What is IT Outsourcing?

Organizations across the world are repeatedly trying to save money on development costs and lower their IT spending, as tech solutions become pricier and talent continues to be difficult to find. By 2024, IT spending is expected to increase to 5.1 trillion dollars worldwide. Recently, the increased rates and developer shortages have led companies to look for cost-effective strategies. One of them involves outsourcing either the company’s entire IT department or hiring outsourced developers to handle a few extra projects. This practice is often referred to as IT outsourcing, and we’ll dive into it in today’s article. Keep reading to learn more about this IT hiring strategy and why you should hire outsourced developers!

What is IT Outsourcing?

To understand the meaning of IT outsourcing, it's easier to think about what the words composing this term mean separately. "IT" stands for Information Technology, while "outsourcing" means externalization. As a whole, IT outsourcing refers to hiring external Information Technology services, instead of performing these services in-house within your company or organization. At a practical level, this practice consists of hiring remote developers to conduct certain tasks or complete entire projects that would otherwise be handled by in-house staff. 

Companies may opt for this internal strategy for various reasons, whether it's to cut costs, incorporate specialized services, improve efficiency, or focus on the company's core needs. All of these goals involve hiring third parties or providers specialized in IT to perform services such as software development, technical support, network management, and system administration, among others.

Some companies choose to hire personnel for specific IT projects, while others opt to outsource an entire IT department to perform its functions externally. No matter the nuances of each project, this practice is quite common in businesses, as it brings strategic, operational, and financial benefits. In fact, IT outsourcing continues to grow. It’s currently the largest market within the IT sector, expected to reach $430.53 billion by the end of 2023. 

The Three Types of IT Outsourcing.

Onshore Outsourcing:

This practice consists of outsourcing IT services to a company or professionals within your own country. The key advantage here is the minimal cultural and time zone differences, making communication and coordination easier. However, onshore outsourcing is significantly more expensive than other IT outsourcing options due to higher labor costs in countries like the United States or Western European nations.

Offshore Outsourcing:

This type refers to outsourcing IT services to a company or professionals in a distant country, usually where labor costs are lower. Popular offshore outsourcing destinations include India, the Philippines, and Eastern Europe. The main benefit is cost savings, but this can be balanced by challenges such as significant time zone differences and potential cultural and language barriers.

Nearshore Outsourcing:

Nearshore outsourcing strikes a balance between onshore and offshore solutions. It involves contracting IT services to a neighboring or nearby country, which often shares a similar time zone and cultural traits. For instance, for a U.S. company, nearshore outsourcing means partnering with nearshore software development firms in Latin America, like ACL. This option offers a good mix of cost efficiency and ease of collaboration due to minimal time zone restrictions and cultural differences, as well as smaller language barriers.

Benefits of IT Outsourcing

IT outsourcing can provide numerous advantages by delegating certain functions, activities, or the development of projects/products externally. Here are the key benefits of this type of IT service outsourcing, which can vary depending on the nature of the company and the services subcontracted.

Cost Savings: 

IT outsourcing can help your organization achieve IT cost efficiency. When it comes to cutting costs, this form of subcontracting is one of the most used strategies by companies. It reduces operational costs by hiring specialized providers in a specific subject, instead of carrying out these services internally for a higher price. 

Large Pool of Experts in the Field: 

Not only are offshore and nearshore talent pools larger but IT outsourcing providers are also usually experts in each service area they offer. Your company will certainly benefit from professionals dedicated to their roles. Thus, the company can focus on its core competencies to achieve its goals and boost its competitive edge, while the external IT team focuses solely on the contracted project.

Focus on Business Objectives: 

Outsourcing secondary tasks improves a company's efficiency and productivity, enabling it to focus on its business and the necessary strategies for its operation. This allows more time and resources to be dedicated to essential tasks.

Reduced Responsibilities for In-house Staff: 

Having an external team to take care of certain IT projects means your salaried staff can focus on core business functions, making your workforce more efficient and better distributed. focus Moreover, hiring IT outsourcing services can lessen financial, legal, and compliance risks. When functions are outsourced, in this case in the IT area, both responsibility and risks are transferred to the service providers.

Improved Innovation and Company Service: 

By hiring IT outsourcing services, companies can access the latest technology tools and systems without internal investment. This benefits and enhances service quality by utilizing these external resources.

What IT Outsourcing Services Can You Access?

IT outsourcing encompasses a range of services depending on the technological objectives and needs of companies, from specialized services in a specific field to a complete IT department. Here's a list of some of the most popular IT outsourcing services!

1. Project Management: IT project management includes planning, executing, and overseeing activities necessary to achieve the main objectives of an IT project. Efficient coordination of costs, time, and resources is essential to execute the project.
   
   
2. Infrastructure and System Administration: This outsourcing service focuses on designing, implementing, and maintaining a company's technological structure to ensure performance and security.
   
   
3. Software Development: IT software development involves designing, implementing, testing, and maintaining software applications created to meet a company's needs.
   
   
4. Cloud Services: Cloud services aim to provide computing resources like storage, processing, and software, enabling companies to access advanced technology efficiently.
   
   
5. Web Development and UI/UX Design: This service creates and improves websites and applications, ensuring functionality, accessibility, and a good user experience.
   
   
6. Technical Support: This service provides assistance and solutions for hardware, software, or network issues.
   
   
7. Information Security: This service implements measures to protect data from unauthorized access, ensuring confidentiality within a system.
   
   
8. Testing and Quality Control: This outsourcing service systematically evaluates software to identify and correct defects, ensuring certain quality standards.
   
   
9. Data Management and Business Intelligence: Services like Master Data Management interpret data to aid companies in making evidence-based decisions. 

As you can see, IT outsourcing offers a range of benefits through its various approaches and types of services. However, it is always important to consider the challenges involved in outsourcing. The relationship between the company and the provider is fundamental to efficiently carrying out IT projects, as well as data security - which has proved to be a crucial point for safeguarding a company’s confidentiality.

Explore the Possibilities of IT Outsourcing With ACL

Are you ready to explore the advantages of nearshore software development for your business? If you're considering hiring nearshore software development services, at ACL, we're ready to take your projects to the next level. Discover the IT outsourcing services we offer and face your digital challenges confidently, backed by our 30-year experience and passion for technology. You can learn more about us here! Our long-standing record in delivering high-quality software solutions and deep understanding of the unique needs and challenges associated with nearshore projects make us a reliable partner for your software development needs. Our team of skilled professionals is equipped to handle complex projects, ensuring that we deliver innovative, efficient, and cost-effective solutions. Choose ACL for an IT outsourcing partnership that combines experience, trust, and cutting-edge technology in nearshore software development.