The advent of global markets and rapid technological advancements have changed the way businesses work. Organizations from all across the world are looking to outsource their business functions to third-party firms that can get the work done with quality but on a budget. This is one of the reasons outsourcing is increasing. It allows organizations to save on costs and streamline their operational workflow. Today, outsourcing has become a new normal for both, small businesses and large enterprises.
Information technology outsourcing (ITO) is one prominent kind of outsourcing that involves services provided for the development of software projects, IT-resilient business processes, and infrastructure solutions. In general terms, outsourcing refers to reducing the workload that could be performed by outside suppliers and giving you the time you need to focus on your business growth. Some other outsourced IT services include:
- Mobile Application Development
- Software Development
- Technical Support
- Software Testing or Quality Assurance
Offshore Popularity is on the Rise
Statista’s Technology Market Outlook (TMO) divides the IT outsourcing industry into application outsourcing, administration outsourcing, IT outsourcing, and web hosting. In total, the outsourcing is forecasted to make a combined revenue of 351 billion U.S. dollars in 2021. The outsourcing rate is high in America, EMEA, and the Asia Pacific regions.
According to Statistica, revenue in the Business Process Outsourcing (BPO) sector is expected to reach around US$276.1 million in 2020 with an annual growth rate of 6.7% by the year 2025.
Outsourcing Cost Savings Statistics
Deloitte’s 2020 Global Outsourcing Survey during the pandemic shows that despite the COVID-19 in 2020, IT outsourcing cost savings remains the primary objective of companies who are opting for this solution. In the survey, about 70% of the participants said that outsourcing is used as a cost-cutting tool. Whereas 40% said that outsourcing assisted businesses in managing operations during the rapid operational transformation as a result of the pandemic.
In 2019, Clutch conducted a Small Business BPO Survey that concluded the main reason that businesses are outsourcing their software project is increased efficiency. About 24% of businesses said that outsourcing projects results in quality work, increased clarity, and peace of mind. 12% discussed cost reduction as a major benefit of outsourcing.
How Outsourcing Cuts Costs?
1. Interviews Cost
The recruitment process is a big expense. The national average of the U.S recruiter’s bill is approximately $40 per hour. The cost keeps on increasing with the number of candidates you are planning to interview. Moreover, if you want to give ads in a local newspaper, it will also be counted in the budget. Instead, outsourcing could cut down these additional expenses. You can find the right outsourcing partner to take care of all of this for you. It is their responsibility to provide the skills you are looking for.
2. Salaries & Taxes
With outsourcing, you can reduce the taxes, payroll, bonuses, employee benefits such as paid leaves, tuition reimbursement, retirement plans, health, and life insurance, etc. Also, you do not need to increase the salaries of your employees because of the inflation in each promotion cycle. Hence, outsourcing is cheaper than your overall expense of in-house development.
3. Work in less with Offshore Countries
The wages of employees are high in Europe and the U.S. You can find outsourcing firms in Pakistan that will provide software engineers in less than 1/3rd your current cost. An experienced resource with 5 years of industry experience will run you anywhere from 3500-4000 USD a month. That’s 20 USD/hour! This is one of the major reasons that companies prefer outsourcing their projects to countries where the cost of living is less.
4. Training Costs
When you hire new resources, they take some time to adjust to the environment and understand the nature of work. Moreover, if they need to work on some new technology, you might not be able to utilize their productivity in the initial days. Training of employees also consumes some part of your monthly budget. By outsourcing an IT project, you do need to take care of employee’s training and get immediate access to the talented IT team from offshore companies.
5. Office Space Costs
With every new employee, the cost of infrastructure and office space also increases. You are supposed to provide them with all the resources they need to work in the office. From electricity to computers, LAN and voice mail systems to kitchen snacks, the costs increase tremendously. Your outsourcing agency will take care of all by cutting these hefty costs for you.
6. Save Costs of Technological Investments
Outsourcing reduces the cost of technical equipment. Established outsourcing companies have been working on a particular domain for a long time with all the essential tools and applications they need already set up. Outsourcing reduces costs and increases the efficiency of all development processes. You no longer have to invest in buying different types of equipment and tools for each project.
7. Turnaround Time
When offices in one part of the world end their work hours, offices at the other side of the world are just a few hours into their workday. Therefore, when you outsource your project to Pakistan, you get more work hours every day with an optimal overlap for communication. No one has to wait on tasks that need to be completed. The next morning, all the updates and work are already done for the onshore team to continue. The constant communication and collaboration enhance synchronization between both parties and ensures timely delivery of the project at a very low cost.
In short, offshore development will greatly help you reduce your costs. FiveRivers Technologies is a company in Lahore, Pakistan that has been providing this very service for the past 18 years to clients in Europe and the USA. If you want us to give you a quote for your project or team extension please drop us an email at [email protected]