Being a startup or small-and-medium-sized business is a constant challenge. Sometimes, their eventual survival depends on a single deal. That is why having access to an external source of deep IT expertise and hands-on skills is a definite advantage for such enterprises. With it, they can save time and resources and apply their energies to growth and gradual expansion. In this piece, we will attempt to summarize what professional business researchers and academics say about this vital connection. If you find this info interesting, make sure to click on the links to read more.
Forbes reminds us: back in 2019, 37% of SMEs were reported to be outsourcing at least a portion of their business processes (according to Clutch). This share was expected to reach 52% shortly. Needless to say, IT was one of the top priorities in this respect. Why are smaller enterprises tend to seek assistance in their IT initiatives more and more?
What makes SMEs prone to resorting to IT outsourcing?
As early as 2004, The International Journal of Accounting Information identified the following characteristics of a typical SME:
– Small-and-medium-sized businesses tend to operate with simpler and more centralized mechanisms when it comes to decision-making.
– Generally, SMEs face the issue of so-called ‘resource poverty’. The latter encompasses not only finance but also IT expertise and coding skills as well as time horizons.
– Enterprises of this kind often have no opportunity to establish and run their one IT-departments.
– Finally, no matter how ambitious and promising smaller ventures may be, they prefer to practice short-term planning.
This combination of factors taken together makes SMEs prone to outsource at least some of their IT initiatives in the modern landscape: i.e. in a situation with countless software service providers competing with each other for customers and critically dependent on their reputations.
Such competitiveness inevitably compels IT outsourcing companies to keep prices low and standards high. Now, more than ever, it is the buyers’ market that puts customers first.
As a result, these buyers quickly make their decisions, allocate their limited resources to cover the most critical IT needs, compensate for the absence of in-house IT specialists, and manage to attain their short-term goals.
Offshore IT Outsourcing as a Direction to Go
Basically, IT Outsourcing is understood as a “practice of turning over all or part of an organization’s IT function to an IT vendor”. Consequently, offshore IT outsourcing can be defined as a situation where ‘the process of sourcing any business task, process, or function supporting domestic and global operations from abroad, in particular from lower-cost emerging economies.’
Previously, offshore IT outsourcing was the domain of enormous multinational corporations. The reason behind that was described as follows: SMEs used to face higher relative costs ‘of… contracting, and controlling suppliers than large firms’. Luckily, it is not so anymore.
Thus, more and more companies nowadays can benefit from offshore IT outsourcing. Earlier this year, we already published a brief piece on the advantages of outsourcing your IT project to a developing market. In that post, we described Russia and the former Soviet Union. However, all the positive factors enumerated below are equally applicable to India, China, Eastern Europe, etc.
– First of all, researchers point out that the key countries can be proud of their national IT pools. Such countries as Russia and India, for example, offer numerous high-quality specialists that often exceed their counterparts in more developed countries.
– Second, financial considerations are also at play here. It is obvious that the key driver behind the offshore IT outsourcing trend is of economic nature: ‘skilled labor is cheaper in the offshore outsourcing destinations’. Hence, any SME can secure convenient and effective ‘access to a large pool of highly qualified personnel at a fraction of the domestic price.’
The third factor is also self-evident. Each instance of IT outsourcing is a fresh perspective. As such, it can generate and promote ‘quality improvement and innovation.’
All the aforementioned facts notwithstanding, offshore IT outsourcing may be also a source of risks, including legal problems, cultural misunderstandings, and even conflicting work schedules. In one of our previous pieces, we published a list of ‘red flags’ you need to pay attention to while choosing an IT outsourcing vendor.
At the same time, such companies as Evercode Lab are a perfect option to boost your IT initiatives. We never disappoint our customers. There are other companies like us all over the world. So if you need a great vendor, contact us!