In this fast-changing business environment, it is not easy to handle everything on your own perfectly within budget and time. Thankfully, many outsourcing companies are out there to help. Outsourcing has become a useful business solution nowadays for companies of all shapes and sizes, especially startup companies.

You may hear some argue that doing all the work on your own would be faster and easier, which begs the question, “Why do I need to outsource my project?”. But when it comes to something that is not your cup of tea and may cost you many resources like mobile app development, you can see the point.

There is the fact that 70% of companies worldwide all over the world are using IT outsourcing. The future of in-house IT is looking bleak may also give you consideration of outsourcing your software development. And if you still want to write down “pros and cons”, MobyteLab will provide you with the top reasons you should add to the “pros” column.

1. What is outsourcing?

Outsourcing is becoming prominent around the world. Outsourcing is a solution that hires a third party, an outsourcing service provider to outsource all tasks or a part of task to complete quickly and efficiently. Providers might be an individual or organization. Outsourcing helps companies streamline workflow, focus on their core goals, utilize existing resources, save a lot of time and money, increase scalability, and achieve their mission. So what are the pros and cons of outsourcing?

Advantages of outsourcing:

• Focus on core business.
• Access to a larger talent pool.
• Cost-effectiveness.
• Resource maximization.
• Less risk.

Disadvantages of outsourcing:

• Lacks of control.
• Management difficulties.
• Communication issues.
• Problem with quality.
• Passive in some cases.

The outsourcing market is increasing rapidly. Outsourcing solutions help both front and back-office operations and management systems. Some popular outsourced activities include human resource management, finance, and accounting, marketing, customer service, information technology, designing, business process outsourcing industry (BPO industry), call center, data entry...

To find out the IT outsourcing market in the world, check this blog: A Report for Global Software Outsourcing Market

To find out the reason why you need to outsource, check this blog: Why do I Need to Outsource My Project?

To find out the differences between outsourcing and in-house, check this blog: What are the Differences Between Outsourcing and In-House?

2. Outsourcing model

Outsourcing has been divided into many different models.

• Based on the relationship, outsourcing has three models: Staff augmentation model, Dedicated development team model (outsourcing team), and Project-based model (outsourced projects).
• Based on the pricing, outsourcing has four models: Fixed price (FP) model, Time and materials (T&M) model, Incentive-based model, and Shared risk-reward model.
• Based on the location, outsourcing has five models: onsite outsourcing, offshore outsourcing, nearshore outsourcing, onshore outsourcing, and multisource outsourcing.

Depending on the outsourcing needs of the company, one of the outsourcing models can be chosen.

To find out three models of outsourcing, including offshore, nearshore, onshore, check this blog: Offshore vs Nearshore vs Onshore: What are The Differences?

3. The statistics of the outsourcing market

According to Capitalcounselor, some statistics about the outsourcing market:

• The global outsourcing market was worth $92.5 billion in 2019.
• Around 300,000 jobs are outsourced by the US annually.
• The top reason for outsourcing (70%) is cost reduction.
• Larger companies are 66% more likely to outsource than small businesses.
• 36% of workers in the US are part of the “gig economy.”
• 24% of small businesses outsource to increase the efficiency of their business.

Some statistics about the software outsourcing market:

• The total IT budget in 2020 grew from 12.7% in 2019 to 13.6%.
• $66.5 billion was the global revenue of IT outsourcing in 2019.
• 83% of IT leaders are planning to outsource their security to an MSP in 2021.
• By 2025, the global IT outsourcing market will be worth $397.6 billion.

4. The reason why to choose outsource to Vietnam

Vietnam has become an offshore development center for other countries around the world. The reasons why the company needs to outsource to Vietnam include low development cost, low labor cost, young population, high education level, socio-economic stability (economic stability, ethnic/religious stability, political stability), and an open economy… Taking advantage of available resources, the number of outsourcing companies in Vietnam with many outsource services is increasing in recent years.

To find out the IT outsourcing market in Vietnam, check this blog: A Report for Software Outsourcing Market in Vietnam

To find out the outsourcing software development companies in Vietnam, check this blog: Top 20 Software Outsourcing Companies in Viet Nam

5. Why do you need to outsource your project?

5.1 Operational and labor costs reduction

In fact, the very first thought you’ve ever made when considering outsourcing your project is cost savings. Outsourcing is a more cost-effective solution than other solutions. This is also listed as one of the chief reasons (70%).

The cost of outsourcing services is typically less than what it would cost to do the same work internally. It means you have to build a system of fixed assets including equipment, software, working space, and recruiting and training staff, paying for their salaries, income taxes, payroll taxes, health insurances, travel trips, etc. Outsourcing providers have those things available, and not to be said, much more professional.

Every outsourcing vendor will provide highly skilled experts to build your product efficiently without delays. You free up internal resources that could be put to more effective use, you can reduce product cost and enhance your competitive edge in the market.

In software development, most doing-outsource companies have been able to cut down 20 - 30% of the software development cost, including mobile application development and website/web application development.

5.2 Do more with your core business & start a project immediately

“Companies need to keep their eyes on the prize, which means focusing on the business, not on the technology that runs the business.” - said Brian Honigman, CenturyLink.

When you do all of your work internally, you have to handle a bunch of different priorities. Especially if you don’t have the in-house expertise or have little relevant knowledge, you need to hire one or more new full-time professionals. After that, you must train and provide them with the necessary inputs and tools to carry out the tasks. It will take a lot of your time and a significant investment.

On the opposite, outsourcing means delegating tasks that you know your partner will do better than you. You pay for a person's service. Washing your hands off functions that are difficult to complete and manage will release valuable time and resources, which let you mainly focus on your core business functions and competencies. This advantage allows you to be more productive in your work, increasing business value and achievements to reach business goals.

Moreover, when working with an outsourcing partner, you can conduct and complete any project as soon as possible. Each outsourcing partner will have its specific ability, expertise, and resources to meet your requirements much more quickly. Don’t take much time to hire an in-house team. You need to outsource to any suitable provider to start projects immediately.

5.3 Share the risk burden

In the tough market situation nowadays, your business always faces risks with every action it takes. For startup companies, every risk can beat you out. Outsourcing is the key to sharing the risk burden.

When outsourcing, you're offloading some of the possible risks to your outsourcing firm and letting them assume and manage for you. Your company to be more agile, flexible, and dynamic. Many risks can be avoided such as a highly-skilled talent shortage, costly mistakes, new technology updating…

Simply, if you assign all tasks or projects to your internal staff, they may fail in one area or another. Because no person is perfect, each member will have a piece of limited knowledge and skill set. To ensure that you don’t face your company to needless risk, it’s essential to choose the vendor carefully.

5.4 Round-the-clock service

Having the advantage of human coordination is a significant strength of outsourcing vendors. Your employees may have personal leave or resign, while you need to ensure workloads are not interrupted. Outsourcing firms always have contingency choices for personnel issues to ensure that works are operated continuously and smoothly.

For some models, such as offshoring or nearshoring, differences are always available. Time zones are one of the main differences. Taking advantage of this difference, cooperating with outsourcing partners offered 24/7 support. Whenever an urgent request is required, outsourcing firms are always willing to assist quickly and effectively. Some vendors can now offer more extended and more flexible service hours. You can easily receive support services regularly and continuously from them.

Meanwhile, if you don’t have any outsourcing provider, you must entirely depend on your in-house team. Full-time employees only work during office hours, usually from Monday to Friday. So it's impossible to resolve the problem promptly on weekends. The delay can negatively impact progress, customer satisfaction, even the cost of outsourcing you will pay for.

5.5 Improving the quality of services through innovation and flexibility

If you have limited resources and experience in any field or industry, you may have difficulty meeting your business needs, as the world changes rapidly.

However, processes that are not the core of your business, are core processes for outsourcing providers. Therefore, they are most likely to deliver the highest quality of service in this area. The outsourcing firm with particular ability and capability will provide you with higher resources that are not available internally. Experts and professionals in your industry will provide the service, you can be assured of excellent quality. Improving customer experience, making competitive advantage, outsourcing company helps you expand your business and meet your expectations.

In this competitive market, many new outsourcing trends and outsourcing companies are established and developed. Outsourcing agencies are continuously investing in new technologies and improving quality to remain at the forefront. Reaping the benefits from outsourcing solutions will help you stay up-to-date with the latest technology and advanced processes.

5.6 Highly skilled talent

Last but not least, you may not have enough budget to hire experts or skilled staffing to devote to all areas of your business. Even if you can pay for hiring professionals, the end-to-end recruitment process must take a lot of time and effort to do. After recruiting, the new member needs a period to fall in line with your team.

By outsourcing to the right agency, you can have the right talents for where and when you need them. You can access a larger pool of talent with highly skilled, hard skills and soft skills that are useful for all projects if you need them. Using offshoring or nearshoring, you can approach talents in other parts of the world. With this expanded search, you can save a lot of time and money from building a training system but still have experts who give you development strategies right away.

If you’ve decided to jump right into this outsourcing thing, think carefully as reading tips to find out your best outsourcing agency. Check this blog: 5 Qualifications to Consider to Choose the Best Agency.

Conclusion

Many reasons depend on your vision and purpose for your decision to choose to outsource your project or not. But it is undeniable that in an increasingly competitive market, many companies have found outsourcing a beneficial technique and been successful. If done well, outsourcing helps to reduce costs, and adds flexibility to the business processes, and that’s one way to grow intelligently. You can consider outsourcing as an excellent way to get your business goals, choose the right strategic outsourcing plan to optimize the benefits from this.

IT outsourcing can be a good way to develop your software, including mobile apps, web apps, or even AI, VR/AR solutions. But there are some risks that you should read before you start. Read this blog to know more about 6 Common Risks when IT Outsourcing & How to Avoid Them.