Outsourcing is the business practice where the production process or service in which the company is not specialized or does not have the resources for internal implementation is transferred to an external company, which has its own resources and infrastructure to carry out the necessary processes and tasks. More and more companies are outsourcing certain aspects of their business by hiring the services of specialized institutions in order to save and optimize costs, improve processes or simply to concentrate on their core business rather than secondary tasks. From 2016 to 2018, Deloitte saw the number of companies using the services of outsourced providers increase from 20% to 49%. According to Statista, the global market size of outsourced services is 92.5 bln. USD. 

Software development is very complicated and involves many processes. Not everyone is able to have their own development team, and in this case it makes sense to hire a third party. This option is used to put the operational technology in the hands of specialists and outsourced professionals. 

Implementing an outsourcing business model brings a number of advantages, but also certain disadvantages, which are important to understand.

What are the advantages of outsourcing?

Cost Reduction 

Often this is the main reason why most companies outsource IT services. When an outside company takes over the IT department or services, there are two main areas in which costs are reduced:  

• Reduction of labour costs. The IT agency has qualified specialists for IT management, which saves the company personnel costs in this aspect (salary, social benefits, costs for further education and other ancillary costs). 
• Cost reduction in infrastructure. Many expenses related to investments and maintenance in IT infrastructure are reduced by working with an external company, which would already have necessary infrastructure in place. 

However, the cost should never be considered as the decisive reason. Otherwise, there is a risk that the quality will suffer because of the cheapness. 

Technological know-how

The IT service provider has access to the best specialists and latest technologies, so the company benefits from the fact that this advantage could hardly be maintained internally. With IT outsourcing, there is a reduction in the risks for IT management, as these are taken over and managed by the service provider.

Business Processes

Software outsourcing enables the company to focus on the core business and its strategies in order to generate added value and keep it at a very competitive level. Outsourcing enables the company to be more dynamic and flexible and to set new corporate goals. This allows companies to devote more time to activities and services that are integral part of their business, while transferring other tasks to more professional companies. 

Flexibility

One of the great advantages of outsourcing has to do with flexibility and adaptability. Market changes are currently happening at breakneck speed and companies are better prepared for them by outsourcing certain services or processes.

What are the disadvantages of outsourcing?

Just as IT outsourcing has the advantages and benefits mentioned, it is also practical to consider the disadvantages of outsourcing.

Confidential Information

First, outside companies are more susceptible to loss of confidential information than in-house procurement. It is important to remember that it is essential to take into account the legal requirements on data protection in order to assign or access personal data.

So it is also vital to choose the right service provider and add confidentiality agreements to the service contracts to ensure data security (avoidance of data theft, disclosure of confidential information and other risky situations involving company information).

Communication

Good communication between different departments of the company is very important. With the outsourced team, such communication can be less fluid, which can lead to a number of misunderstandings. That is why it is so important to hire a high-quality team. The problem of communication with foreign companies cannot be overlooked. In order to avoid the miscommunication and language misunderstanding, look for an experienced agency with specialist staff who can provide outsourcing advice and other services at a high level.

Hidden costs 

Expenses are often generated that have not been discussed beforehand, which cause additional costs. If the IT outsourcing company is in another country, additional costs may be incurred for support calls etc. Reputable company will always discuss such charges in advance.

Why is Ukraine Excellent Option for IT Outsourcing?

In today's market, the IT department has become the core of every business due to the constant advancement and innovation of communication technologies. An efficient IT service can be a huge competitive advantage, so outsourcing the service to a specialized company can be a right decision that brings great benefits. 

After looking at the pros and cons of IT outsourcing, let's discover one of the most popular IT outsourcing destinations. According to various ratings, Ukraine is one of the top ten countries for software outsourcing. Ukrainian programmers were considered one of the best in the world in terms of value for money. The following factors make Ukraine an attractive partner for companies worldwide: 

• Talented developers
• High quality of job 
• Mature IT market
• Competitive prices
• Favourable time zones 
• Geographical location 

The IT industry is one of the fastest growing segments of the Ukrainian economy. It has over 1600 IT agencies providing software development services and more than 20 higher education institutions that train thousands of IT specialists every year. So one can be sure to find a team here that will meet all expectations in terms of expertise, price and the desired tech stack. World famous startups like Grammarly, Jooble, GitLab, Depositphotos were developed by Ukrainian programmers.

Why is it worth choosing our agency?

KennerSoft is an experienced German agency with offices in Ukraine and Germany as well as sales offices in the USA and Taiwan, specializing in web development and integration. Majority of our customers come from Germany, Austria and Switzerland - countries where quality is paramount. We create online shops, web services, B2B portals and marketplaces. We use the following technologies for individual software development: Shopware, OXID, Magento, EspoCRM, KennerPIM and others. KennerSoft offer the highest quality advice and further support for your project. 

Our professional team takes care of the qualitative implementation of your projects with the highest demands on performance, design and user-friendliness, create excellent online shop and also take care of digital marketing. Our references say more about us.