, ITO can also be described as a development of an interorganizational relationship between clients and suppliers with the purpose of providing IT services.

In organizations where ITO is adopted, the outsourcing strategy can be defined as the logic used in a set of IT-related decisions of an organization. Outsourcing choices represent alternatives for organizations to increase, by means of IT, the potential for achieving their organizational objectives. An integrated view of ITO consists of three perspectives: economic, social and strategic.

Major reasons companies outsource their software development are:

  1. Utilizing enhanced skills: There are companies that require particular skills for particular projects that their internal teams lack. In some situations, it is more feasible to outsource resources having the skills for the required period of time, instead of hiring them knowing they might not be required once the particular project is over.
  2. Gain a competitive edge through innovation: With the emergence of innovative technologies like AI, blockchain, RPA, etc. there is a need for companies to integrate them and gain a competitive advantage. However, it is not always easy to hire resources who are competent in these technologies and that’s when offshore outsourcing comes for the rescue.
  3. Optimizing operational costs: Instead of just cutting down on costs, outsourcing is being used by companies to optimize their departmental costs through long-term engagement. Entire operational departments such as IT, HR, etc. can be outsourced via cloud vendors to optimize costs.

Things to consider when selecting an offshore outsourcing partner:

  • Development methodologies

Companies must ensure that the methodologies used by the outsourcing partner are considered best practices in the industry and are in line with the practices that they use in the organization. It is crucial to choose a partner that operates transparently in providing issue management and resolution. Predefine all the expectations, roles, and responsibilities to ensure smooth engagement.

  • Cultural differences

When outsourcing offshore it is imperative that companies pay heed to the cultural differences that the two parties need to face. Choosing technology partners that are not conventional to their country’s work norms and instead have a work culture that’s internationally acceptable is always considered beneficial while outsourcing offshore.

  • Consider the time difference

Although in some situations, it is considered better to have a different time zone than the outsourcing partner, there are projects that require both the parties to be in closer time zones for better results. This decision is majorly based on the type of project that the company needs to work on.

Another very important factor to consider when hiring a team for offshore outsourcing is the type of structural requirement for a project. There are majorly three team structures that a company can choose from for its outsourcing engagement. The generalist structure is majorly used when a company needs to elevate its development capacity. In this structure, a team of development experts provides end-to-end development services. The specialist structure can be selected if the company requires a team with niche expertise for projects that require assistance in specific technologies. Lastly, a hybrid team structure, as the name suggests is a mix of both generalist and specialist team structures.

Companies can choose a team structure according to their project requirements. There are no criteria to judge which structure will be best suited. Hence, whichever team blend works best for the complexity of a project is considered the best for that project.

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