IT outsourcing involves hiring a third-party to deliver various IT functions. The type of tasks that are commonly outsourced include software development, handling infrastructure, cloud computing, mobile and web app development, cybersecurity, and Q&A testing.
Types of IT outsourcing
There are three principal types of IT outsourcing: offshore, onshore and nearshore development. The type that will best suit your business will depend on the functions that you need to outsource and what you want to achieve.
- Nearshore outsourcing involves working with a provider in a country that’s geographically close to yours. It offers the advantage of a good culture fit and timezone compatibility.
- Offshoring means working with an IT provider remotely, in a country geographically far from your own. It provides access to a large talent pool and specific expertise.
- Onshore IT outsourcing involves working with home-grown talent. This option provides the opportunity for engineers and developers to work in-house alongside your internal team.
Advantages of outsourcing
As the business landscape becomes ever more digitized, companies are no longer restricted to hiring from within a small geographic pool. Businesses of all sizes can benefit from the cost-effectiveness and efficiency of outsourcing.
- Gaining access to expertise – companies benefit from working remotely with the best engineers, developers and specialists in the world.
- Increased efficiency – an experienced IT team can accelerate workflows without compromising on quality.
- More flexibility – internal resources are freed up to focus on daily activities and onboarding new clients.
- Mitigated risk – outsourcing balances the risk of IT projects. A diligent team will plan ahead to avoid future issues.
- Improved security – an experienced provider will ensure sensitive information is handled correctly and security features are integrated in appropriate environments.
- Effective results – a successful IT project enhances your company’s reputation. A good outsourcing provider will ask questions, propose solutions and implement effective workflows.
IT outsourcing statistics
Here’s what you need to know about the IT outsourcing industry, including its market size, demand and effectiveness:
- The IT outsourcing industry is valued at $375 billion USD worldwide as of 2017. Source: Statista
- The annual global revenue from IT outsourcing is estimated to amount to between 60 and 70 billion U.S. dollars. Source: Statista
- Worldwide IT spending is projected to total $3.79 trillion USD in 2019. Source: Gartner
- The percentage of the total IT budget being spent on outsourcing rose from 10.6% in 2016 to 11.9% in 2017. Source: Computer Economics
- The most commonly outsourced functions by IT leaders worldwide as of 2017 are software application (64%), software application maintenance (51%) and data centers (40%). Source: Statista
- In 2019, the enterprise software market is forecast to reach $427 billion USD, up 7.1% from $399 billion in 2018. This increase is due to the shift of enterprise IT spending from traditional offerings to cloud-based alternatives. Source: Gartner
- The total contract value of the IT outsourcing market will grow to over $409 billion USD by 2022. Source: Technavio
- By 2020 there will be 1.4 million computer specialist job openings, which will create a talent shortage that universities won’t be able to fill by even 30%. Source: Gartner
- 70% of businesses and outsourcing providers are currently implementing, or are discussing the use of, Robotic and Cognitive Process Automation to improve outsourcing results. Source: Deloitte
How to outsource IT functions
Once you’ve identified the best outsourcing model for your needs, i.e. nearshore, offshore or onshore, the following three steps will ensure seamless integration with your chosen provider:
- Develop a project specification. A detailed specification ensures little room for error. It should outline what functions need managed and how they should be implemented.
- Hire an IT outsourcing company. Create a shortlist of providers who can meet your requirements. Verify the quality of their work by approaching their past clients and reading reviews of their services on third-party sites.
- Implement project management tools. Workflow scheduling tools like Asana, Jira and Basecamp ensure that communication is a two-way street. They also provide an overview of a project’s progress.
Video – What is IT?
The letters IT stand for Information Technology. The term includes the development, maintenance, and usage of computers, hardware, and computer networks, as well as data processing and distribution.