The outsourcing of IT services is no longer associated with cost savings, as it used to be in days gone by. Also, we no longer need to explain the meaning of the term. However, business representatives still encounter difficulties in differentiating between outsourcing and offshoring. What is the difference? In today’s article I will try to clear up any doubts, thereby facilitating the decision-making process in terms of choosing the appropriate cooperation model.

Outsourcing tamed

The times when the term sounded unfamiliar or suspicious are gone. Just a brief note on outsourcing, as it will be helpful in terms of further clarification. We all know that outsourcing as an idea derives from the automotive industry and the term was used for the first time in 1979 in America. At the time, businesses discovered that it is very handy to delegate some processes to other parties (often more skillful or capable of providing the service or product needed). The American idea became widespread and that’s how the whole outsourcing revolution began. Nowadays we no longer consider outsourcing to be revolutionary though, since we deal with it on a daily basis – even unknowingly, while being recruited by external headhunters employed by HR agencies or when using websites most likely designed by external agencies.

Outsourcing and the sharing economy

While talking about outsourcing, it is worth mentioning that it is evolving as the concept of the sharing economy gains popularity. In a nutshell, according to the sharing economy idea, nowadays we rather tend to take advantage of goods provided than possess them outright. A couple of the myriad examples are city bike systems, cars and scooters for hiring via application. And herein lies the magic of outsourcing: business no longer struggles to recruit an entire team of specialists, which is an issue especially in the IT industry, particularly in the context of access to cutting-edge skills which are the main power driving the IT market. According to LinkedIN research, the top 3 desirable skills in information technology are those related to:

1. cloud computing,
2. artificial intelligence.
3. analytical reasoning.

It takes time to change the strategy to adapt swiftly to the main IT technological trends. This is where outsourcing helps a lot, as recruiting a certified cloud DevOps engineer or machine learning specialist, for example, is a real challenge.

Outsourcing vs offshoring

As mentioned, the term outsourcing no longer requires clarification. Nonetheless, entrepreneurs have difficulties in deciding on a particular type of outsourcing cooperation and some terms, such as offshoring or nearshoring, still seem to be vague for them. So what are the main differences between outsourcing and offshoring? Compared to outsourcing, offshoring is more related to geographical dependencies. In general, offshoring means delegating processes to teams located abroad. The benefits and costs of offshoring differ between respective countries. Whenever we discuss expenses related to IT outsourcing, Western ones are almost instantly associated with higher costs. The key benefit of offshoring is related to a better quality-price ratio. Companies take advantage of offshoring possibilities, as they allow you to save, ensuring a high level of service at the same time.

Offshoring vs nearshoring

While searching for offshoring services, it is relevant to take such aspects as effective communication and working culture into consideration. Firms willing to benefit from offshoring cooperation often decide on a nearshoring model, meaning searching for an offshoring partner “in the neighbourhood”. Thanks to signing a contract with a provider located nearby, they minimize potential issues which might result from the distant location of the IT partner or cultural differences. For example, Poland is a natural nearshoring partner for countries such as Germany, Holland, United Kingdom or Sweden.

The benefits of nearshoring cooperation are as follows:

• better communication,
• similar working culture facilitating cooperation,
• improved control over the project,
• the possibility to get to know the outsourcer’s team members in person,
• cost savings on far-off business travels.

IT outsourcing in Poland

America was a cradle of outsourcing, but Poland has become its home over the years – mostly in the context of providing IT outsourcing services. As per research, Poland is among the top 10 locations for IT outsourcing and among the top 3 in Europe. The early signs of Polish outsourcing potential were observed during the global financial crisis in 2012. This forced a huge number of companies to seek more effective, yet economical means of time and resources management. At the time we could spot the rise in the value of the outsourcing sector, and Polish outsourcing companies started to thrive. Poland is advantageous thanks to professional programmers with excellent language skills that rank us 13th out of 88 countries (11th in Europe) when it comes to English proficiency.

Summary

Delegating IT services to an external company is a natural strategy for firms willing to thrive thanks to access to unique competencies. While deciding on a particular cooperation model, be it outsourcing, offshoring or nearshoring, it is worth getting to know the benefits of each. I hope I have managed to clarify the main differences. Should you still be weighing up the pros and cons of a particular model, why not verify your beliefs or misconceptions with a firm which offers IT services? Effective communication is crucial while cooperating with an external service provider. That is why reaching out to an IT outsourcing company for a free consultation is the easiest way to verify your strategy straight away.