How Outsourcing in Recession Can Benefit Your Business?
It’s no arguing the fact that the current pandemic situation has created a worldwide chaos. If you’ve been following the news, you already know that the world economy has hit the rock-bottom.
Today, businesses are standing at a point where recession can knock on their doors anytime and if they’re not prepared, they are most likely to witness severe economic downfall.
No doubt, managing consistent business growth is challenging during a recession, but with effective strategies, you can survive or even expand your business in such difficult times.
One such strategy is IT outsourcing. Believe it or not, but outsourcing in a recession offers a multitude of benefits for businesses. From helping companies cut-down costs to ensuring high-efficiency, outsourcing different operational goals will help them fight the unbearable economic realities.
So, today, we’re going to discuss how IT outsourcing in recessions will help your company survive the sudden economic change and how you can find the right outsourcing partner.
What is Outsourcing?
Outsourcing is the practice of hiring a third-party to manage different operational goals.
While the primary objective of IT outsourcing is to cut-down costs, many companies also avail outsourcing services to take-off the stress and focus on core objectives of the organization.
In fact, 57% of the companies outsource to focus on their core business objectives. Irrespective of the reason, however, outsourcing is a great way to boost your company’s overall productivity while cutting-down the expenditure at the same time.
As a company, you have the liberty to outsource various tasks. For instance, some organizations outsource marketing, IT (software and web development), and HR while others prefer outsourcing less-valued tasks like accounting.
Different Types of Outsourcing
IT Outsourcing is divided into different types, each having pros and cons of their own.
Let’s discuss each of the outsourcing types to understand them more precisely.
Offshore Outsourcing
Offshore outsourcing is the practice of hiring an IT company from a foreign countries like India, China, Philippines, Ukraine etc.
- This usually involves sending IT development tasks to a company in developing countries like India, China, Philippines, etc.
- Since the development costs in these countries are comparatively lower, the main objective of hiring an offshore outsourcing company is to cut down costs.
Nearshore Outsourcing
Nearshore outsourcing also involves hiring an IT company in a nearby foreign country.
- Here Outsourcing company is basically hired from a nearby country, usually the one that shares a border with your own country.
- This makes communication much smoother as traveling to a nearby country is comparatively easier.
Domestic Outsourcing
Domestic outsourcing is a less-popular type of IT outsourcing as it involves hiring a company in the same country.
- As opposed to other cases, cost-cutting isn’t the main objective with domestic outsourcing as hiring company in the same country will be as expensive as having an in-house development team.
- Companies usually choose domestic companies to lay-off some burden for a while and focus on the core competencies.
Choosing the right outsourcing type will completely depend on your business objectives. However, in a period of recession, companies usually prefer offshore outsourcing, considering it’ll help them save a significant amount of money.
How Outsourcing Has Evolved Over the Years
It is worth noting that it isn’t a new concept. Companies have been outsourcing different tasks, such as development, designing, and customer care since the 90s.
However, it’s safe to say that it has changed tremendously in the last two decades.
According to the Deloitte 2018 global outsourcing survey,
Traditional outsourcing technologies, methodology, and services era is coming to end.
From now “Disruptive Outsourcing Solutions” is a new normal.
Organizations are embracing disruptive outsourcing technologies such as cloud and robotic process automation (RPA).
The vast majority of organizations 93 percent are considering or adopting cloud solutions and 72 percent are considering or adopting RPA solutions. Seventy percent of respondents believe their service providers have a reasonable or advanced ability to implement disruptive solutions.
To begin with, startups and small businesses contribute to the consistent growth of the IT outsourcing industry. 78% of small businesses believe that hiring an offshore development company gives them a competitive edge in the market.
Although, there are few challenges to adopt disruptive solutions:
- Cloud Adoption Challenges: Data migration, security requirements, and application optimization/change
- RPA Adoption Challenges: Organizational resistance, highly fragmented processes.
- Similarly, along with development, companies have also started to outsource other business activities such as finance and accounting. Nowadays, businesses hand-over different payroll and billing tasks to third-party accounting firms.
- This helps them further cut down the costs and get enough time to invest in achieving core business objectives.
What are the Benefits of IT Outsourcing in Recession?
Circling back to our main topic, let’s dive into the benefits
Outsourcing is Cost-Effective
- As compared to hiring a dedicated in-house team, outsourcing will allow businesses to cut costs for different tasks that don’t require full-time assistance.
- For instance, if you own an app development company, you can outsource minor tasks such as UI designing to a third-party agency in a country like India or China.
- Since the per-hour rates of the designers in these countries are comparatively lower, you’ll get the same quality work in a fraction of the amount you would have paid for an in-house designing team.
- This is probably one of the major reasons why businesses should outsource software development and other similar activities in recession.
Maintain High-Efficiency
- Low-level employees are the biggest victims of the recession. Since companies can’t fire their experienced and valuable employees, they usually have to lay-off the low-level employees.
- However, due to this unfortunate trade-off, the low-value tasks start piling-up, which eventually damage the overall productivity. One of the ways to avoid this scenario is to hire outsourcing company in India and handover these low-value tasks to them.
Reduce Workload for Your Employees
- After a company has fired half of its employees, the overall work is usually distributed among the remaining staff. This increases the workload on each employee, which is most likely to affect the productivity at a certain point.
- Although, such situations can be avoided by outsourcing services to foreign companies. This way your valuable employees won’t have to suffer over-workload and they’ll be able to perform their job duties without compromising with the quality.
Offer Necessary Benefits to Your Valuable Employees
- Loss of necessary benefits is a major concern for employees who don’t get fired during a recession.
- When you outsource low-value tasks to an outsourcing company in India, you basically end up saving money. This money can be utilized to provide all the necessary benefits to your valuable employees.
Outsource Software Development During Recession
Among all the job roles, software development is most critical for every organization as it requires 24x7 assistance.
Whether you had to shut down the development process midway due to the mass firing of employees or you want a support team to assist your product during the recession period, outsourcing will help.
In saying that, it is still important to outsource software development to the right company as your product’s performance will depend on the expertise of the company you hire.
So, let’s discuss how to find the right outsourcing partner for your company.
How to Find the Right Outsourcing Partner for Software Development?
STEP 1: Research Thoroughly
Finding the right outsourcing partner is a complete challenge in itself.
- One small blunder and you’ll be stuck with an unprofessional agency who doesn’t understand deadlines. That’s why it’s extremely crucial to research thoroughly to identify all of the available options.
- You can start with a basic Google search. Since you’re planning to outsource software development projects in India, type-in “software development outsourcing company in India” in the search bar and hit enter.
- This will help you find different available options and it’ll become much easier to narrow down your list to the most suitable companies. You can also visit online platforms like Clutch to get detailed reviews and ratings of a particular company.
STEP 2: Contact Each Company Individually
- Once you have narrowed down your list to the most suitable candidates, the next step would be to contact each of them individually to discuss further project details.
- If you’re looking for an offshore outsourcing agency, it is better to take a video call with the project coordinator.
- This will make it way easier to decide whether the company is capable of meeting your business objectives or not.
STEP 3: Don’t Forget About Cost
When we’re talking about IT outsourcing in recessions, the cost is going to be one of the primary deciding factors.
- Even if you have finalized 3–4 offshore software development companies, they are most likely to offer varied development rates.
- That’s why it’s important to compare the development rates of each candidate and select the right partner accordingly.
- However, that doesn’t mean that cost should be the only factor you consider while hiring dedicated developers. The goal should be to find a trade-off that allows you to cut down costs without compromising with the quality at all.
STEP 4: Check Portfolio of Each Candidate
- If you’ve ever worked with an outsourcing company in the past, you already know the significance of the company’s portfolio.
- The portfolio will give you an insight into the company’s core expertise and help you determine whether it can handle the assigned tasks or not.
STEP 5: Check Client-Reviews
At this point, you’ll be left with 2–3 most potential candidates.
- In this scenario, the most suitable way to find the right outsourcing partner is to ask for client reviews from each candidate.
- Keep in mind that a professional IT outsourcing development company will provide client reviews without any hesitation.
- Go through these reviews and if possible, try contacting the clients to check if your project will be in good hands or not.
STEP 6: Outlining Job Responsibilities for Outsourcing Partner
Once all the above conditions are met, you can move towards outlining the job responsibilities for your outsourcing partner.
- It is never a good strategy to rely on assumptions as it can damage your relations. Not to mention, the wastage of time and money.
- That’s why it’s imperative to discuss all the job responsibilities before sealing the final deal so that you don’t witness any unexpected misunderstandings in the future.
Are there any Success Stories of Businesses Surviving Recession Through Outsourcing?
Fortunately, there is enough evidence to prove that outsourcing can help your business swim through the sea of recession.
Here are two of the leading tech-giants who survived the tough economic downturn during the 2008 recession by outsourcing different job roles.
- Apple has always relied on outsourcing its manufacturing process to China. However, a little do people know that a large portion of Apple’s engineering jobs was actually outsourced to Indian engineers back in the 2008 recession.
- IBM also ended up signing two major outsourcing contracts in the markets of South America to reduce the overall expenditure in 2008. These contracts involved different outsourcing services including data center outsourcing, technical support, and database management operations, etc.
Conclusion
While a recession can be the most challenging period for an IT company, outsourcing can help it sail through the unexpected economic downfall.
With the right outsourcing partner, it’ll become easier to execute all the job roles while reducing overall costs at a significant rate. Moreover, outsourcing different IT services at the right time will help you prepare for catastrophic events like a recession. Contact us to explore more options.
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