Effective IT Outsourcing Strategy for Your Business

IT Outsourcing Strategy

IT outsourcing has long been recognized as a viable solution to the conundrum of how to implement digital transformation. Given the rapid development of the global IT market, many businesses are rushing to hire an external team to handle their technical matters, but few of them report positive results. To fully realize the benefits of IT outsourcing, you and your company must develop an IT outsourcing strategy. Let’s take a look at this Lotus QA action plan to see where to begin with IT Outsourcing.

1. What are your objectives when IT Outsourcing?

When it comes to IT Outsourcing, there are numerous advantages for your company. IT Outsourcing, when done correctly, can help you reduce the overall cost of the IT department, shorten the timeframe for faster product release, gain access to an international talent pool, and so on.

When beginning an IT outsourcing project, your company should always prioritize cost. According to a Deloitte survey, the recent years have seen a sharp increase in the number of organizations prioritizing cost reduction, while the key objectives of outsourcing in 2018 were to enable faster time to market, scale faster, improve user experience, and achieve competitive advantage.

IT Outsourcing Strategy - Project Objective
IT Outsourcing Strategy – Project Objective

On the other hand, in today’s uncertain economic climate, businesses must also stand out from the crowd, so it is recommended that you go look for providers who can also elevate the way you do business, enable you to be more flexible, and assist you in implementing the latest technology. With the advantage of being one step ahead of the competition in technology, you can easily become the market’s trailblazer.

So, what is the ultimate deciding factor on which you want to concentrate your next IT outsourcing project? Deciding on this will help you shape the requirements for the vendors, completing the first step toward obtaining a strategic plan for IT outsourcing.

2. What IT functions do you want to outsource?

It is not possible to outsource every IT function. Many businesses have stated that they must consider many factors, including security and authority, when deciding which parts of their technology operations can be outsourced to an external party.

Let’s look at an example from HBR. There are many IT operations in a business, and dividing them according to the “Strategy vs. Commodity” approach allows us to clearly see which operation makes you stand out in the market (the strategy), and which operation does not differentiate the business from its competitors (the commodity). For business owners, it is common practice to keep the strategy in-house while outsourcing the commodity.

IT Outsourcing Strategy - IT Functions
IT Outsourcing Strategy – IT Functions

The current state of the IT market, on the other hand, suggests a different approach. Strategic IT operations now necessitate in-depth knowledge and experience that an in-house team can scarcely provide (except for teams from large corporations), so the only option is to outsource them. As a result, the question of “what IT functions to outsource” will be answered if you know what parts of the business you are capable of handling and which parts require the assistance of experts.

Another approach for IT Outsourcing is to start with the minor parts of your operation. This serves as a litmus test for how well you can perform and the potential outcomes of outsourcing. Even if the system fails, the critical components are preserved.

3. The suitable outsourcing models for you

It is critical that you understand the IT outsourcing model that is best for you. Knowing your outsourcing models allows you to understand the fundamentals of how you will manage your outsourcing projects as well as the model that best fits your financial situation and plans.

IT Outsourcing Strategy - Outsourcing Models
IT Outsourcing Strategy – Outsourcing Models

Before signing any contract with an international technology outsourcing company, you should investigate these IT outsourcing pricing models. Knowing how you intend to collaborate will allow you to create better plans that streamline your visions and goals. Lotus QA employs the four IT outsourcing pricing models, which are as follows:

  • Project-based (for businesses that have clear objectives and fixed budget)
  • Time & Material (for businesses that want flexibility)
  • Dedicated Team (for businesses that want total control of who will work on their projects)
  • Staff Augmentation (for businesses that want highly skilled staff to work on their short-term projects)
  • Find out more about IT Outsourcing Models: Choose the Right Approach

4. The requirements and specific tasks

After you’ve completed the planning phase of the outsourced project, the task becomes much easier because you only need to go over the technical details of the requirements. There are numerous types of IT outsourcing projects, but they all boil down to the following:

  • Project’s stakeholders (who’s taking part in this project and their responsibilities)
  • Scope statements
  • Tools and programming languages (if any)
  • Testing specifications (if any)
  • Security requirements (what measures, what tools, etc.)
  • Management requirements (reporting platform, leave request, meeting request platform, etc.)
  • Maintenance requirements
  • Data storage and information management requirements
  • Platform management
  • Communication requirements

You can then determine which tasks should be outsourced after breaking down the detailed requirements into smaller different criteria as described above. Continue with the requirements analysis, system analysis, code development, testing, implementation, deployment, and maintenance/support steps.

5. Working process and task management

How can you ensure that every process and operation from both parties goes hand in hand when working with an external party? How do you ensure that the project’s objectives are in sync with your business objectives without a hiccup?

The work process and work management are the answers to these questions. With a properly developed work process, every activity of your project becomes a cognitive part of the overall project, transforming the entire operation into a well-oiled “machine” that everyone can follow. Each specific action is well-designed and noted for each phase of definition, execution, and termination, so that even the most complex task can be effectively managed.

IT Outsourcing Strategy - Delegate Tasks
IT Outsourcing Strategy – Delegate Tasks

How you control the tasks and the people working on those tasks is also very important In work management. The approach you take to work management will have a direct impact on how you cut down the task, review it, and possibly redo it. Your company can keep track of every detail of what is going on in your project if you have a proper work management system in place.

6. Risk management for IT Outsourcing

IT outsourcing brings not only significant benefits, but also significant risks such as intellectual property theft, unethical behavior, data breaches, and so on. Your business can avoid the already-existing risks of outsourcing by implementing a proper risk management plan and taking the necessary precautions. It not only prepares you for worst-case scenarios with service providers, but it also iteratively improves your immunity to potential risks in the future.

IT Outsourcing Strategy - Work Process
IT Outsourcing Strategy – Work Process

7. Conclusion

IT outsourcing has many advantages, but it also has many drawbacks for your company. To avoid these risks, you must successfully develop an IT Outsourcing strategy by following these guidelines:

  • Know what you are doing this for
  • Decide what IT functions you want to outsource
  • Choose the outsourcing models
  • Devise detailed requirements and specific tasks
  • Develop working process and task management
  • Develop risk management

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