Outsourcing is the business of delegating a portion of your activities to a person or organization outside of your own. You can outsource the production of goods, manufacturing, or the provision of a service, such as transportation or payroll processing, to a third party.
Outsourcing is often first associated with production, in countries such as China and Mexico. But you can also entrust a single item, to a local partner. We also see that instead of expanding a company’s facilities, and adding to its fixed average costs, when reaching maximum capacity, some companies decide to outsource some of its storage needs.
In order for an IT company to stand out and generate a significant revenue, it requires visionary management.
In regards to adapting to new technologies, and the integration of IT tools within your organization, it is imperative for you to understand the key elements of any potential or applicable IT service contracts.
Leveraging an IT service provider to develop, improve, fix or maintain a software application, piece of hardware or computer network, or to train staff within a company, is quite common.
Subcontracting involves delegating the execution of a task or even an entire project to an external company, known as a subcontractor. There is therefore a client (company wanting to outsource), as well as a subcontractor (fulfilling the client’s needs).
In the IT sector, subcontracting is very common. Companies specializing in computer services may subcontract certain types of work for various reasons.
The 3 types of subcontracting are as follows:
Need to outsource the project to a specialist because there is a lack of in-house technical skills. For example, developing a project on a new framework that is not managed internally.
Subcontracting of capacity:
Lack of time in-house to carry out the project even if the technical skills exist within the company. As a result, outsourcing is required, in order to meet deadlines, or to make certain approaching deadlines more achievable.
When a subcontracted project that was assigned to a provider, is subcontracted a second time, to yet another organization.
How does it work?
IT subcontracting operates on the same principle as any type of subcontracting. The ordering company produces specifications, illustrating all that needs to be delivered, whether it is functional (including features and functionality required), technical (technologies that should be used, operating systems and hardware required) or even the expected delivery time.
Once specifications have been produced, the ordering company may either:
Solicit its panel of service providers
Solicit new service providers through the publication of a call for tenders
Large companies generally have trusted partners listed in their purchasing department. First, they will therefore solicit all their identified IT partners in order to find the best technical and financial proposal.
If none of the known partners are available or qualified for this project, then the contractor will generally turn to the publication of a call for tenders.
What types of IT projects can be outsourced?
Subcontracting allows many services companies to develop new projects quickly and easily. Any type of project can be contracted out. Whether it is the management of a computer network, the development of a tailor-made software or IT managed services.
The following is a list of computer projects that can generally be outsourced:
- Management of a computer fleet
- Custom software development
- Software architecture for new projects
- IT Maintenance
- Enterprise Cyber Security Management
- Development of an artificial intelligence algorithm
- IT Project Management
- Technology Consulting
What are the advantages of subcontracting?
Subcontracting makes it possible to develop new projects more quickly. Companies often rely on subcontracting due to a lack of time or in-house skills.
Subcontracting therefore allows, for example, a temporary peak in activity to be met, without having to recruit or expand in the long-term. Subcontracting therefore makes it possible to gain flexibility and agility. It opens the doors to all the possible and imaginable skills.
For example, you want to add a touch of artificial intelligence to your current process? This may be possible thanks to outsourcing! Consult with your trusted IT partner and they can connect you with an AI expert, and then manage and subcontract the project for you.
A company often chooses to outsource part of its business to reduce costs. For example, a part can be produced by a supplier at a more affordable price than if the company invested in-house to manufacture it. It can also clean up the balance sheet by eliminating assets and stabilizing cash flow.
Access to expertise
Many companies also choose subcontracting because it gives them access to cutting-edge expertise or technology that they do not have or have in limited capacity.
Strategic use of resources
Outsourcing also allows you to add resources during peak periods, or to reserve them for high-value-added tasks. To achieve this, you need to consider the fundamental mission of the company and the necessity and cost to continue certain activities internally.
Quick adjustment to market
A company may also decide to subcontract when the market is changing rapidly, and it does not have time in the short term to become familiar with a new field. A good example is the high popularity of e-commerce, and the sudden volume of orders to process. Several contractors decided to outsource the processing and shipping of their orders, because they had neither the knowledge nor the human and physical resources to do so themselves. However, they still wanted to take advantage of these business opportunities.
How does technology facilitate outsourcing?
While outsourcing was previously complex to manage due to manual processing of information, technology has greatly simplified and accelerated exchanges.
Management systems also provide a wealth of information for real-time production monitoring. It is also possible to access the status of orders and the level of stock available. In addition, it is recommended to be transparent with your subcontractor, for example by giving them a good overview of the work to come.
In conclusion, outsourcing is not the cure for all ills, but it can be an interesting avenue to explore depending on the specific context and objectives of your business.