What types of IT-Sourcing exist?
What would fit best for your project and your specific needs?
Let’s help you and make these questions a little easier to answer.
As you can see from the diagram above created by the University of St. Gallen, there are many kinds of IT-Sourcing which can make the process of deciding which one to use excruciating. It is commonly differentiated between seven different dimensions in IT-Sourcing which are strategy, location, financial dependence, degree of sourcing level, time, the number of providers and the degree of business orientation. Inside these dimensions exist again plenty of variations. Unfortunately, this topic is quite controversial and even scholars have different opinions on how to differentiate the different forms from each other.
In order to take on this difficult task, EASTCODE has sorted the various types of outsourcing and describes 5 of the most important ones, that we encounter every day in our work.
-Let’s start with a general introduction to Outsourcing-
The most basic definition is simply, “Outsourcing is the practice of obtaining goods and services from a foreign supplier.” Your company will use an external resource or remote developer to handle specific tasks and deliver functions that have been requested by you. In today’s competitive world, businesses have the opportunity to use an external professional for various beneficial reasons including boosting brand visibility, access to global resources, cutting operational costs, and increasing efficiency.
-Offshoring and Nearshoring-
These two forms of outsourcing have similarities, but they have distinct differences which make them stand out from each other. To begin, Offshore Outsourcing is a strategic practice where your company hires a third party or individual from another country of sizeable distance to perform specific tasks your business has requested. More often than not, companies looking to offshore outsource usually work with countries such as China, India, Pakistan and Malaysia. When your business uses an external country such as the examples above, you incur much lower costs for this type of outsourcing as a result of cheaper labor fees and production costs. Also, when your company uses an external recourse with a different time zone, you can receive round the clock support (also called “follow the sun”) to the task required. On the other hand, offshore outsourcing has risks in which nearshoring would not have which include communication barriers, different culture and work habits, as well as sizable distance.
Nearshoring is the little brother of offshoring because the term refers to outsourcing your projects much closer even though still in another country. Benefits vary for nearshoring which include cost effectiveness, proximity, same time-zone, and efficiency. It is highlighted that efficiency is a key takeaway for nearshoring because not only will your company be using an external professional resource, but the external asset will probably be in the same time zone and close in proximity which will result in quick problem solving if needed. The list of benefits for nearshoring are quite favorable.
-IT Project Outsourcing-
This form of outsourcing allows your company to execute entire projects using the resources of another firm. Project Outsourcing varies from the two previous forms of outsourcing because your company is allowing an external expert to work on and complete an entire project for your business. By allowing an outside professional to complete a project for your company, you now have access to concentrate on core operations while allowing for cost management and risk mitigation. The benefits of project outsourcing are long which include reducing training costs, scalability, reduced management overhead, and most importantly never not have the capability to complete certain projects again because of an external professional taking care of it! Although the list of benefits for project outsourcing are long and great, you should consider a few things. There might be internal resistance among your company employees at the beginning, and communication with your external expert is also a task that should be treated seriously and requires a certain amount of dedication.
Outsourcing of singular personnel is getting more popular in the IT world. Due to the importance of IT-projects and its costs, implementing new software and IT systems is not possible for some companies as a result of the cost to train the business employees or simply because the people at the company do not have the capabilities to create the software.
This is where body leasing comes into play. The act of temporarily hiring IT professionals allows for the ability to take advantage of the requested technology specialization that your company demands. Through body leasing, your company can reduce the cost associated with IT project implementation as a result of your company only paying for the effects of the IT project being created and installed. Although, costs will be minimized though temporary body leasing, your company must take into account that there may be risks of communication as well as internal resistance among your employees for hiring outside technology specialists.
Although outstaffing is not a form of outsourcing, it is an important route that a company can take and it is often discussed in these conversations. An outstaffing supplier disposes of an extensive HR-Department, selects skilled personnel qualified for a particular task set by your company. Outstaffing can provide your company a full team of skilled professionals. However, the company is not responsible for all other tasks that than preceded the Hiring Process. Project Onboarding, Team Building, setting up Tasks and all other goals have to be done by yourself. These are clear disadvantages in comparison to IT Project Outsourcing where you work with established companies that have already the required knowledge and can build your projects from start to finish.
As you can see, there are numerous options of outsourcing available based on your set needs. The positives and negatives vary based on each specific form which is why it is key to understand exactly what your company is looking for.
EASTCODE partners with agencies that work in all forms of outsourcing and we can help make sure you find the right one. We are here not only to help your company hit new goals but make life a little easier for you and your business.
Contact us at firstname.lastname@example.org if you would like to know better how we do it.