Debunking the 12 Common IT Outsourcing Myths & Misconceptions
Outsourcing, in general, has become an increasingly popular business strategy for almost every sector. For example, hiring an external sales team or contracting an outsourced call center. And outsourcing is no exception for the IT industry. Partnering with an IT service provider is a good way to help organizations save time and resources that they could use on other components of their business while getting the work done with quality.
While the skepticism of a majority of business owners about contracting remote development teams or delegating business processes to external parties has eroded, others still remain reluctant to embark on outsourcing software services because of some false beliefs. In fact, IT outsourcing has its pros and cons, but biased opinions and misinterpretation among people have generated more misconceptions about the risks and challenges of outsourcing face a company. As a result, clouded by groundless assumptions, a lot of companies are deterred from utilizing the outsourcing model as a way to increase their business efficiency and agility.
Let’s have the most common outsourcing myths debunked in this post.
Myth 1: Outsourcing Industry Is Dying
Being around the business realm for a long time before, remote working and IT outsourcing business truly exploded on a global scale only when Covid-19 broke out. This was the result of companies attempting to be resilient by going digital to cope with the harsh reality at that moment as well as survive and thrive in the era of digital transformation. Hence, following the Covid outbreak, the market size of global business process outsourcing amounted to $232.32 billion in 2020, and it was valued at $526.6 billion in 2021.
After the pandemic was contained, there was public opinion claiming that IT outsourcing is nothing more than a fad and it will soon come to an end. Nonetheless, the truth diverges from this myth as the global spending for IT outsourcing reached $700 billion in 2022, and it could hit $731 billion in 2023, according to Deloitte. Obviously, numbers do not lie, IT outsourcing is not only alive, but it is also advancing at speed. Thus, the need for quality outsourcing service providers will continue to remain high, and the number of outsourcing companies will rise accordingly. And the sector is here to stay and flourish for a long time.
Myth 2: Outsourcing Is Expensive
The second common myth relates to costs. Business owners, especially ones that have never outsourced before, tend to claim that vendors need to charge exorbitant rates for their outsourcing services, and thus they will be better off not opting for IT outsourcing. This is, in fact, a misunderstanding, as the truth is quite the contrary. Overall, outsourcing can save you costs on different fronts in the long term or the short term, depending on your business goals. In 2020, 70% of companies chose to outsource their software development projects to keep their budgets lean, according to a study by Deloitte.
First things first, when it comes to outsourcing, you pay for resources and services as you use them. Thus, you can have complete control over your budget and how to use resources. Secondly, hiring an outsourced team of developers is more often than not cheaper than assembling an in-house team. Statistics show U.S. corporations can save up to 90% of labor costs thanks to oversea outsourcing. This is the reason why there is a bandwagon of outsourcing to Vietnam, China, India, or other countries in which the costs of living and running businesses are more “friendly”. Last but not least, you gain the flexibility to upsize or downsize your external teams to fit the demands and situations without worrying about laying off your staff or bearing overhead costs of salaries for idle employees.
Remember that developer rates vary by location, and the services also vary by provider as well. Therefore, outsourcing costs can be either affordable or costly depending on multiple factors, including what outsourcing model you choose and where you farm out your project to. For your own sake, you will need to pay attention to a few key points regarding costs before signing the contract with an outsourcing company.
Myth 3: Outsourcing Is All About Cost-savings
This is another common outsourcing myth that relates to costs, and you can agree that it is founded based on the economic effects this business strategy has to offer. Although it is true that utilizing outsourcing services or contracting with an outsourced team is a means to control costs, there are a lot more impacts to acquire more than just cost reduction.
While more than 59% of global companies rely on outsourcing to cut operational or development costs, 26% of small businesses (could be tech startups or midsize businesses) do so to get expert advice and support. Others seek external aid to offload the in-house teams and have them concentrate on core business activities by hiring a dedicated team or augmenting skilled talent. At the end of the day, each and every company has its own reasons for seeking outsourcing services aside from cost-savings.
Myth 4: Outsourcing Is More Than Offshoring
This way of thinking is false and short on information. Offshoring refers to electing an external entity to provide services from outside the country. There are many different outsourcing business models, and offshore outsourcing is solely one of them.
Businesses from all across the globe can entrust their projects to a remote outsourcing service provider and hire offshore developers to work on their projects, but they can also do the same thing nearshore or even onshore. In brief, you have three options when it comes to outsourcing software development – Offshore, onshore, or nearshore outsourcing.
Myth 5: Outsourcing Is Responsible for Job Losses
This is one of the most controversial yet common myths about outsourcing. With the fact that organizations of all sizes and types are shifting their budgets toward outsourcing providers and hiring remote developers, people have reasons to be concerned about the job losses of the existing workforce in the local community.
However, the myth might not be true in the context of the IT industry. On the contrary, outsourcing is somehow creating more jobs for local labors when companies expand. How does outsourcing help with that? By fueling these organizations with the manpower that they are in need.
There is an increasing gap in the demand and supply of tech talent in developed countries, leading to the scarcity of developers. This circumstance possibly results from the rising demand and competition for skilled tech professionals, the complexity of custom software development, or else. No matter the reasons, the problem is, unfortunately, getting far more complicated than it looks. As of 2021, approximately 40 million technical jobs are unfulfilled because of the shortage, and it is projected to rise up to 85.2 million by 2030, according to U.S. Labor statistics. Hence, many businesses see outsourcing as a way out.
Outsourcing is a win-win situation for all involved, and it is not the leading cause of unemployment.
Myth 6: Outsourcing Is for Large Enterprises Only
There is a belief that outsourcing is accessible to only big companies, but reality proves the contrary. Unsurprisingly, large-scale businesses or projects are more enticing to service companies on some points; however, smart providers will never shut their opportunities down by choosing one client over another. In fact, the outsourcing industry chooses no size, and all businesses can outsource their IT needs.
When it comes to IT outsourcing services, there is no discrimination in company size or industry. Even a small business with limited budgets and resources will have equal opportunities as enterprise-level ones in the “war for tech talent.” In specific, smaller and midsize businesses are increasingly outsourcing their IT projects and business processes to third-party providers.
Myth 7: You’ll Lose Control Over Your Project to Outsourcing Companies
Most people are concerned that they might lose control over their projects and outcomes if they outsource business processes and tasks. This perception is understandable, yet you will not be leaving your projects out of hands in reality if you select the right outsourcing partner. A reliable BPO company will provide you with an adequate control level, visibility, and collaboration based on your needs. In addition, transparency is definitely included, so you will be kept posted on the whole project’s progress. Make sure that you discuss this with your partner thoroughly before committing to the outsourcing agreement.
In the end, you are still in charge no matter what outsourcing model you go with. You will be accountable for decision-making throughout the entire project lifecycle, from setting up goals to evaluating results. Last but not least, you should prioritize trust. In business relationships, it is the key to unlocking a successful long-term partnership and desired outcomes for both sides. So, there is no chance that losing control over your project might occur at this point.
Myth 8: Agile & DevOps Are Not Compatible in Outsourcing
This is not true. Agile project management methodology and DevOps practices benefit outsourcing in multiple ways.
In software development outsourcing, Agile methods enable the development of complex projects in shorter iterations with accuracy, allowing for faster time-to-market and quality delivery. Agile can now be contracted out as an outsourced function, also called Agile outsourcing, which offers the best of both models.
You can see the same for DevOps. Regarding business benefits, DevOps practices encourage close collaboration between respective teams of the project, thereby facilitating faster, more reliable development and deployment. As DevOps adoption is an extensive process, and it requires internal resources and efforts to pull it off, many businesses decide to outsource their projects or teams to service vendors who have already mastered the processes. Outsourcing DevOps services definitely allows you to reach better performance results faster.
Thus, there is no hindrance in adopting Agile or DevOps in outsourcing but rather helps businesses bring them into play in a shorter time.
Myth 9: Cultural Differences Make Outsourcing Fail
There are countless factors that lead an outsourced project to failure. And such obstacles as cultural differences, time zone differences, language barriers, or something else are not necessarily the primary cause for your setbacks. Thanks to technological advancement, communication and collaboration tools are brought in to solve the mentioned problems. Plus, outsourcing service providers are well experienced in handling such issues, so they often have best practices in place to ensure seamless collaboration and mutual understanding between inbound and outbound teams. That’s why it is absurd to blame cultural differences or similar things for your failed outsourcing experience or poor-quality products.
Myth 10: Outsourcing Might Put Your Company’s Data Security at Stake
The next important thing any business owner worries about when outsourcing is the safety of the company’s privacy and its clients’ data. This is a practical concern as the outsourcing process involves working with third-party companies and their staff who have access to your confidential information. Nevertheless, this is a misconception.
Data security is important to you and also the outsourcing service providers. These companies will do their best to safeguard your data and prevent security breaches from occurring. This is not a favor but a compulsory duty any credible outsourcing provider must fulfill. When signing an agreement, they will also include a clause that requires them to comply with the highest standards of privacy data security laws. That being said, you can always rest assured that your data is in safe hands when outsourcing.
At this point, the best thing you can do is to vet your service provider carefully and ensure they have secure data handling procedures.
Myth 11: Outsourcing Takes Longer Than In-house Development
Usually, the time required for one project completion varies case by case, and it depends on the requirements, project scope, complexity, available resources, team size, etc. So, there is no proof that outsourcing takes longer than in-house development and vice versa.
In some cases, if the outsourced teams are more experienced and have much to offer with their resources, they can finish your project faster than an average in-house team. The same can be said if you have an excellent in-house staff with extensive knowledge and project management expertise, they may be able to do a better job than the third party.
Myth 12: Outsourcing May Result in Low-quality Services
A lot of people assume that outsourcing offers services at lower costs and that the service quality is in proportion to the price you pay. However, this assumption is not entirely accurate. Perhaps your outsourcing fails, and you undergo sub-par services only because you fall for the wrong service vendors.
The demand for IT outsourcing services is on the rise, which means providers boom in the number thereof. Unfortunately, there is no guarantee that not all outsourcing companies deliver an equal level of quality service. So, as a business owner, you will need to vet your potential partners meticulously and pick out the one that can offer the best-in-class services up to your standards. When it comes to choosing a service vendor, there are several tips you should consider.
Now that we have busted the truths behind the 12 most common outsourcing myths, there are surely more you might run into when discussing the IT outsourcing topic. People judged outsourcing based on these myths, and it is the wrong ideas that turn them away from this business strategy and miss out on tremendous value. As a business owner, you should have a comprehensive view of outsourcing in order to derive maximum benefits from it. Hopefully, this list has given you the correct ideas for outsourcing.
If you are seeking the answer to your IT outsourcing needs, Orient Software is what you are looking for, no doubt. Simply contact us for further discussion. We provide whatever IT outsourcing services you ask for at affordable prices and high quality.
Topics: Software Development Outsourcing