Consumer expectations, competitive pressures, and the rapid pace of technological change are driving the digital transformations that businesses everywhere are undergoing. As Eric Pearson, CIO of the InterContinental Hotel Group has noted: “It’s no longer the big beating the small, but the fast beating the slow.” For many organizations, in-house IT has become an obstacle to the speed of technological change.
At a time when responsiveness is key, companies can be disheartened to find it takes weeks to months to find the right IT staff. In fact, 69% of US employers struggle to find the right people for their needs, with IT talent scarcity topping the list of reasons why. Insourcing also carries a fixed cost and comes with the added risk of the talent pool remaining static while the market continues to shift.
By contrast, outsourcing allows businesses to tap into a flexible team of creative thinkers, designers, and developers with diverse backgrounds able to design and build the right digital product for their needs. The efficiency and innovation that comes from having access to a comprehensive set of IT services has led to significant growth in the outsourced IT market which is currently anticipated to reach USD 937.6 billion by 2027.
Why Choose an IT Outsourcing Service?
One of the primary drivers for outsourcing of any kind (including digital product development) is the ability to gain access to skill sets that are not available within the organization — or at least not at the scale businesses need them to be. Rather than trying to tailor a project to the skillsets an organization has internal access to, outsourcing allows a company to weigh all the factors in choosing the right technology to support the project — factors that could change from project to project.
35% of organizations turn to outsourcing for innovation, with additional benefits coming by way of cost savings, reduced capacity issues, and the freedom to focus on core business. Working with an IT outsourcing service helps companies align their organization with a flexible talent pool of people, skills, and services which empowers them to transform their business outcomes.
Advances in technology have helped forward-looking companies to benefit significantly from outsourcing services for quite some time now. This is particularly relevant for small to medium-size enterprises, which simply lack the space or labor funds for in-house auxiliary departments like finance and payroll. – Kikis Pissarides, Manager, Business Process Solutions,
What are the Benefits of Outsourcing IT Services?
Key advantages of outsourcing to an IT service provider:
- Cost efficiencies: Outsourcing allows organizations to realize cost savings via access to specialized experience without the burdensome fixed costs of a full-time employee or the time-intensive and high-priced option of re-training current employees for new IT skills. At the same time, outsourcing eliminates additional expenses associated with certificates, office equipment, and other infrastructure.
- Scalability: Outsourcing partners can scale when companies need them to which allows for rapid project initiation and ensures faster time-to-market.
- Expertise: Companies can access skills “on-demand” allowing them to expand their team to include broader expertise and tap into state-of-the-art technologies quickly. This allows companies to have teams assembled that are best-suited for each project’s needs.
- Reduced risk: With the rapid pace of change in the marketplace, responsiveness is key during the development phase. Businesses can scale their team up or down as needed if the business environment or the requirements change (as we saw with COVID-19). Outsourced partners also have the workforce to meet tight deadlines and are accustomed to working within set budgets which are much less flexible with full-time, salaried employees.
These benefits of outsourcing can influence organizations to make the switch, however, finding the ideal partner is imperative. The ideal partner would constantly evolve their internal products to give the organization the lightning-fast speed and access to current technologies they need to remain competitive.
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What to Look for in an IT Outsourcing Partner
There are many creative agencies focused on design and numerous outsourcing IT service companies that can deliver a project. Still, very few combine these into a product development mindset that can effectively turn ideas into optimal outcomes.
It is crucial to find a partner with a product development mindset who is detail oriented and sensitive to each unique client’s needs rather than just focused on finishing the project and moving on. An outsourcing partner who operates from a product development mindset looks at outcome instead of output. This shift in thinking focuses on developing the right product for the company’s needs. From the discovery phase to development, one wants a partner who is experienced and brings the best possible processes and expertise to the table.
When it comes to selecting the right outsourcing partner, bigger isn’t always better. Finding the right partner for a business should focus on fit. Key factors to consider when deciding if a partner is the right fit for a specific business include:
- An Established Track Record:
- Look for a provider with an established reputation specific to the organization’s niche.
- Seek out strategic, long-term partnerships
- Test-drive digital products
- Speak with references who have outsourced similar projects to the partner in the past
- Broad Technical Skills: There is no one-size-fits-all solution for product development, so it is useful to look for a partner with published technical expertise in multiple areas. This includes platforms, mobile, web, databases, DevOps, video, machine learning / AI, Cloud, CRM, and analytics.
- Agile Processes: Look for a partner leveraging Scrum-based agile development methodology to be sure that partner is continuously incorporating feedback in order to avoid costly reworks. This iterative process allows for measurement, testing, and scaling to ensure the results align with the business objectives.
- A People-First Approach: Designing the right product begins with one-to-one attention to understand the organization’s needs and to document the scope of their project. The ideal partner will establish preferred communication channels and a roadmap for how often the company would like to be updated.
The right outsourcing partner is dedicated to helping companies to succeed and grow, no matter the size or scope of the project or if it is one that will have ever-evolving needs.
COVID-19 Prioritizes Outsourcing
COVID-19 has had significant impacts on organizations and on the economy. Organizations have been forced to cut costs and focus on core capabilities to support business continuity. At the same time, COVID-19 has impacted consumer expectations, forcing organizations to prioritize their digital transformation.
The greatest benefit that the outsourcing partner can provide is the ability to support the business through periods of both disruption and growth.
The 7-Step IT Vendor Selection Process
To perfectly manage an IT vendor, an enterprise needs a set of principles and processes to increase the engagement’s profitability. However, planning to hire an IT vendor for the first time requires extensive planning.
Many outsourcing companies have well designed websites and claim to have well-known brands on their lists of previous customers. However, all that glitters is not gold. One needs a viable vendor selection framework to filter the best ones.
Here is a plan that can help identify the best fit from the many IT vendor companies out there.
Step 1: Analyzing the Business Requirements
Hiring an IT outsource partner is a big business decision that must be an informed one. Therefore, prior to reaching out to partners and interviewing the potential vendors, the business should make their part of the story clear by analyzing their requirements and needs thoroughly. This is one of the essential steps in the IT vendor selection process.
Organizations should list who might have an opinion that can influence their decision about the IT vendor selection process. Next, define in writing the technical, business, and functional requirements for which they are planning to hire a vendor. Then, share these documents with the company stakeholders and decision-makers to seek their opinions.
We recommend including the following points in the required documents:
1. Type of software the company plans to build: When planning to hire an IT vendor for building a software product that is desired to perform a specific task or function, describe it in detail. What is the goal behind hiring an IT vendor? Is it building a custom app, a training simulator, an IoT platform, or something else? Consider listing its functions and business needs in detail.
2. Make note of the tech stack the company has specific expertise with: Enterprises dealing with software projects may have a specific list of technologies that they are familiar with and would like to use to reach the desired solution. If they already have an in-house team working on the same software and then plan to outsource any specific panel, their team or developers may have some good suggestions related to the already integrated tech stack. List all of them in the document and let others share their opinions about the same.
3. Estimated deadlines: In the software development world, time is money. The IT vendor’s team will propose its own timelines related to the delivery, but companies must estimate when they need the initial delivery.
4. Other requirements: The company stakeholders may have additional opinions on whether they want to hire developers with certain affiliations when considering long-term relationships and post-release interactions. This includes logistical considerations such as technical support being available during hours that are complementary to the business’ hours of operation.
Nobody knows an organization better than the people in it. Expecting an outside, outsourcing vendor to have the same level of familiarity as them isn’t reasonable. If there is a fair idea of the business needs, it will be easy for the organization to do the initial research. Besides, doing the initial research will also help the company negotiate contracts with potential outsourcing partners.
Step 2: Research the Market and Filter Vendors
Once all the requirements are known and have approval from the company stakeholders, it is time to search for potential IT vendors.
The following resources will help in this process:
- Search out B2B network sites of tech companies like Clutch or Good firms and look for IT outsourcing vendors with good ratings and reviews.
- Refer to industry publications. Gartner and Forrester provide research papers in which they list market leaders.
- Ask friends or post a job on LinkedIn to seek attention from potential IT vendors. Use LinkedIn to see who else has endorsed the particular vendor for services similar to your needs.
Establishing an IT vendor selection team can further narrow down the search to companies that provide specific services on the domain, which is required after a complete background check.
Step 3: Use Agile Methodologies in the Organization’s Development Process
The only way to survive in the present market is by accommodating customers’ ever-changing requirements. To efficiently serve the continuously changing customer, the organization will have to utilize Agile methodologies.
Agile methodologies offer a highly collaborative environment and give quick results. To stand out as a leader, prefer leveraging a partner who follows Agile methods to quickly adapt according to a customers’ changing requirements.
Step 4: Request for Proposals (RFP)
Now that the business needs are known and a list of IT partners that appears suitable has been created, it is time to test and evaluate the assumptions. At this point, it is time to write a request for RFP (Request for proposal) or RFQ (Request for Quotation) to send to potential IT outsourcing partners.
An RFP is created if the desired service, quality, or final result is different for each vendor that is likely to respond. On the other hand, an RFQ is utilized to ask for quotations for simple services with no chance for desired service or product differentiation between responding vendors. Here are some of the objectives behind creating RFQ and RFP:
- Getting detailed proposals from IT vendors that showcase their knowledge and expertise around the domain.
- Negotiating the best deal possible and identifying the vendor best suited for the needs of the company.
- Setting clear goals, responsibilities, and constraints to maintain a healthy relationship with the outsourcing partner in the future.
Companies should create these documents to clearly describe their business goals and present their needs to the vendor. The main points of these documents will be different depending on their company type, however, there are few sections that every RFP and RFQ document must have, including:
- Submission details
- Business overview and goals
- Detailed specifications
- Business constraints
- Terms and conditions
- Selection criteria
After creating such a document, send copies to each of the vendors that seem suitable. Also, include the contact information in the document so that the vendor can reach out for any query.
Step 5: Analyze and Evaluate Responses
The next step in selecting the right outsourcing partner is to analyze the vendor responses and select those who best understand the business needs and possess the expertise to fulfill them. A spreadsheet can be prepared to evaluate and compare the vendors. Specify different criteria for selection and rate every vendor with a color code for each criterion. For example, green for the best responses, red for the bad, and orange for the average.
This will make the vendor analysis process clear by visual inspection. By the end, it will be easy to further narrow down the list to three to four potential outsourcing partners.
Step 6: Schedule Demos and Interviews
The most crucial step in the IT vendor selection process is analyzing the value a potential IT outsourcing partner will add to the business. Request the shortlisted outsourcing vendors to provide a demo of the technology solutions they are proposing. This will help predict their expertise and how companies can integrate their proposed solutions into their tech ecosystem.
Another benefit of scheduling demos is that they help in testing the proposed solutions before investing. This helps to determine how they can serve the stakeholder’s expectations and business needs. Therefore, companies should arrange demos before selecting and finalizing the deal with a vendor.
Here are a few queries that should be addressed during this stage of the outsourcing partner selection process:
- Does the proposed solution meet the organization’s user’s needs?
- Is the tech team aware of the proposed technology?
- What are the risks involved in integrating the proposed tech into the business processes?
- Do the company stakeholders think the proposed tech solutions are economically viable?
- How was the experience of the demo – any bugs or bad UX realized by the team?
Step 7: Negotiate the Contract
Once everything looks fine, companies can close a deal that looks worthy for both parties. This requires good negotiation skills, so it is advised to involve people from the sales and finance department before settling with the numbers.
After deciding the total cost of the partnership, make payment milestones so that the final payment should be a substantial amount of the full payment. The final payment should be made only after the work has been fully completed and tested.
If there is a legal department within the organization, make sure to get them to review all contract clauses before finalizing the deal. It may take a few days; however, it is a crucial step to make sure everything falls in the right place. As an IT leader, one may not have the expertise to avoid all hidden clauses in the deal which could create problems for the enterprise later in the process.
Tips to Make Your Outsourced Project a Success
Organizations should look for a partner who wants to do more than just build the product; the ideal partner will want to work alongside the organization to elevate their brand in the marketplace in the long term. However, like any relationship, the success of the outsourced project is a two-way street. Help the project succeed with these tips:
- Define the goals clearly
- Conduct feasibility studies and market research
- Choose a provider in a similar time zone (look for satellite office options)
- Check-in regularly for progress updates and feedback
- Choose a provider focused on iterative development (Agile and DevOps)
- Choose a provider who is able to meet the compliance requirements without delay, providing confidence their processes are already secure
Net Solutions is a strategic software development company that unites creative design thinking with agile methodologies under one expert roof. Founded in 2000, Net Solutions creates award-winning transformative digital products & platforms for startups and enterprises worldwide.
At Net Solutions, we take a 360° view of your brand to chart the optimal course for revenue- and growth-driving digital products and platforms, including:
- UX strategy and product prototyping
- Usability testing & validation
- eCommerce strategy and optimization
- Lean, agile product development
- Data analytics, visualization, and digital customer experience strategy & insights
- Legacy IT modernization and digital transformation services
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