How Does Outsourcing Reduce Costs? - The Cost-saving Benefits of IT Outsourcing

Trung Tran

Trung Tran | 16/03/2023

How Does Outsourcing Reduce Costs?

Outsourcing is not only a fad coming to light during a time of uncertainty; on the contrary, it has been proven to be a future-proof strategy for businesses of all types to access numerous advantages and stay relevant in today’s digitization world. There are various engagement models, and all of them enable businesses, especially startups and small businesses, middle-tier, or large companies, that are short on human resources and budgets to tap into a global pool of talent and external resources without needing the overhead associated with an in-house team. In addition to dealing with manpower and skill shortage, businesses can obtain high-quality services and drive results quickly when outsourcing their business processes to expert hands. On top of that, cost reduction is widely believed to be the primary driver for seeking outsourcing solutions, and 70% of organizations concurred on that, according to a publication by Strategy & Business.

In this post, let’s drill further into the key benefit of outsourcing.

How IT Outsourcing Services Aid in Cost-savings for Your Company

To swiftly recap, information technology (IT) outsourcing is a broad term umbrellaing different subcategory services (including software development outsourcing, dedicated teams, application service, infrastructure solutions, and more). It refers to the act of a company committing to an external service vendor to deliver IT-enabled services rather than an internal team. The goal of outsourcing is to help companies to achieve their goals in a fraction of the time, free up resources, and save money.

Generally speaking, utilizing outsourcing services is a cost-effective technique to keep your budget lean and get your hand on the desired outcomes, without further ado. And remarkably, statistics indicate that 92% of G2000 companies are using some form of IT outsourcing services, which is allegedly chasing the same goal. That somehow explains why companies and organizations in developed countries prefer outsourcing some or their entire business processes to oversea IT destinations.

How can outsourcing reduce cost? We may all get the point that IT outsourcing helps companies to cut down on total expenditure, but you rarely pay attention to how exactly it does so. That’s what we are about to bring to light:

Lower Labor Costs

Lower Labor Costs

Low spendings on labor are probably the most critical factor to consider if you want to keep your budget tight and make the most out of outsourcing services.

First and foremost, the outsourcing costs for external resources are much more affordable than hiring employees on a long-term basis for your in-house team. The project-based teams will only be around to accomplish the tasks, so you will bear no burden of salary costs for retaining and maintaining a full-fledged team when the project is paused or over.

Secondly, as a business owner, you can benefit from cost-cutting thanks to the disparity in developer wage patterns among different countries. Hence, you can staff your project at very low cost. This scenario is extremely true in the case of offshore outsourcing. For instance, companies in Western developed countries can save around 30% to 90% of development costs if they outsource business functions to developing countries like Vietnam.

Last but not least, you gain the freedom to upsize or downsize your team at your disposal. It means you can have fewer employees on your team when the workload is not too heavy and augment your outsourcing team should the situation demand during peak times. Flexibility and scalability keep you proactive in responding to the constant fluctuations of businesses and projects without stretching your budget or breaking the bank.

Save Operational Expenses

Save Operational Expenses

It is no secret that the expenditure on operations of inbound teams is much higher than the outsourced ones. More often than not, in-house employees will entail additional expenses to the company’s budget, such as office supplies, hardware, software licenses, and IT system maintenance, etc., to name some. All these have direct impacts on the company’s budget and operations in the long run.

But outsourcing can allow businesses to roll at a low operational cost. Since the outsourcing company invariably is responsible for managing their teams, and they already have the necessary facilities in place. So, you have no need to invest in office space, utilities, and equipment needed.

Moreover, you do not have to touch on the entire hiring process, and you do not have to provide training programmes for the outsourced staff either. This is because the outsourcing providers will be in charge of these activities on your behalf. Therefore, outsourcing can also save you from hiring and training costs as well.

Save Opportunity Costs

Save Opportunity Costs

In fact, the value of outsourcing is not merely measured by cost-savings but by the opportunities it can help to create.

Admittedly, IT outsourcing is a fast and efficient way to transfer the non-core business processes to a third party that has what it takes to handle them better than you do. This way, you can offload your internal force and channel your resources, capital, and personnel to prioritize your core functions.

Moreover, outsourcing solutions not only cut costs but also make better use of time. In most business cases, saving time means saving money as well. As outsourcing can shorten the turn-around time and accelerate your development processes, you stand a better chance to roll your products out faster and seize the market opportunity.

Lastly, the data flow process can be further automated when committing to an outsourcing partner. A good outsourcing vendor can automate the data flow process and blend in the usage of the latest technology to better support your business operations and increase efficiency. In this way, you are likely to experience a smoother workflow with no interruption or hindrance.

Ready to Choose the Right Outsourcing Company & Save Costs?

Ready to Choose the Right Outsourcing Company & Save Costs?

In a nutshell, opting for IT outsourcing grants you numerous benefits in terms of cost savings. By minimizing every course of fee, businesses are able to maximize their products’ profit margin. But before you can achieve the numerous benefits mentioned above, you first need to get the right outsourcing partner.

You will need a well-planned outsourcing strategy and best practices to take you there. Or if you have not got them yet, consult with Orient Software. Why should you partner with us? We are an industry expert in IT outsourcing. With solid expertise and a wealth of experience accumulated over the years in delivering solutions to clients worldwide, we can understand your business domain and blend in well-suited technology to give you the best result. More importantly, we pledge to offer the best-in-class services at a reasonable price. So, why wait? Let’s get connected and bring your project to life.

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