Outsourcing IT Services: Best Service Provider, Benefits

Dec 1, 2023 | Insights

Want to revolutionize your company’s tech capabilities while optimizing costs? 

IT outsourcing is not just a trend but a strategic move set to reshape the tech landscape, with a projected market growth of 4.1% between 2021 and 2026 to USD 117 million. 

Why are so many businesses turning to IT outsourcing services?

The reasons are compelling: 

Specialized expertise, massive cost savings, and the flexibility to scale.

This post will explore the different types of IT outsourcing, models, and benefits. We’ll also highlight some drawbacks and helpful tips to ensure you have a smooth outsourced IT service experience. 

We’ll also share why Distillery could be your best IT outsourcing services partner.

Further Reading:
Not sure which outsourcing model to opt for? Learn more about the differences between Nearshore vs. Offshore Outsourcing.
Looking to outsource product development? Learn more about the benefits of Nearshore Product Development. 

This Article Contains:

What Is IT Outsourcing?

Information technology or managed IT outsourcing involves delegating tech-related tasks and projects to external service providers. This strategic move lets large and small businesses access global tech expertise without straining their in-house team or overspending.  

You can leverage geographical advantages through offshoring and nearshoring and capitalize on regional cost variations. This way, you avoid hefty recruitment costs, launch products faster, increase operational efficiency, and more. 

Ultimately, it lets you streamline your IT operations and enhance your agility and competitive edge in the market. 

Which IT Functions Can You Outsource?

From cloud solutions to software development, cyber security and quality assurance, here are some of the IT tasks you could delegate to a managed service provider: 

  • Custom software development
  • Software solutions testing
  • Quality assurance
  • Cloud services
  • Mobile app development
  • Web development
  • Maintenance and support services
  • Blockchain consulting services
  • Data science
  • Internet of Things
  • User interface and experience (UX/UI) design
  • Minimum viable product (MVP) development
  • Cybersecurity services
  • Infrastructure management
  • Data storage and management
  • Technical support
  • Enterprise reporting
  • Outsourced IT support

When Should You Use IT Outsourcing Services?

Knowing when to leverage managed IT outsourcing will help you optimize performance and budget. 

Let’s explore the key situations where the information technology outsourcing strategy shines:

  • If your development team lacks specific tech expertise, an IT outsourcing service provider can quickly fill those gaps, ensuring projects don’t stall.
  • For software development projects with intricate requirements or technologies, an IT outsourcing service provider can provide the specialized know-how to navigate complexities effectively.
  • When your internal IT team has limited bandwidth, outsourcing can help you meet crucial deadlines. 
  • If you’re facing challenges in ongoing projects, IT outsourcing offers expert consultations and support services to steer things back on track.

Next, we’ll highlight how you can outsource your IT projects.

3 Geographical Models of IT Outsourcing 

Understanding the three different types of IT outsourcing can guide your strategic decision. 

A. Onshore IT Outsourcing

Onshore IT outsourcing involves collaborating with an external service provider or outsourcing company within the same country. For instance, a company based in Los Angeles might outsource its app development to an enterprise in Dallas or Miami.

ProsCons
Better Communication: Overlapping working hours and no language barriers, given that both parties operate within the same country.
Benefits the Local Economy: Promotes domestic economic growth and reduces unemployment.
Legal and Regulatory Familiarity: Onshore teams better understand local legal requirements, ensuring easier adherence to all regulatory standards and protection of intellectual property.		High Labor Costs: Developed countries usually come with hefty labor costs. For example, a US data scientist makes, on average, $14,963/month, while their Mexican counterparts make around $6,358/month.
Limited Talent Pool: Your selection of qualified candidates is restricted to professionals within the country.
Higher Overhead Costs: Operational expenses, including managing a data center, paying rent, and utilities, can be steep compared to lower-cost nations.

B. Nearshore IT Outsourcing

Nearshoring refers to outsourcing your projects to firms in neighboring countries. An example would be a small business in the United States outsourcing managed IT services to a company in Canada or Mexico.

ProsCons
Time Zone Compatibility: Working hours will overlap, facilitating real-time interactions. For example, a company in New York nearshoring to Bogotá, Colombia, will only experience a 1-hour time difference. 
Cultural and Linguistic Similarities: Proximity often results in shared cultural traits and languages, easing communication.
Cost Saving Benefits: Nearshoring can offer more attractive rates than onshore models. For example, a US quality assurance specialist earns around $49,877 per year, while their Mexican counterparts earn around $15,331 annually. 
Ease of Travel: Being geographically close enables frequent in-person meetings and training sessions with your nearshore teams.		Slightly Elevated Costs: While cheaper than onshoring, nearshoring might still be more expensive than offshoring due to relative geographical proximity to developed nations.

Minor Language Barriers: There might still be minor language challenges, although less significant than offshoring.
Slightly Limited Talent Pool (Compared to Offshore Outsourcing): Nearshore outsourcing regions, like Mexico, may offer a smaller advanced talent pool than offshore hubs like China. 

What’s the best way to nearshore your IT software and app development projects?

Your ideal partner would be Distillery – a top-tier nearshore software development firm that offers an outsourcing software delivery model that’s scalable, flexible, and customized to your project needs.

Here’s more:

Why Distillery Can Be Your Ideal Nearshore Outsourcing Partner for IT Services

Distillery is the best IT outsourcing company offering high-caliber development talent in Latin America and robust engineering prowess to take up your projects seamlessly.

Here’s what we offer you:

  • Exceptional Talent: Gain access to a vast pool of senior IT professionals in Latin America.
  • Customized Service Delivery Approach (SDA): Our SDA is designed to expedite service delivery and adapt to the evolving needs of your small business.
  • Top-tier Technical Talent: Through a rigorous hiring process, we ensure your IT team matches the quality you’d expect locally.
  • Adaptable Team Structure: We tailor our team size and skill set to align perfectly with your specific business needs.
  • Holistic Skill Set: Our teams are versatile, spanning expertise from cloud services to UX/UI design, QA, custom software development, and project management.
  • Collaboration at Its Best: We maintain a constant dialogue with our clients, ensuring seamless collaboration and smooth project execution.

Contact us for reliable IT outsourcing services today.

C. Offshore IT Outsourcing

Offshoring is when a company employs the services of a company located in a distant country, often on another continent. For instance, a US-based company employing managed IT services from India or the Philippines.

ProsCons
Significant Cost Savings: Labor costs in developing countries such as Poland and Malaysia are typically much lower than in the US, providing substantial savings.
Broad Talent Pool: Offshoring allows access to a vast global talent pool, often with specialized expertise.
Round-the-clock Operations: Different time zones can mean continuous operations. For example, if a company in the United States partners with one in Kenya, their time zone difference facilitates 24/7 customer support. As the US development team ends its day, the Kenyan team begins.		Time Zone Differences: Significant time differences can hinder real-time communication.
Cultural and Language Barriers: Understanding cultural and language differences can be challenging, affecting collaboration.
Regulatory and Compliance Concerns: Ensuring that the outsourcing partner adheres to specific local or international standards can be complex due to diverse regulations and cultural differences.
Lack of Control: When you delegate tasks to an external service provider, you might lose some direct control over the application development process. This could potentially influence project timelines, progress, and software quality.

As you can see, nearshore outsourcing strikes the perfect balance, combining the cost saving benefits of offshoring with the proximity and communication advantages of onshoring.

Next, let’s look at the different models that shape how these managed service partnerships work.

3 Common Outsourcing IT Services Strategies

Here are three strategies that businesses frequently lean on:

A. Staff Augmentation

Staff augmentation allows small businesses to enhance their in-house teams with specific expertise (.e.g., a senior software developer) or additional resources on a need basis. 

This approach is often used when a company’s in-house team is stretched too thin or when there’s an urgent need for a specific skill set that isn’t available internally.

The bonus?
Enhanced productivity without long-term commitments.

B. Dedicated Team

In this model, the outsourcing provider provides a managed team of IT professionals to work exclusively on your projects from start to finish. 

The dedicated team approach is best suited for companies looking for long-term project alignment and lacks the resources to hire permanent team members.

C. Full-Cycle, End-To-End 

This is a comprehensive approach where the service provider manages every project phase, from inception to completion. 

This includes initial planning, design, application development, testing, deployment, and post-launch technical support and maintenance.

By adopting this strategy, you can ensure consistency, quality, and seamless integration throughout the project’s lifecycle.It also eliminates the need for multiple vendors and ensures the project aligns with your company goals at every stage.

Let’s check out the compelling benefits that make IT outsourcing a game-changer for many businesses. 

7 Compelling Benefits of Outsourcing IT Services

Managed services can be a boon for businesses aiming to supercharge their IT operations, particularly in the context of digital transformation. 

But what benefits really stand out? 

Let’s find out:

1. Reduced Costs

With IT outsourcing, you only pay for the required managed services, eliminating the need to purchase equipment and software solutions. Plus, you avoid hefty recruitment, training, and onboarding costs commonly associated with permanent hires. 

Additionally, nearshoring with companies like Distillery can offer instant cost benefits due to lower regional labor costs. 

While there might be upfront costs like training and setup, these operational shifts lead to steady, predictable expenses thanks to fixed outsourcing vendor contract terms. 

The result?

You gain long-term cost efficiency, freeing up your budget for other strategic activities.

2. Access to Advanced Expertise

Ever struggled to hire the right talent for specific roles? 

IT outsourcing bridges this by offering a gateway to a vast pool of specialized talent without investing in lengthy recruitment and training processes.

Suppose a startup aiming to develop a cutting-edge mobile app doesn’t have AI or AR experts on the team. Outsourcing lets them work with experts in these technologies, accelerating project timelines and ensuring that the final product is ahead of the competition. 

3. Increased Operational Efficiency 

IT outsourcing can help you streamline processes, leading to a more agile and responsive workflow. 

For example, a company might outsource its information technology helpdesk to a specialized outsourcing firm, ensuring round-the-clock support for its employees without the need to maintain a 24/7 in-house team. This reduces operational costs and ensures expert and timely resolution of IT issues, leading to minimal downtime and enhanced productivity.

4. Flexibility

Need to scale up or down based on business needs? 

IT outsourcing offers that elasticity. 

Instead of grappling with the overheads of hiring or letting go of in-house staff, businesses can easily adjust their outsourced resources, matching the ebb and flow of project demands.

For instance, an IT company with a large-scale web development contract can swiftly ramp up its outsourced software developer count. But once the project wraps up, they can quickly scale back. 

5. Bandwidth to Focus on Core Business Competencies

By outsourcing some IT tasks, businesses can zero in on what they do best. 

This not only ensures that primary objectives receive undivided attention but also boosts overall productivity and quality of core business operations.

Here’s an example:
A tech startup specializing in machine learning solutions can leverage managed security services.

This allows them to direct their primary focus and resources toward refining and advancing their machine learning models without getting bogged down by day-to-day security concerns.

6. Faster Launch Times​

You can drastically shorten project timelines by hiring an outsourced IT team.

Why?

Their specialized expertise, coupled with a singular focus on the given project, ensures that launch dates are met and sometimes beaten.

7. Get Objective Risk Assessments

An external IT service provider offers a fresh, objective lens on potential threats and vulnerabilities within any business process or system. 

For example, due to familiarity, a financial institution might overlook certain security loopholes in its digital banking mobile app. An outsourced IT security team can objectively identify and address these vulnerabilities, ensuring robust protection against potential cyber threats. 

While IT outsourcing services offer a slew of advantages, we also need to understand the flip side of the coin. 

Challenges of Outsourced IT Services 

Let’s delve into the potential pitfalls that you might run into when outsourcing IT services:

1. Cultural and Language Barriers 

English might not be the native language of developers from offshore regions. This could pose communication challenges, causing misunderstandings and increasing project costs.

Moreover, cultural differences, such as varying work ethics, communication styles, and problem-solving approaches, can add layers of complexity to collaboration and project management.

(But rest assured, this wouldn’t be the case when you work with an onshore or nearshore outsourcing partner!)

2. Synchronization of Time Zones 

When US companies offshore to countries like China, navigating the substantial time zone differences can be tricky.

You might face challenges with scheduling meetings or deadlines, receiving prompt feedback, and navigating decision-making processes. 

3. Less Control 

Delegating tasks to an externally managed team can compromise direct oversight, leading to potential misalignment with industry standards and in-house procedures. 

Additionally, this diminished control can hinder the swift identification and resolution of urgent operational issues.

4. Data Breaches

When you outsource cybersecurity services to an external security services team, you will need to share some confidential business data.

If the outsourcing company doesn’t have strong security measures in place, you could be at risk for breaches and other cyber security threats.

A breach could dent your finances, damage your reputation and lead to legal repercussions.

5. Hidden Costs

There can be hidden costs when leveraging managed IT outsourcing services.

Examples include:

  • Unexpected costs to bring the outsourced IT team up to speed with company protocols and tools.
  • Issues arising from communication missteps or quality lapses can impact both budget and brand image.
  • Transition costs linked to moving outsourced IT services back in-house or to a different outsourcing service provider.

Up next, we’ll share some tips to help you mitigate these drawbacks of outsourced IT services. 

10 Handy Tips to Help You Outsource IT Services Successfully

These indispensable best practices will ensure a smooth-sailing outsourced IT services experience:

1. Decide on the Projects You Want to Outsource: Define what projects you want to outsource and the scope of the managed IT services. This way, you can set expectations and boundaries, ensuring both in-house and outsourced IT teams understand their roles clearly. 

2. Choose the Best Outsourcing Model for the Project: Assess the scope, timeline, and complexity of your project. Whether it’s project-based, dedicated teams, or hybrid, the right fit can optimize outcomes.

3. Check the Expertise and Reputation of Your Outsourcing Firm: Review the case studies, customer testimonials, reviews, and track records of the company to ensure you leverage reliable IT outsourcing services.

4. Negotiate Service Level Agreements: Service Level Agreements (SLAs) define the service quality and scope of the outsourced IT service. They help set clear expectations, ensuring accountability and reducing potential disputes between you and your outsourcing service provider.

5. Establish Clear Communication and Collaboration Channels: Regular check-ins and meetings with your outsourcing partner, facilitated by platforms like Slack or Zoom, ensure real-time feedback and alignment. Set up review meetings to share concerns and feedback and ensure alignment between your outsourced IT support team and in-house departments. 

6. Set Performance Metrics: Setting clear KPIs provides direction to your external service provider and makes it easier to track the progress of your outsourcing strategy. A goal like “a 15% reduction in security vulnerabilities and a 98% uptime in 6 months” provides the external security services team with a clear business goal and standard to gauge effectiveness.

7. Ensure Cultural Alignment: Conduct orientations to share your company values with the outsourced team. Opt for the nearshore model to reap the benefits of both cost-effectiveness and better cultural alignment.

8. Implement Data Security Measures: Collaborate closely with your outsourcing provider to establish rigorous data protection protocols, including encryption methods, access controls, and regular security audits. Ensure all this is detailed in the outsourced IT service contract.

9. Invest in Periodic Training Sessions or Workshops: This will align both in-house and external teams in terms of technical, operational, and quality standards, as well as the latest tech trends.

10. Conduct On-Site Visits or Audits: Schedule on-site visits for a firsthand glimpse into your external team’s processes, compliance, and quality of work. 

The Best IT Outsourcing Company For Nearshoring Your Projects: Distillery

Outsourcing IT services definitely has its perks, including huge cost savings, access to global expertise, and faster project delivery.

But among the various options out there, nearshoring definitely stands out — offering affordability, geographic proximity, and cultural alignment with the US.

Ready to work with a promising outsourced IT service provider? Contact Distillery today for your IT and software development outsourcing needs.