Choosing the Right IT Outsourcing Approach: Factors to Consider

A recent study conducted by Deloitte has shed some light on the main blockers for companies to achieve their main strategic goals. It showed that 50% of executives agreed that talent acquisition was the top challenge, followed by limited data analysis tools and technologies (35%) and little collaboration between functions (32%).

Companies face increasing pressure to stay competitive and achieve their corporate goals in a rapidly changing marketplace. Hence, the IT sector has emerged as a driving force behind the transformation of the business world, enabling companies to streamline operations and propel innovation.

 

While IT outsourcing may not be the panacea to all business issues, it may be a helpful tool in tackling some of them. IT outsourcing may improve business performance and give flexibility in scaling up operations, allowing the core team to focus on other critical business activities. All you need to do is find a trustworthy outsourcing provider who can meet your expectations.

Key tips on how to choose the right IT outsourcing partner for your company

According to Deloitte’s 2022 global outsourcing survey, the most sought-after qualities for an outsourcing partner are transparency (54%), trustworthiness (41%), and understanding of the business needs (40%).

 

As companies strive to remain competitive in the market, they are looking for IT service partners that can provide more than just technical competence. Companies want an outsourcing partner who can deliver efficient communication, customized solutions and outstanding customer service. With these requirements in mind, we’ve compiled a list of the top tips for finding a reliable IT service provider:

Define your needs. Before beginning the search for a vendor, it is critical to have a thorough grasp of the services and solutions required. This includes identifying gaps and pain areas of your business, and developing goals for the outsourcing cooperation. Answering these questions, you will help you outline your needs:

• What IT services do you need to implement your project?
• Do you need short-term or long-term cooperation?
• What level of expertise and experience do you want from our IT services provider?
• What are the expectations for the project outcome and deliverables?

Research top providers. Websites such as Clutch, GoodFirms or DesignRush provide authentic client reviews and lists of top providers, which can greatly assist in the decision-making process. It may also be worthwhile to tap into your professional network and seek recommendations for reputable IT service providers.

Check potential vendors’ websites. Thoroughly examine each provider’s website, taking into account their domain experience, technical expertise, case studies, and client testimonials. This will allow you to assess whether they possess the necessary experience and expertise required for the successful execution of your project.

Create a shortlist of the best. Once you have evaluated the vendors, you should choose the top 3–5 providers that are most suited to your project. By creating a shortlist, you can easily compare the strengths and weaknesses of each candidate and make a wise decision.

Schedule an intro call with potential partners. Initiate a contact with each provider to discuss project requirements and assess the alignment with company goals. To enable your potential partners to understand the idea of your project, make a brief with tasks and requirements for developers.

After choosing the ideal candidate, create a partnership agreement. This involves setting clear expectations, deadlines, and deliverables, as well as discussing the communication and project management approach. Choose the best engagement model for you, and agree on payment terms as well as any additional contractual conditions. By specifying all project components ahead of time, you may reduce misunderstandings and problems later in the collaboration.

Outsourcing approaches

Companies can select from various outsourcing approaches, each with pros and cons. The principal outsourcing approaches are referred to as offshore outsourcing, onshore outsourcing, and nearshore outsourcing. Understanding the distinctions between these are critical for businesses considering outsourcing to improve their operations.

Offshore Outsourcing

Offshore outsourcing means working with an IT provider located overseas (for example, you are outsourcing IT services to Ukraine while your business is based in the USA).

Advantages:

• Offshore outsourcing can provide companies with access to a large pool of top talents in different countries. This is incredibly beneficial for companies requiring highly specialized knowledge or skills.

• Working with a reliable offshore company can offer you the ideal cost-quality ratio, which means achieving the perfect balance between reasonable pricing and exceptional software quality.

• By adopting an offshoring strategy, you can benefit from a “follow-the-sun” model. This model involves one team passing work to another team at the end of their day, enabling the project to progress around the clock. As a result, the significant time difference becomes less of a hurdle and can actually accelerate the project’s implementation process.

Disadvantages:

• There could be considerable time differences when collaborating with offshore service providers. To tackle the time difference, companies need to establish defined project timeframes and milestones, as well as ensure regular communication.

• Working with experts from different cultures might result in differences in communication styles and business approaches while offshoring. It is vital for successful cooperation to agree on the partnership details so that there are no obstacles to the effective implementation of the project.

Nearshore Outsourcing

Nearshore outsourcing is contracting with a service provider in a neighboring country (for example, you are a USA-based company, and your IT service provider is from Canada).

Advantage:

• If a close time zone is important to you, but you have not yet found a contractor to meet your business needs in your country, outsourcing to a neighboring country is your best bet.

Disadvantages: 

• Nearshore locations may have a smaller talent pool compared to offshore destinations, which may be a barrier to companies looking for specialized IT expertise.

• If you have a very tight budget, this outsourcing type is unsuitable for your project.

Onshore Outsourcing

Onshore outsourcing is when a corporation contracts an IT vendor within the same country (for example, your company is in Chicago, and you are hiring developers from Pittsburgh).

Advantages: 

• Onshoring may be the sole option for businesses operating in industries like banking, healthcare, or governance, with stringent laws or standards. Companies that engage with onshore service providers may ensure that their partners adhere to the same norms and standards as they do, which can mitigate risks and assure compliance.

• Onshoring minimizes concerns about cultural differences and disparities in work ethics.

Disadvantages: 

• In most situations, onshore development is substantially more expensive than employing an offshore crew.

• When businesses select an onshore model, they can access a quite limited tech talent pool, which can make it more difficult to find qualified developers and other professionals.

Rates comparison and popular outsourcing destinations

Many aspects influence the cost of outsourcing software development in each region, including developer accessibility and skill set, the country’s economy, and local salaries. Look at review of rates in various places:

Destination	Rates*	Most popular locations
Northern America	$75-137	Seattle, Denver, Atlanta, San Francisco
Western Europe	$56-93	Germany, Netherlands, France, Belgium
Eastern Europe	$33-55	Ukraine, Poland, Czech Republic, Romania
Latin America	$25-52	Argentina, Brazil, Colombia, Mexico, Peru
Asia	$19-43	India, China, Indonesia, Philippines, Vietnam

* based on salary.com

Top outsourcing locations in Central and Eastern Europe

The Central and Eastern Europe (CEE) region is an attractive hub for software development outsourcing for companies worldwide, with over 1 million talented and experienced experts. According to Statista, IT Outsourcing is the CEE market’s biggest niche, with a forecast market volume of $4.17 billion in 2023. The Central and Eastern Europe market combines quality, reliability, good communication skills, and convenient rates. This region is attractive for companies from Western Europe, the USA, and Canada.

Here, we have provided some compelling reasons why you should outsource your development services to the CEE:

• The CEE region has a closer cultural affinity and work ethic to Western customers than any other outsourcing locations, allowing for seamless collaboration and highly productive teamwork.

• The CEE countries follow the same standards as the rest of Europe. It includes adhering to non-disclosure agreements, copyright regulations, and standards such as the General Data Protection Regulation (GDPR).

• Based on EF Language Proficiency Index, Central and Eastern European countries ranked as proficient users of English.

Ukraine

Despite the war, Ukraine remains one of the leading European software development outsourcing destinations and IT talent hubs, offering top-notch software solutions.

• Showing great resilience and strength during the invasion, during 2022 the export of IT services saw a rise of 5.8% while revenue from IT increased by 13% from the previous year. Based on the IT Ukraine Association’s research, the majority of tech companies in Ukraine were able to maintain business operations, sustain productivity at a level of 85-90%, and resume positive growth trends.

• Approximately 100 corporations listed in Fortune 500 are choosing Ukraine for IT services.

• With almost 309K IT specialists, Ukraine ranks 1 out of 169 countries in The Good Country Index, in terms of Science and Technology contribution.

Poland

Poland has established as a popular destination for IT outsourcing because of its advantageous geographic location, highly qualified workforce, good business environment, and affordable rates:

• Poland has over 400K tech experts – the largest pool of developers in the CEE region.

• According to the Top Coder rating, Polish coders are ranked 6th globally regarding competence level.

Romania

Romania is increasingly becoming an attractive center for outsourcing. Romania has reasonable IT service pricing, making it a cost-effective alternative for outsourcing:

• Romania’s software development industry was worth €3.2 billion in 2022, ranking 13th in Europe.

• The Romanian IT and services sector employs 147K people.

Estonia

The Estonian IT business is known for its speed, inventiveness, and forward-thinking approach, making it an appealing location for both entrepreneurs and investors.

• The Estonian IT industry today employs about 5% of the entire workforce and contributes nearly 7% of the country’s GDP, thanks to a continual influx of domestic and foreign talent.

• Estonia is ranked 3rd in the world in the ITU Global Cybersecurity Index.

Bulgaria

Bulgaria’s IT sector is steady and constantly expanding, making it one of the most beneficial industries in the country.

• Bulgaria has over 70K IT professionals.

• Bulgaria is one of the EU member nations with a substantial share of ICT in the formation of gross added value, ranking 5th in the EU.

Conclusion

Your specific demands, budget, and goals determine the best outsourcing strategy for your company. When making a decision, examine the advantages and drawbacks of each model, and while choosing your IT services provider, consider factors like provider reliability, expertise, and communication process.

Leobit would be privileged to be your IT outsourcing partner. We have 9 years of experience in software development and a strong team of high-level specialists to handle any project, regardless of its complexity. Based on your unique project requirements, we can assemble a dedicated team from our offices in Ukraine, Austin (TX), Estonia, and Poland. Please do not hesitate to contact us for additional information regarding our services and expertise.