The Best Guide for IT Project Outsourcing in 2023

it project outsourcing

IT project outsourcing is a proven solution for enterprises to achieve business growth, and enhance competitive advantage. It helps fuel your project by filling technology capabilities, expertise, and human resources gaps with a massive pool of highly-skilled IT talents.

However, outsourcing software projects is not without risks. Choosing the wrong vendor, an unmatching model, or unclear goals and processes can lead to poor-quality products, project delays, and unnecessary costs. Therefore, successful IT project outsourcing is about getting the most valuable return on your investment, not just finding the cheapest solution. 

So what are the crucial steps for an effective and productive outsourcing strategy? To help you, we’ve compiled a comprehensive guide with real-life practices and valuable business tips. Let’s get cracking!

When Should I Outsource IT Projects?

Delegating a whole IT project to a third-party service provider is a tough decision to make. Hence, before diving deeper into a more detailed guideline, you need to make sure that it is the right time for your business to outsource an IT project. And here are a few clear signs:

  • Shortage of in-house IT talents: Heavy workload with limited human resources can lead to decreased work efficiency and prolong the product life cycle. To overcome this challenge and avoid any business pitfalls, you should consider outsourcing as soon as possible.
  • Technology lapse and skills gaps: In the ever-evolving technology world, if your company’s systems and staff’s skills cannot keep pace with the change, your business will not be able to continue to grow. This is the time to seek professional help from other IT project outsourcing companies.
  • Tight project timeline: Regularly meeting deadlines with quality results is important to any project’s success. For instance, if your internal team is struggling to keep up with your ERP project’s roadmap, delegating a function or a part of the project to a separate team of developers/ testers might be the solution you’re looking for.
  • Need to optimize cost: Outsourcing your project to an experienced cross-border team allows you to improve the overall velocity, and achieve your business goals in a cost-efficient way. By shifting to a more affordable global region such as Vietnam, you can eliminate all the pesky recruitment, training, facilities, and administration costs.

Step-by-Step Guide to IT Project Outsourcing

Now that you are determined that outsourcing your IT project is the most viable option, let’s break it down into specific actions to gain a smooth and value-driven outsourcing experience. Here are the 3 practical steps for successful outsourcing:

steps to successful it project outsourcing
3 steps to successful IT project outsourcing

1. Set Clear Goals

A key to making a successful IT project outsourcing strategy is determining what exactly you want to outsource. Here come some critical questions you should answer before harnessing IT project outsourcing:

  • What problems are you trying to solve?
    Is your in-house team facing issues like a heavy workload with a shortage of IT talents, lack of expertise, limited budget, or difficulty in dealing with a tight deadline? By defining the challenges you want to overcome, you will be clear about the solutions you are looking for, or the goals to achieve.
  • Pricing, human resources, quick team ramp-up, quality, or technology expertise, which aspect do you prioritize?
    Setting up your priorities straight will help you identify what to expect from an outsourcing partner, and shorten the supplier search period. The factors that you have chosen to prioritize will become the criteria for evaluating and choosing the right supplier in the following step.

2. Choose Suitable IT Project Outsourcing Companies That Match Your Needs and Goals

Even though you have clear goals and priorities, you need more to find your ideal technology partner. Here comes our suggestion to shortlist the long line of candidates.

Outsourcing Location

Based on where your outsourcing vendor is located, there are 3 types of IT outsourcing:

  • Onshore outsourcing
  • Nearshore outsourcing
  • Offshore outsourcing

Deciding which type of outsourcing to choose will determine the price and working model of the project. Below is a brief comparison of the pros & cons of each type for you to better understand and make the right choice.

Onshore Nearshore Offshore
 Definition A form of IT project outsourcing when the vendor is in the same location/country as the business A form of outsourcing IT with a cross-border team A form of IT project outsourcing that brings your business or projects overseas
Pros Same time zone
-> Easier management-> Better communication with the outsourced team
Small timezone difference between the in-house vs the outsourced team Big timezone disparity
-> Continuous around-the-clock working flow with a   combination of in-house and outsourced team

– Geographical gap

-> Low labor and living costs

-> Bigger financial advantage

Cons No advantage in cost-reduction Less advantage in cost-reduction – Language barrier
– Big timezone difference
– Geographical gap
-> Limited management

-> Find out more about Nearshore vs Offshore Software Outsourcing: Which is Better?

Pricing Models

There are several IT project outsourcing pricing models you can consider, namely Time & Material, Fixed-price contracts, and Dedicated teams. Each model has the best performance in a specific type of project. Hence, it is essential to pick the suitable one.

Fixed Price Time & Material Dedicated team
How it works Vendor commits to implement a project within the exact budget, timeline, scope, and outcome aligned with the client’s business goals. Vendor supplies a team of experts who meets the client’s needs in terms of skill set and experience. Vendor builds an entire IT team for your projects
Advantages Clear timeline and output – High flexibility
– Significant control over the outsourcing process
The most flexible model
 Disadvantages Least flexibility in case of more functions or technical modifications needed Cost-inefficient in case of long-term partnerships Unpredictable budget
When to use Most suitable for simple, short-term projects Perfect for a short-term project phase or a particular task Best used for long-term outsourcing projects

At LTS Group, we provide all three pricing models above, flexibly tailor-made for each client’s specific requirement and timescale. Check out our engagement models here!

Experiences and Reviews

Inquire about the vendor’s portfolios to assess their technical expertise and experience. Do they have prior experience in your field? How satisfied were their clients with the quality? The list of their previous clients will reveal a lot about their abilities.

Technology Expertise

Make sure your vendor offers the technology stacks that meet your project’s demand. For example, if your business needs an automation testing solution, you should search for vendors that have testing tools such as Perfecto, SoapUI, Testcomplete,… and programming languages like Java, and Python,…

Besides that, by cooperating with a third-party, your in-house team can adopt new tools and technologies.

lts group technology capabilities
LTS Group technology capabilities

Stable Performance

When you outsource your IT project to an outside vendor, be aware of all the aspects that might affect their ability to deliver stable and consistent performance.

A vendor based in a location with a complex socio-political environment, lack of support from the government, and poor facilities will affect the quality and progress of the project.

That’s the reason why hundreds of businesses have chosen LTS Group for outsourcing IT projects. Located in Vietnam – a top country for outsourcing, we offer a stable e-social system and international diplomatic relations, which enables projects to run smoothly without external disruption.

Time Zone

Choose a vendor with a timezone that best suits your business’s needs and working models. If you want to have better management control, onshore or nearshore outsourcing is a perfect choice with little timezone difference.

On the other hand, offshore outsourcing would be beneficial if you want to build a continuous around-the-clock working flow by taking advantage of the timezone’s variance.

Language Ability

English is fundamental for both teams to clearly understand each others’ requirements and reports. Besides, it will be perfect if you can find vendors with the competency of your native language for effective communication.
As global technology engineers, the LTS Group team achieves a high level of language proficiency to communicate effectively with its customers around the world. Which, 85% of the staff are proficient in English, 25% of the staff are fluent in Japanese, and 5% of the staff are fluent in Korean.

3. Make a Choice and Start the Cooperation

The final step is to choose the tech vendor with the best offers, and focus on the legal and privacy issues of future cooperation. Here are some factors you need to consider during the pilot phase of an outsourcing project:

  • A well-prepared legal document including a Non-Disclosure Agreement (NDA)), employment agreement, or Memorandum of Understanding (MOU),…is the key to a valuable and successful IT project outsourcing.
  • Precise and constant communication methods can help eliminate any potential misunderstanding between the outsourced team vs the in-house team. Moreover, it also reduces the risk of a vendor is out of track from the project’s goals and priorities.
  • Clear methods of measuring the project’s effectiveness enable you to keep everything on the right track and provide timely feedback throughout the process. Being aware of new status updates, significant milestones, or any concerns about the project is critical to eliminate costly fixes later.

Once everything is taken care of, the outsourcing process can officially start. Especially when partnering with LTS Group, we offer you a free 2-week pilot to make sure you are satisfied with the quality, and the working processes.

Business Tips for IT Project Outsourcing

1. Sign an NDA to Ensure Security Management

Working with an outsourcing vendor means presenting them with private and/or confidential data. Here is one of the core drawbacks of outsourcing.

However, businesses can rest assured by signing an NDA (Non-Disclosure Agreement) – an authoritative document that sets up all the requirements for utilizing and transferring data, etc. This is an indispensable step before starting any IT project outsourcing.

sign non disclosure agreement when it outsourcing
Sign Non-disclosure Agreement when IT outsourcing to protect privacy

2. Prioritize Value over Cost

IT project outsourcing can surely save your IT budget, but that’s not the only reason why it saves your business. A trusted outsourcing partner should be a reflection of expertise, technology capabilities, and quality of work.

According to a recent McKinsey report on technology transformations, the IT industry is witnessing a further shift toward technology-delivering revenue. The emerging IT Outsourcing is so much more than just a lever for cheaper technology services. It plays a key part in growing business, improving user experience, and enhancing competitive advantage.

For instance, you are considering two potential vendors. Supplier A offers a 10$ per hour rate but with a large number of inexperienced junior developers. On the other hand, supplier B could have 20$ per hour rate but fuels your project with fewer yet more experienced developers at the senior level. Which one would you choose, a cheaper solution or a more value-driven deal?

3. Create Plans for Effective Knowledge Sharing

Knowledge sharing and accumulation are essential, especially on long-term projects. According to Deloitte’s Global Outsourcing Survey 2022, organizations are turning to outsource to fill human resources and technical gaps, drive value, and provide end-to-end solutions.

Hence, be sure that your outsourcing vendor is able to provide you with a comprehensive knowledge transfer plan and let you access their robust technology skillset.

4. Prepare a Backup Plan

IT project outsourcing to only one vendor might lead to a risk of putting all eggs into the same basket. That’s why worldwide IT leaders are shifting to an ecosystem of third-party relationships. Instead of accessing limited technology, and talent pool when working with only one vendor, stakeholders tend to cooperate with a slew of IT outsourcing providers to be less dependent on one vendor and better risk mitigation.

Best Practices for Outsourcing IT Projects

1. Save 50% Cost When Building ERP Projects with LTS Group’s Offshore Development Center

In the following case study, we helped an American client reduce 50% of the cost of building an ERP system.

offshore development center case study
LTS Group’s Offshore development center case study

Client’s problems: The fragmentation and inconsistency in managing, planning, and operating enterprise resources. Each department uses a different management software, the data is not synchronized.

Client’s need: Build an ERP system to solve the following problems:
– Synchronize company data on the same system for seamless organization, management, and storage.
– Integrate the personnel management and operation system of all departments on the same platform, thereby creating a close connection between departments and eliminating the falling points in job processing, so no more miscommunications or missed work.
– Relieve the pressure of the management team and CEO in running the business.
– Customize the ERP system according to the operation and business processes of each department, without having to patch up another existing template.

However, to build and design such an ERP system, businesses need a huge budget to hire a team in the US. By outsourcing to LTS Group, customers have taken advantage of more affordable labor costs to reduce system development costs by 50%.

LTS Group’s solution is to quickly set up an Offshore Development Center with 25 skillful engineers, including senior positions of Project manager, Solution Architecture, Business Analyst, UI/UX designer, Developer, and Tester in a quick time. Next is the professional training process to best understand the customer’s requirements before deploying. As result, LTS Offshore Development Center helped clients develop 8 different features for their ERP system.

2. Well-Being Measurement Instrument Saves 50% of Test Effort and Speeds up Time to Market with LTS’ Group Automation Testing Solution

automation testing case study
LTS Group’s Automation testing case study

Client’s Description
The client has a well-being measurement instrument, and they use it to help their clients improve their life quality across five key well-being elements: purpose, social, financial, community, and physical.
They apply comprehensive, highly configurable Well-Being Improvement Solutions to keep people healthy, mitigate lifestyle risks and optimize care.

Business Need
They deliver 3-month releases and they are doing testing manually. They need to apply automation to reduce time to market and reduce test effort.

The system is complicated, including Embrace (desktop app), Well Being Portal (web app), Well Being Plus (mobile app), Data Warehouse, and Web services. The automation solution must do end-to-end Testing.

LTS Group’s Offshore Testing Center Solutions
Our IT engineers provide the set of tools for each component: Ranorex for the desktop app; Selenium for the web app with multiple browsers; ETL Validation for ETL Testing.
We also use CI – Jenkins to integrate tests to automate End-2-End tests.

Test Result:
Automated test cases: 36
Bugs detected: 92
Regression runs: 2000

IT Project Outsourcing with LTS Group

With more than 6 years of experience in diverse domains, LTS Group has become a reliable tech partner with 60+ clients all around the world and reached a satisfaction index of 94%. We marked our success in varied areas, namely E-commerce, ERP, Automotive, Insurance, Healthcare, Education, F&B, Banking, Gamification, etc.

Cooperating with LTS Group, clients can take advantage by accessing our 200+ skillful developers and testers. Moreover, we have our own IT Academy, specializing in providing Information Technology training services. Students who complete our courses can completely become one of LTS Group’s members and participate in your future projects.

lts group edu it academy
LTS Edu – IT Academy specialized in Information Technology Education

LTS Group’s top global quality has been confirmed by 2 prestigious Sao Khue awards (the biggest award in Vietnam Software Industry) for best testing services and when becoming a silver partner of the International Software Testing Qualifications Board (ISTQB).

Trusted by leading companies like LG Electronics, Panasonic, Toshiba, Qualacomm…, we have helped them drive business growth with our optimized IT budget, and 100+ experienced engineers with a robust suite of tech capabilities (.NET, React, Java, PHP, NodeJS, React,…).

Here are some specific case studies of our previous clients, who also struggled with their IT team’s inefficiency before deploying our solutions. Check our portfolio!

FAQs About IT Project Outsourcing Services

1. What Is the Difference Between IT Project Outsourcing vs. Staff Augmentation?

IT project outsourcing is outsourcing a part or the entire project to an external company while staff augmentation provides virtual and onsite human resources to the in-house IT team to help manage the workload.

2. Why Outsource IT Projects?

IT project outsourcing is a proven solution for enterprises to achieve business growth, and enhance competitive advantage. It helps fuel your project by filling gaps in technology capabilities, expertise, and human resources with a diverse pool of highly-skilled IT talents.

3. Why IT Project Outsourcing to Vietnam?

Vietnam has been a popular destination for IT project outsourcing thanks to its more affordable labor costs compared to other countries, a large pool of IT talent with foreign language proficiency, stable socio-economic and political situation, and the government’s supportive policies towards foreign companies.

Wrapping Up

Despite a long list of things to consider before outsourcing an IT project, the benefits that you get make it well worth the effort. Having an effective and productive outsourcing strategy in place provides a roadmap for the success of your business.

By following our comprehensive guidelines and useful business tips, you can accomplish anything you set out to do.
If you have a project in mind and want to get similar results as our successful clients, drop us a line and our experts will help your business grow faster and bigger in 2023!

We, at LTS Group, are just a contact form away:
Tel: (+84) 24-6660-7474

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