Did you know that 40% of Fortune 500 companies actively outsource in-house functions? Did you also know that IT outsourcing is the largest (28%) among all outsourced activities?
These are not shocking statistics but on the contrary only indicate a trend. It is a fact that outsourcing is a proven business strategy, whether it is done within the country or to an offshore location like India.
Most companies want to focus on their core functions and hence the need for outsourcing arises. In this article, I will discuss the top 8 reasons why companies outsource their IT functions
8. Many companies work with an offshore partner to obtain a 24 hour development cycle to reduce the time to market for their software development efforts.
There is roughly a 12 hour time zone difference between USA and India. When companies in United States outsource to Indian companies, it is possible practically to allocate work in the evening (US time) and get it done by morning because while it is night in the US, it is daytime in India where work can continue.
7. To gain access to project management expertise not available in-house.
6. To accelerate a project in order to meet deadlines by hiring skilled programmers for a short term project.
It is a common situation in software development that additional scope of work needs to be completed within shorter deadlines. For such a scenario, hiring full time regular staff just for a few months does not make sense. Therefore, many organizations hire the required number of developers for a project from an offshore Indian company.
5. Several companies institutionalize outsourcing as a part of their business objectives to accelerate company re-organization
This is known as strategic outsourcing and is done when the company sees long term benefits in this arrangement and finds a reliable offshore partner.
4. To improve customer or business focus by using outsourcing to improve operational efficiencies
3. To free up internal resources by outsourcing non-core IT functions.
If a company has a limited number of IT resources, it needs to deploy them for doing critical tasks rather than routine maintenance and support. Therefore, organizations tend to outsource non-critical functions.
2. Many companies work with offshore partners who bring in specialized IT expertise to supplement in-house skill-sets to gain access to IT skills not available in-house.
Countries like India produce a large number of skilled IT resources each year. Mature education systems and increasingly lucrative employment opportunities within the country in the IT sector attract a lot of talent. Many organizations in the US therefore scout for such talent for their projects.
1. To reduce or control costs of IT Since the dollar exchange rate is high for currencies like the Indian rupee, and combined with the fact that the government would like to maintain such a situation, it becomes possible for US companies to gain access to comparable IT skill sets and resources at much lower expenses than within the USA.
Whether outsourcing is a project based decision or a strategic decision for a company, there are many benefits to be derived from this practice.