The Ultimate Guideto Outsourcing

What is outsourcing?Outsourcing is a company’s strategy to contract a third-party

ally. Whether handling operations, managing production,

offering services, or finding talent; this external partner is meant

to merge with the hiring business in a way that streamlines

efficiency and optimizes spending (Bucki, 2018).

The outside company may work in-office or from a distance,

with different outsourcing strategies favoring geographic

closeness or expanded international teams. It’s no wonder that

our now very connected world seems quite small, after all.

54%CompaniesOutsource

78%Organizations

report a positiveexperience

Outsourcing types

Offshoring

The strategy that rose to popularity

near the turn of the 20th century,

when shipping and travel technologies

became widely accessible (Offshoring,

2020). Offshoring moves a company’s

operations or production to an

international location, normally from

an expensive economy to a more

cost-effective one. For example, a toy

business in the United States that

relocates its factories to India or

China.

Onshoring

Just as it sounds, onshoring stays

landlocked. Companies that opt for

this outsourcing strategy hire within

the borders of their own nation, or

even relocate operations back to their

home countries (Onshoring, 2020).

Imagine: the North American toy

company from the previous example,

if it decided to re-open factories for

production in the United States.

Nearshoring

Nearshoring strategy takes the

international mindset of offshoring,

but gathers a highly-curated team

only in near or neighboring countries.

In other words, nearshoring

companies seek to hire diverse teams

across cultures and even continents,

without straying from the same

relative time zone (Cantor, 2019).

Continuing with our toy company,

imagine that it sets up production in

Latin America, instead of Asia.

Choosing the right outsourcing model

Cost E�ciency

Same Time Zone

Shared Business and Cultural Practices

Local Job Opportunities

Diverse Talent Pool

Enhanced Productivity

High Security

Easy Communication

Accessibility and Control

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

O�shoring Onshoring Nearshoring

There’s a reason why “strength in numbers” is such a classic

adage. Outsourcing’s nature sets up game-changing advantages

that make a tangible difference.

Companies use outsourcing to enhance efficiency in production

or services, diversity in skills and perspectives, focus on

top-priority operations, and optimization of costs invested.

Let’s take a healthcare enterprise that’s looking to streamline its

patient intake. By outsourcing software development of a digital

information system, the hospital saves the investment of finding

IT talent and infrastructure, and instead immediately gains the

years of expertise that the hired company offers. It’s able to

efficiently fill the business need, without being distracted from

its daily, life-saving work.

Benefits of outsourcing

Success in outsourcing not only depends upon questions of where, but also of what.

Whereas many think that outsourcing centers on production (i.e

a clothing factory), there’s also a huge and still-growing market

for BPO Outsourcing, or Business Process Outsourcing (i.e.

accounting) (The Outsourcing Handbook, 2013).

BPO, in fact, is far from being left out of the equation; in 2017

alone, companies worldwide invested $88.9 billion USD into

outsourcing their services (Mazareanu, 2018).

BPO is commonly implemented even across industries. These are

the top outsourced processes and services (Outsourcing, 2020):

The Most Commonly OutsourcedServices or Processes

IT services

Accounting

Marketing

Customer Support

Human Resources

Development

37%

37%

34%

24%

24%

28%

Staff AugmentationTemporarily contracting a third-party team to

extend your operations, materializing a project

without in-house hire.

Per ProjectEntrusting your project and priorities to an

outsourcing ally, who will put them into action

from start to finish.

Managed TeamCombining your talent resources with those

outsourced, sharing the nitty-gritty work of

project execution (Types, 2019).

Types of Outsourcing Contracts

Defined by Working Style

Time & Material ContractA pay-per-hour and team member contract, for

long-term projects that can’t be priced in a fixed

estimate.

Fixed PriceA quoted and straight-forward contract, which

outlines details from the get-go, but yields little

flexibility (Ch., 2016).

Target CostA contract that estimates a total cost, but tracks

the actual resources invested, charging the client

an accrued sum upon project completion

(Jaworski, 2020).

Defined by Cost Variable

Securing the best case-by-case contract requires a perfect combination of working style and cost strategy, depending on the

project’s top priorities.

Types of Outsourcing Contracts

Time Saving

Per Project

Target Cost

Time & Material

Management Control

Sta� Augmentation

Fixed Price

Managed Team

Cost E�ective

Sta� Augmentation

Managed Team

Fixed Price

High Flexibility

Sta� Augmentation

Target Cost

Time & Material

Like choosing a strategy, deciding on an outsourcing country

requires a good understanding of the hiring company’s priorities.

For the lowest possible cost, businesses most commonly turn to

China and India (Gallimore, 2019). On the other hand, closer countries like Mexico, Peru, and Colombia (relative to North

America), and Ukraine and Poland (relative to European

countries), provide better communication and higher efficiency

(Top IT, 2019).

All of these countries boast high English proficiency, competitive

hourly wages, and exacting standards of education; making them

especially friendly for outsourcing (Krosse, 2019).

In recent years, Nearshore countries have been the

increasingly-popular choice for North American markets, with

Latin America being the fast-growing outsourcing market

(Filiatrault, 2013).

Popular Outsourcing Countries

The key to a positive outsourcing collaboration is finding the right

combination of variables to meet a company’s priorities.

For example, if finding the lowest possible cost is markedly more

important than efficiency and quality communication, then

outsourcing to Asia may be the best choice. Likewise, this priority

would most likely choose a fixed-price, per-project contract.

However, if cost optimization is important, but so are efficiency

and communication, a nearshoring model of staff augmentation

and target cost contract is sure to combine those three priorities.

And, finally, the most important thing that a company can do to

help itself achieve outsourcing success: communicate its

expectations from the get-go, clearly, to a company with a

track-record of boosting competitive advantage.

In Conclusion:tips for a successfuloutsourcing experience

• Bucki, J. (2018, September 27). What Is Outsourcing and Why Do

Companies Do It? Retrieved March 9, 2020, from

https://www.thebalancesmb.com/what-is-outsourcing-2533662

• Cantor, S. (2019, October 30). A Comparative Guide to

Outsourcing Models. Retrieved March 10, 2020, from

https://webcreek.com/en/blog/technology/offshore-onshore-right

shore-nearshore-comparative-guide-to-outsourcing-models/

• Ch., M. (2016, June 21). Outsourcing Types of Contracts: Fixed

price model, Time and Material model and Dedicated Team model.

Retrieved March 11, 2020, from

https://www.cleveroad.com/blog/types-of-contracts-in-outsourcin

g-how-to-make-a-wise-decision

• Dautovic, G. (2020, February 10). 15 Insightful Outsourcing

Statistics to Know (2020 Update). Retrieved March 9, 2020, from

https://fortunly.com/statistics/outsourcing-statistics#gref

• Filiatrault, D. (2016, April 2). 7 reasons to choose Latin America

for your dev outsourcing. Retrieved March 16, 2020, from

https://venturebeat.com/2016/04/02/7-reasons-to-choose-latin-a

merica-for-your-dev-outsourcing/

• Gallimore, D. (2019, December 16). What Countries Make the

Best Outsourcing Partners. Retrieved March 13, 2020, from

https://www.business.com/articles/countries-for-business-process

-outsourcing/

• Jaworski, B., & Grela, M. (2020, February 18). The 3 most popular

types of outsourcing contracts: Blog Future Processing. Retrieved

March 11, 2020, from

https://www.future-processing.com/blog/the-3-most-popular-typ

es-of-outsourcing-contracts/

• Krosse, S. (2020, January 17). The Ultimate List of Outsourcing

Statistics. Retrieved March 16, 2020, from

https://www.microsourcing.com/learn/blog/the-ultimate-list-of-o

utsourcing-statistics/

Bibliography

• Rouse, M. (2019, December 12). What is Business Process

Outsourcing (BPO) and How Does it Work? Retrieved March 10,

2020, from

https://searchcio.techtarget.com/definition/business-process-outs

ourcing

• The Outsourcing Handbook: A Guide to Outsourcing. (2013). The

Outsourcing Handbook: A Guide to Outsourcing. London.

• Top IT Outsourcing Countries in 2020: Existek Blog. (2019,

December 3). Retrieved March 13, 2020, from

https://existek.com/blog/top-it-outsourcing-countries-in-2020/

• Types of Outsourcing: How to Choose the Best Solution for Your

Business. (2019, June 12). Retrieved March 11, 2020, from

https://topdigital.agency/types-of-outsourcing-how-to-choose-the

-best-solution-for-your-business/

• Mazareanu, E. (2018, May 30). Topic: Business process

outsourcing industry worldwide. Retrieved March 10, 2020, from

https://www.statista.com/topics/2257/business-process-outsourc

ing-industry-worldwide/

• Offshoring vs Outsourcing. (2020). Retrieved March 10, 2020,

from

https://www.diffen.com/difference/Offshoring_vs_Outsourcing

• Onshoring: Meaning of Onshoring by Lexico. (2020). Retrieved

March 10, 2020, from

https://www.lexico.com/definition/onshoring

• Outsourcing Trends and Statistics for 2020 and Beyond. (2020,

March 9). Retrieved March 10, 2020, from

https://www.superstaff.com/blog/outsourcing-trends-statistics/

Bibliography

WebCreek offers IT nearshoring services, software outsourcing, IT staff augmentation,

and dedicated teams. WebCreek’s suite of outsourcing services provides top

development talent that enables all organizations to extend their IT capabilities.

Headquartered in Houston and with offices around the globe, our nearshoring services

guarantee a quick and expert response, from teams that share your time zone and

language.

To learn more, visit https://webcreek.com