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Team outsorcing - near or offshoring?

Adam Sieczkowski

Looking at the current situation in the labour market, it is clear that the human resources deficit in IT specialised companies is continuously increasing. Therefore, it is estimated that nearly half (45%) of all companies are planning on delegating their business activities to outside specialists.


Business landscape

The IT outsourcing services market is constantly growing and developing. According to “Statistica”, the value of the outsourced orders will reach $413,72 bn. by the end of 2021. These numbers indicate the widespread implementation of the IT outsourcing strategy by the majority of the players on the market, which without a doubt contributes to the improvement of the company’s IT systems.

And that`s only the beginning of the optimistic forecast for the IT outsourcing market. According to the Global Industry Analytics report, the value of such services in 2020-2024 will increase another 5% year to year. The increasing demand vs supply gap and a constant shortage of fresh blood in the industry causes companies to gain confidence in outsourcing, going forwards, being the most effective move for their business.

The first question that arises after deciding to follow the outsourcing path is, which type of outsourcing is best for our company? There are many factors one should consider, before choosing the right IT specialised partner. Below there are some examples of aspects that play a key role and determine the highest degree of productivity of such cooperation.

Agile Software Development – Make sure that your business partner applies the agile development methodology based on the SCRUM process, thus taking into account your objectives to avoid unexpected and costly modifications later on. The iterative approach allows for making quick changes to the product at every stage of the project.

Ranking of Internet Websites – When considering a Poland-based agency, firstly I`d check how attractive this location is in comparison with other countries. According to the 7N report “Executive Brief. Outsourcing 2020” Poland is 10th on the list of top IT outsourcing destinations in the world and 4th in Europe. Are you surprised? I`m not.

Modern Technologies – Before starting cooperation with a given company, make sure that the solutions and technologies it offers meet your business requirements and enables the scalability of your venture.

Well-established Achievements – What is the first thing you consider, when choosing a specific product on an e-commerce platform? For most people, it would be the opinions of other customers. Testimonials are something that helps to build trust in the potential seller and eliminate doubt. It is the same for IT outsourcing. Posting numerous customers’ statements on the companies’ websites, allows them to strengthen their credibility and authority.

And what if we were to consider location when choosing an IT outsourcing model? The most common division of outsourcing is the distinction between nearshore, onshore and offshore. Depending on where our company is based, the locations assigned to each category will be different for each business. In the rest of this article, we will focus on presenting the differences between these concepts and listing examples of the potential benefits that each of these solutions has to offer.


Nearshore Outsourcing

Simply put, nearshore is the outsourcing of IT resources aimed at places located in the same local group as the outsourcing company’s headquarters. Outsourcing work within the same cultural crucible undoubtedly has many advantages. This is one of the reasons why American companies outsource work to Canadian, Mexican, or Brazilian employees.

Communication – Soft skills in the IT industry are especially important. After all, the implementation of the project is the responsibility of the entire team and not just a single person. One of the most important advantages of nearshoring over the other models is that there are no cultural, ethical, or time zone barriers in communication and bonding between employees.

Work Ethics – The risk of potential differences in work ethics between countries located close to each other is reduced to an absolute minimum. This is important, as indicated by the list provided by Accenture, as much as 69% of outsourcing transactions fail, with the main reason being cultural differences between contractors.  

Value for Money – It might seem that employing someone from India will involve much lower costs than hiring a Pole. But, for example from the perspective of a German entrepreneur, it may not be so obvious. Taking into account such things as travel, accommodation, diet, or time spent on business trips. It could be concluded that choosing the cheaper option is not so obvious.

Offshore Outsourcing

Offshoring is simply delegating tasks to a geographically distant country. This is most often due to cost reduction. According to Cushman & Wakefield’s data, the current world leader in outsourcing services is India, with a 56% market share, followed by the Philippines with a touch over 40%.

Communication – Based on the IAB Poland report “Consequences of the COVID-19 epidemic for the online advertising communication industry ”, it can be concluded that 60% of respondents indicated an increase in the use of online messaging services and an easier to manage work-life balance because of it. The growing popularity of such tools as Zoom, Slack, Microsoft Teams, or Google Meet is evident, and the constant expansion of the user base means that the distance is no longer a problem.

Work Ethics – Nowadays, it makes no sense to limit yourself to only one region of the world while in search of resources for your company. When choosing a place that suits your company’s business model, focus on the popularity of your language of communication, the availability of raw materials and their costs, as well as the analysis of the local labour market.

Value for Money – This is, without doubt, the best advantage of this outsourcing model. Just look at the difference in earnings between North America and Europe. According to Payscale, a system that collects data on professional earnings, the average salary of a software engineer in the US is $ 70,000 per annum. In comparison to somebody holding a similar position in Canada receiving around $52,000 per annum and in Poland $25,000.

Onshore Outsourcing

The most popular outsourcing model. It involves moving your business to another place within your country. Usually, it`s another city, although it can also mean that the activities will be relocated within the same metropolis.

Communication – In this model, arranging a face-to-face meeting with individual employees or an entire team is the easiest to implement. Rotating in the same time zone gives you the benefit of the general availability of all employees and the unification of their time dimension.

Work Ethics – Cultural differences do not play a role in this case. You do not have to worry about the different approaches of employees to their duties, communication, project implementation methods, or different communication channels. In addition, having the same legal system can significantly facilitate the issues arising when recruiting new employees or dealing with any formal aspects.

Value for Money – This is a solution for companies with headquarters located in large metropolises. The costs of maintaining an office, hiring employees, and services related to it are high. For example, the employer will face higher expenses when opening an office in Warsaw than in Szczecin.
The Bottom Line

The current Polish economy is very dynamic and, with its intensive changes and growing in-house competition, the pressure of companies to continuously improve their effectiveness and efficiency is increasing. As a result, reorganisation and cost reduction are much needed. All these processes are supported by a business strategy called outsourcing. According to data from the Office of Central Statists for 2019, as many as 71% of Polish companies used at least one IT service provided by an external provider.

It seems to be an ideal solution for both small and large companies. No matter at which stage of your business development, outsourcing will save a lot of time and money. Unlimited access to experienced professionals from various fields makes it a tempting and universal strategy for every entrepreneur to consider.