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Pros, Cons, and New Trends in IT Outsourcing in 2023

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Users hear of IT outsourcing increasingly. Still, only a few actually understand what this is about.

IT outsourcing is one of the most in-demand and advanced sectors. The list of services that company owners can outsource continuously grows. Moreover, the standards of performance grow along with the number of services. Outsourcing reduces the need for in-house staff and changes the vision of the modern business. Yet, what will happen next?

To understand the present and the future of IT outsourcing, let’s first cover what it actually is. This article will explain it to you.

What is IT outsourcing, and why is it popular?

Outsourcing is a business model in which a company involves talent from other companies for corporate resources. The idea of outsourcing is delegating particular tasks, processes, or projects in software development to a party outside a company.

Outsourcing as a business model is an excellent solution for accelerating development progress. By outsourcing particular stages or entire projects, companies can reduce the load on their professionals, thus increasing their efficiency. At the same time, the companies that do outsourcing offer a maximum speed of task execution; hence, each party wins.

With outsourcing, businesses will reach max efficiency in minimum time. This method cancels the need of own employees and staff for each particular process. The thing is that within hundreds of successfully finished projects yearly, some companies will work with several software pieces that require narrow specialization. Finding talent with the needed skills is challenging, especially in the short term. However, outsourcing is always ready to help.

By using outsourcing to develop your business, you can significantly expand the range of services your company provides. In fact, you can turn your corporation into the equivalent of a Swiss knife because by outsourcing, you can give virtually any services related to software development as quickly and efficiently as possible.

Indeed, outsourcing offers numerous advantages, yet there are some disadvantages too. So, what do company owners have to know if they consider outsourcing a potential development opportunity? What trends in outsourcing will be relevant in 2023? How will the industry develop in the future? You can find the precise answers to these questions below.

The advantages of IT outsourcing

The advantages of IT outsourcing

There are some outsourcing advantages covered already earlier in the article. This block will tell you in detail about the benefits it provides and will answer why it is so popular.

IT outsourcing gradually takes over the market. More and more professionals appear in outsourcing. Therefore, company owners who consider outsourcing part of their business can find a specialist for their particular needs.

Since outsourcing is widespread, its market continuously grows and will keep this trend in the future. For instance, Technavio forecasts that the outsourcing market will reach 97.51 billion dollars in 2024. According to the Grand View Research report, outsourcing-related business processes made 232.32 billion dollars in 2020.

The outsourcing-related business processes share grows annually by 8% on average. Hence, in 2028 IT outsourcing will gradually force out the corporate labor market in terms of market size and popularity.

Evidently, IT outsourcing had to offer significant advantages to become this popular. Let’s highlight the main benefits here.

Reducing the expenses

No matter where your company is located, you will always find someone who offers the services you require cheaper. Outsourcing will reduce the cost of developing new products by delegating the work to professionals from other corners of the world.

There are millions of talented developers globally. About 70% of companies outsource part of their products to reduce expenses. It is worth noting that such tactics are fail-safe and are therefore becoming increasingly popular.

Significant talent reserve

Significant talent reserve

Many entrepreneurs experienced difficulties in finding bright professionals while starting their companies. However, the number of professionals continuously grows; hence, it becomes easier to find appropriate human resources.

It is practically impossible to have a team that can solve any development tasks since no matter how many employees you have, there will always be a project that requires knowledge in less popular or rare niches. Outsourcing solves this issue.

By outsourcing software development and other areas, you can significantly expand the range of services your company provides. For instance, you can develop a piece of software in a less famous language or with plugins that only become popular. You may not have a specialist for this project, but by outsourcing, you can develop everything you need and save money.

A wide range of services means more orders and revenue. Furthermore, outsourcing development is often more cost-efficient than corporate development. Indeed, this IT business model seems perfect.

An extensive set of technologies

But for numerous specialists globally, the entrepreneurs who employ outsourcing also access countless technologies.

In contrast to your in-house team dedicated to a particular current task, outsourced talent is ready to do the work for you and move further. You are not obliged to hire professionals for the long term if you only need them for a single project. Thus, the budget suffers less.

At the same time, the technologies you can offer to your clients with outsourcing have no limits. Regardless of the project, you will always find a specialist who knows a specific language or plugin. The rich availability of outsourcing technologies helps reach the maximum results without additional expenses. Furthermore, the income potential is considerable.

It is worth considering that the list of advantages does not stop here. Outsourcing has many other benefits besides those listed, but these are the primary ones.

In the case of outsourcing, there are also disadvantages. Let’s talk about them next.

IT outsourcing weaknesses

No matter how many functions a business model covers, it will always have some drawbacks. There is nothing ideal in the world. Not surprisingly that IT outsourcing has several cons.

You will have to decide whether they are critical, while we’ll highlight the most significant ones.

Finding a reliable partner

You can always ask outsourcing specialists or an entire outsourcing company for help if you manage a software development company. One of the primary outsourcing issues is finding a reliable partner. This is the most troublesome outsourcing aspect.

Currently, the outsourcing market is overcrowded with specialists ready to take over a specific task. Outsourcing companies are also actively involved; they offer a wide range of services and supersonic speed. Unfortunately, what they describe and what actually is done sometimes differ, and the companies suffer from it.

When outsourcing a task, you will have to consider the risks adequately. No one will guarantee that the specialist you involve has enough expertise in the niche you require. Even if the partner is experienced enough, it will not be a guarantee of the quality.

Companies always cooperate with agencies offering specialists to ensure that they outsource experienced talent. This approach allows studying a particular professional's former feedback and cases; thus, the risks will be low. Still, cases and feedback will not guarantee a perfect and in-time outcome.

Communication issues

You can cooperate with people from different parts of the world with outsourcing. However, it has both advantages and disadvantages.

Communication issues are prevalent in the outsourcing sector. The thing is that you might work in different time zones, which complicates the project communication processes. It will also be challenging to introduce changes before the final work approval

The primary issue with feedback is that an individual outsourced developer is not your team member. They will not consider your corporate ideas or be bound to the company with a contract of employment. It means that the developer can stop working on your project without even notifying you about it.

However, the number of cases when outsourcing developers cease the development project reduces yearly. Short-term contracts that bound the developers to finish the work in time effectively fix this issue. Nonetheless, we advise the meticulous selection of the technical partners or companies in outsourcing. This approach will reduce the risks of missing deadlines and increase the chances for successful cooperation.

Product quality control

When working with a developer on the other side of the world, the company occasionally has problems with quality control. To accept the developer's work, it is necessary to carefully analyze the sequence of their actions and the final result, which takes time.

The lion’s share of companies that employ outsourcing to expand their range of services does not analyze the finished tasks in detail. Hence, there are delays in the entire project since finding the reason for an issue within the program or application is complex.

To minimize the risks of getting a low-quality product, we advise thoroughly studying the intermediate stages of development. This approach lets your employees detect and fix the issues before they vanish in hundreds of code lines.

IT outsourcing has an impressive list of advantages and disadvantages that create a balance. Improvements in the interaction between executing companies in the outsourcing market allow this area to become increasingly popular and even develop trends. But what are the most popular outsourcing trends of 2023? What direction is IT outsourcing moving in, and what should we expect in the future? This is what we will talk about next.

Trends and tendencies in IT outsourcing in 2023

Trends and tendencies in IT outsourcing in 2023

IT outsourcing has a lot of benefits, and there are means of fixing the issues of it; thus, outsourcing becomes a perfect business model.

Both contractors and companies profit from outsourcing. It allows business and involves talent from around the world while the range of services only increases. Not mentioning the economic efficiency that outsourcing offers.

As outsourcing popularity increases, certain trends related to the model appear. The following list includes the most exciting and popular IT outsourcing trends:

IT outsourcing gradually forces out the standard in-house employment approach.

According to the Commit reports, outsourcing for software development in startups will grow an astonishing 70% from 2022 to 2023. At the same time, medium-sized companies and enterprises require support in software development to swiftly increase the return on investment and quality of client service.

Max Nirenberg, CRO and CEO at Commit USA in northern America, claims that intelligent IT outsourcing will become critical soon. The scale of development grows swiftly, there is no chance for regression, and each company will do everything possible to get more benefits and spend fewer resources.

Business leaders believe that remote teams will increase productivity and speed up the release on the market with the help of rich experience and well-planned management processes. The following year will be successful for profitable partnership relationships, and IT outsourcing will remain a reasonable investment.

Creating a perfect security system and providing reliable data protection

Protecting personal data is one of the most topical issues for all in the cyber environment, including companies. Each year the laws that regulate personal information protection become stricter, while the threat level only increases. IT outsourcing is a solution that helps companies to maintain the data integrity of the employees and clients with minimum investment.

Outsourcing companies and their employees can conduct independent security audits. Also, remote employees can provide data on all the hazards associated with your company's data protection system. In this way, outsourcing can be an additional opportunity to expand the services a company provides and become its security auditor.

IT outsourcing in Europe and trends in developing this industry in Ukraine

Russia started a full-scale war against sovereign Ukraine, which undoubtedly affects the entire world. IT market experiences it too.

It is worth mentioning that Ukraine is one of the European countries' primary IT service suppliers. Our specialists are professional and responsible. Despite the forecast of various companies, the IT market in Ukraine has not ceased; it hasn’t practically changed.

According to the IT Ukraine Association and Sayenko Kharenko law firm, none of the questioned IT companies has moved abroad wholly. Hence, Ukrainian vendors stay in place and demonstrate courage and flexibility under unexpected circumstances. Consequently, in 2023, the high trust credit will reinforce IT outsourcing in Ukraine.

Dynamic cooperation strategies

Working for any company involves a contract, a clearly defined work schedule, and payment. This cooperation strategy is the most popular but also offers many drawbacks.

One of the biggest problems of working according to a schedule is the minimum motivation to work faster. Also, the idle time of employees results in redundant expenses. Since an employee works eight hours in the office and receives a fixed payment, they have no motivation to finish the work faster since it will not affect their income. Outsourcing will change it in the near future.

Hourly pay and short-term contracts can minimize the cost to companies of finding new staffing opportunities and expertise. All employees working remotely will be able to receive a decent wage, thanks to hourly contracts, where their earnings will be directly linked to the quality of their work and performance. At the same time, the burden on the employees themselves will be reduced, as working with short-term contracts dramatically increases the range of options available to performers.

One of the primary trends in IT outsourcing for 2023 is improving efficiency and work by increasing income and introducing hourly rates. Thus, each specialist is paid only for the time they spend working. Simultaneously, the company that works with outsourcing agencies can considerably reduce their expanse thanks to the optimization of ready products and the funds paid on the development correlation.

Increasing number of outsourcing benefits

IT outsourcing industry keeps growing. The companies that provide talent to other companies aim to over-perform the competitors and offer additional services but for the agreed assignments. Providing additional services is one of the main trends in IT outsourcing.

The search for new opportunities and customers is forcing outsourcing companies to look for new approaches to customers. This trend is likely to continue in 2023. This means that the number of opportunities for companies using outsourcing services will grow, while agencies providing performers will increasingly have to find ways to get ahead of the competition.

As IT outsourcing develops, it certainly affects the entire IT market. The advantages and opportunities that outsourcing offers their companies significantly outnumber the opportunities that in-house employment and corporate business structure offers. Given the range of outsourcing opportunities, it is likely that most IT giants will soon give up creating their teams altogether, leaving only vital employees.

Given the advantages, disadvantages, and trends of IT outsourcing, one can conclude that it is the future of the IT industry.

Merehead does professional development of Trends Outsourcing 2023. If you have questions, contact us for a free consultation.

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Yuri Musienko
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Merehead is a development company

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