Outsourcing in IT: Choose Business Process Outsourcing (BPO)

Major technological advances of the early 2000s signified the emergence of IT-BPO (Information Technologies Business Process Outsourcing). The initial intention of outsourcing in IT, like any other type of outsourcing, was in increasing business flexibility, which became crucial for efficient cost management. Changes in the industry, the increase of business’ online presence, and common global trends lead to the substitution of commodity-based contracts to a more service-based approach.

Outsourcing of IT services is a practice of partial or full delegation of responsibilities of delivering, maintaining, and modernizing IT-enabled business processes and solutions to third-party entities. Most modern companies actively use outsourcing services, since they provide an opportunity to focus on the business development process, reduce administrative costs, and minimize the bureaucracy while maintaining high-quality service.

Like any other business, BPO in IT has its benefits and disadvantages, a set of tools and prerequisites for its establishment.

IT-BPO prehistory

The first indication of outsourcing could be attributed to the 18th-century manufacture of textiles in Europe, where the core operation of a textile enterprise that involved management handed off the technical part to a number of smaller craftsmen, then collected fractions of a product, and then assembled and sold the commodity. The core operation thus could concentrate on managerial tasks without getting caught in the whirlwind of bureaucracy and insignificant details.

History of outsourcing

Image: britishheritage.com [1]

However, as technological progress kept growing, the production that had spread all over the place, shrunk to cut the costs and management issues caused by delayed communication and challenges in quality control.

Later, in the 20th century, the plot took a new twist by going back to the expansion policy due to the cheaper labor and resources discovered globally. The trend kept going in that direction ever since, occupying more and more industries along the way. Ultimately, the IT industry became affected by outsourcing, and Silicon Valley technologies, operation models, and culture spread worldwide. The emergence of the IT-BPO industry was a matter of time and now it occupies a huge portion of the IT market.

BPO outsourcing in it

Future of Outsourcing illustration by Elisabetta Calabritto [2]

IT-BPO models

We at Shakuro work primarily by 3 basic IT outsourcing models:

  • Time and materials 

The client pays only for the actual volume of performed works, taking into account only the time spent and the rate of specialists. It is easier to change the requirements, conditions and priorities of the project, making the necessary rearrangements faster.

  • Fixed price 

There is an overall cost for the project that depends on the scope of works estimated beforehand. However, in the event of unforeseen issues, a client may find themselves in a situation when the costs exceed the expected limits.

An outsourcing company creates a group of IT specialists, based on the needs of a client. This team of employees does not participate in any other IT outsourcing project and only serves the client that it’s assigned to.

Outsourcing challenges

How to Make It Work by Unini [3]

Examples of outsourcing in IT

Among the most popular IT services that get outsourced are:

Oftentimes outsourcing companies specialize in certain areas, which means that their greater expertise and knowledge of current technological aspects allow them to implement such structural elements as efficiently and quickly as possible. Formulating a task, assembling a team, refreshing knowledge, making the first iteration, then the second one… All of this takes time. IT outsourcing services let you skip some of these steps and save time.

Outsourcing in IT companies

Working together by Janis Andzans[4]

Types of outsourcing in IT

Depending on the geographical location, there are several types of IT outsourcing:

  • Offshore outsourcing

Offshore IT outsourcing involves the services of partners based at large distances from the customer’s location (for example, when a customer from the USA uses the services of a team from Europe or Asia).

  • Nearshore outsourcing

Nearshore outsourcing is about turning to teams with closer locations, when the difference in time zones is barely more than 1-2 hours. For the USA it would be Mexico or the Latin America.

  • Onshore or domestic outsourcing

This option involves using services from an outside company that is situated in the same country. 

Benefits of outsourcing

Remote Work by Rogie[5]

Why outsource software development

Outsourcing wouldn’t have been a widely accepted approach if it wasn’t somehow natural. Obviously, it gives a number of benefits which makes it worthwhile justifying the IT outsourcing problems with time zones, indirect communication, cultural difference, and all sorts of hassle that is often attributed to remote collaboration.

What started as a manufacturing outsourcing spread throughout the white-collar industry in the early 21st century. The digital market requires a high level of technological development which leads to the overall quality of life improvements, and thus, bigger costs. However, some parts of the world display a striking contrast between tech profoundness and living standards that are yet to be perfected. At the same time, quality education is available in most of the major technologically advanced countries which creates an enormous pool of technical professionals to choose from. By paying only a portion of the US wage, companies can count on a dedicated team of professionals willing to succeed in their every endeavor.

Who is benefiting from outsourcing? Financial benefits remain the core of outsourcing due to the flexibility that it provides with fixed to variable costs transformation.

IT BPO

Image: Brightbolts[6]

Optimizing total costs by attributing employees to variable costs offers tremendous opportunities for revenue growth and development. Sustaining a development team that only concentrates on the actual technical tasks, designers that specifically create UI/UX and front-end specialists focusing on putting it all to life is the workflow that has shown its efficiency in multiple super successful enterprises. Along with that, having a sharp management team committed to performing core tasks with no restraints, can significantly improve business results.

This model has been adopted by all major IT companies which turned them into global corporations and at the same time, some firms transformed into software outsourcing companies operating exclusively under the remote scheme. This helps them minimize fixed costs and leverage the advantages of variability.

2020 became a year when the pandemics affected every industry. It is difficult to single out any sector that managed to avoid a bunch of accompanying problems. However, it seems like the possibilities of outsourcing in the IT industry are trying to block at least some of COVID-19’s blows. Moreover, a survey from 451 Research found that two-thirds of companies may render their current work-from-home policies permanent.  

Example of outsourcing

Team Collaboration – Illustration by Andrew McKay[7]

Why “NOT” outsource software development

It wouldn’t have been true if outsourcing as a solution was not coming with a number of risks and outsourcing issues to consider. But risks are not myths and can be dealt with if addressed right. Myths, on the other hand, are the ultimate blockers that appear somewhere and are referred to in the 3rd person, meaning little to none experience and a lot of generalization.

Let’s bust some myths about IT outsourcing challenges:

“Remote developers are mediocre”

If all the major technologies and IT-related projects had been created or developed in the US, it would make sense that the people behind the technology were concentrated in Silicon Valley. A study by HackerRank, however, has shown that the US developers are ranked as #28 of the global rating as per their software development skills… Here’s the top 3:

  1. China
  2. Russia
  3. Poland

The research was done by hackerrank.com which is a platform that ranks engineers based on their coding skills and helps companies discover talent faster. And their conclusion is the following:

According to our data, China and Russia score as the most talented developers. Chinese programmers outscore all other countries in mathematics, functional programming, and data structures challenges, while Russians dominate in algorithms, the most popular and most competitive arena.

The location can definitely play a role in the sheer amount of opportunities a young developer can find, but in terms of dedication, passion, and hours of work put in, there is no go-to place in the world.

Outsourcing of IT services

Image: hackerrank.com[8]

“Remote developers are not fully involved”

Chances are you can hire a remote worker that won’t be honest in their representation of progress and time spent. This can’t be attributed to the remote and outsourced environment though. If you are not hiring the right people, you will face sandbagging regardless of the location of your dev workshop.

The pursuit of a smaller payroll can ultimately leave you with a bunch of contractors that slack on performance and perseverance and there is no universal way to fix their attitude once it has been established.

“The opposite of love isn’t hate; it’s indifference”

― Steven Pressfield,

The War of Art: Break Through the Blocks & Win Your Inner Creative Battles

Building a strong foundation of a remote management team that feels like a part of the bigger entity is the guarantee of their success as your supervisors. Like any other important decision, team selection has to be performed with maximum effort and care, on the part of the project owner in the first place.

Business process outsourcing in IT

Connected in a Remote World by Noelle Blatz[9]

“Time zones and cultural gaps are critical”

As for time zones, different people have different productive hours. We’ve had meetings at 7 AM while for the team on the other end it was almost night. Even though you could think we were on different tracks energy-wise, we had a steady and continuous workflow almost with no stoppage! If it’s important to stay online for all the remote teams, adjusting the timeline a couple of hours doesn’t seem to be much of a problem in most cases.

As for the cultural gaps, this question is relevant in 2020. In the pre-internet era– yes, people were detached and much more isolated culturally but as of now, good luck trying to find a millennial and surprise them with anything. In fact, global companies build their own cultures within their enterprises. And they do it for the purpose of bonding all their employees with the help of a positive attitude.

Outstaffing as an HR policy must have cultural training ingrained into it, as there can be no happy and engaged employee collaboration if productivity is not fostered culturally from within.

Simple ways to bond:

  • Manifest. This is the statement of your company’s core beliefs and values that you expect all the employees to share.
  • Have an internal social portal or an app like the one we’ve made for OMGene.
  • Personalize information. This includes having actual photos and names of team members so that there are no “John Does” and grey silhouettes.
  • Exhort transparency. Your remote team must not feel like they are the last to know, or least important. Address your entire team and don’t neglect minor events happening around your business.  

It takes time to establish a tradition but once it has been settled, it stays for years and works for you. Your leadership in cultural development is a crucial factor that everything around is built upon.

Outsource services

Remote Work: Designing VICE by Ka Lee[10]

“Remote developers flee”

This actually has a point. We’ve had a remote developer disappear mid-project to go hitchhiking. In that case, hiring a person like that is always a gamble regardless of the recruitment type. He could have walked away from the office just the same way he did from his house.

Perhaps it’s easier for people to quit in a remote environment because there is no need to settle things in person? Anyway, like any other solid relationship, trust and confidence takes time to build and can only be built with the right people. The skill of finding and recognizing such people is the key to establishing an awesome remote development team.

BPO in IT

Remote Work by Ulys Bourassa[11]

In other words, even though there are factors that may make outsourcing in IT look like a risk compared to having an in-house team, there are techniques that help to overcome its trickiest aspects.

Remote development management tools

We’ll leave the obvious communication tools and concentrate on business process enhancement.

Time & progress tracking

As an app and web design and development agency providing outsourced services, we are enthusiastic about effective, precise, and simple solutions to track our time and effort ratio. We’ve played around with some tools and ended up choosing the Jira plus Hubstaff combo.

Jira is one of the leading project management solutions capable of assigning tasks, setting priorities, and covering all the stages of product development. Hubstaff is an intuitive desktop tool to indicate the task you are working on. It gives a clear perspective of the progress time-wise and provides screenshots as proof, so you can always estimate the resource and leverage specific tasks.

Oftentimes we work with clients that might not be familiar with any type of remote productivity tools, so it’s extremely important that the tools we suggest are simple and do not require a lot of time to comprehend, at the same time they must be trustworthy and neutral.

Collaboration tools

Remote collaboration is a different animal. As opposed to tracking the progress of technical tasks, there should be a highly productive solution that allows successful joint effort in terms of the entire project.

Think of it as a video game map of the world, where you can zoom in to concentrate on your specifics or zoom out to get the grasp of the entire scene. Add to that the ability to make changes in real-time, smooth transitions, and embedding options and you get a complicated list of requirements that not a lot of solutions for outsourcing can stand to. We made our choice and sided with Figma.

Figma is where we found the functionality that provides the big picture options as well as the specifics handling options on all the levels of production. As a web design agency, we thrive in versioning and iterations that ultimately lead to a polished and thought-out user experience. In terms of project management, having a clear understanding of where the project stands, adding tweaks that come into play as we go and dealing with a constant flow of changes are the most backbreaking responsibilities. The quality of the end product relies tremendously on the initial architecture and performance pathways established in the core of the project.

Outsourcing tools

Share to Dribbble from Figma by Jody Heavener[12]

As a design hand-off tool, you’d want to use an easily editable and visually informative platform with perceptive navigation available to everyone. This aids the speed of task to implementation to the feedback process leaving no space for ambiguity and slip-ups.

While Figma is an excellent tool for designers and front-end developers, our back-end developers also use GitLab, which was created with a specific purpose of providing a more convenient and easier for multiple people to work on a single project, ensuring better outcomes and bringing more value to customers as a result.

Rapid remote application development

All of the benefits that RTB brings to the table make it a great solution for rapid application development, aka RAD. The  RAD concept was created out of the frustration from the waterfall software development approach that had proven itself multiple times as inefficient. Mix in a remote team and you’ll get a constantly delayed and dated product.

The RAD approach offers the utilization of certain strategies that lead to faster development, better quality, and overall advantages of the RAD approach. Some of the strategies are the following:

  • Extensive requirements study.
  • Design iterations through multiple tests.
  • Reusable components (not only in development but RAD design as well).
  • Casual communication.

Interesting fact – all these strategies can be applied to a remote development model, business process outsourcing in IT as well in any other industry, and extended team models. So if RAD and remote collaboration use the same methods of increasing productivity, then the remote method is the most productive one and the fastest!

On top of that, the RAD approach adopts object-oriented programming tools like C#, Java, and Ruby that are highly exploited by the remote and extended development communities.

Outsourcing of IT

Code modules by Fabrizio Morra[13]

Choose your IT outsourcing provider wisely

Aspiration for improvement is a natural phenomenon and as the world develops, it becomes a matter of survival that we adopt and the matter of success that we evolve. Global outsourcing is the evolution of local outsourcing and management expertise. It does involve certain risks but those are not exclusive for remote work, outstaffing, and extended teams. Strong corporate culture, transparent and fair management aided by the latest technologies are the means that help build a close-to-perfect team regardless of the recruitment model and distance.

Some development methodologies like RAD thrive in a remote environment, cutting all the unnecessary things and focusing on the end product delivered on time and with maximum impact.

When making a choice of who to hire as a provider of remote IT services, one thing is certain, you must know how to manage successful working relationships. Have a vision and a strategic plan of your project, make a research of suitable IT companies, opt for a contact that would take into account all of the major aspects, especially the financial ones, and, most importantly, keep open communication. The ability to clearly communicate designs and the rationale behind them, as well as the technical issues is one of the reasons why we have so many favorable reviews on Clutch. Go check them out.    

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The article was originally published in February 2017 and was updated in September 2020 to make it more relevant and comprehensive.

Illustrations by:

  1. ^ britishheritage.com
  2. ^ Elisabetta Calabritto
  3. ^ Unini
  4. ^ Janis Andzans
  5. ^ Rogie
  6. ^ brightbolts.com
  7. ^ Andrew McKay
  8. ^ hackerrank.com
  9. ^ Noelle Blatz
  10. ^ Ka Lee
  11. ^ Ulys Bourassa
  12. ^ Jody Heavener
  13. ^ Fabrizio Morra
Web & Mobile UI/UX Design
Not a programmer design. Pretty, efficient, and fully implementable
Written by Moses Kim
September 09, 2020

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