IT Outsourcing: Everything You Need to know about 


IT Outsourcing has been the buzzword for decades and it’s only getting more popular. It’s almost annoying for those who have heard it over a thousand times, and puzzling for those who don’t really know whether or not it is the right option for them.

Love it or loathe it, outsourcing has become a permanent feature of the business toolkit.

It is also the reason we get to see new small businesses belting out absolutely ridiculous growth rates.

What is IT Outsourcing?

IT outsourcing is a strategic approach that involves enlisting the help of external service providers or companies to handle specific information technology tasks and functions on behalf of a business. These tasks can range from software development and technical support to infrastructure management and other IT-related activities. By outsourcing these functions, businesses can redirect their focus towards their core competencies while tapping into the expertise and specialized skills of external professionals.

Over the past decade, companies have increasingly started to hire outside of their company. This paradigm shift, fondly known as “outsourcing” is today an inseparable part of the business toolkit.

IT outsourcing involves sub-contracting certain IT functions to independent, third-party establishments or individuals, instead of keeping those functions in-house.

For example, a small business might outsource its IT to a third-party because it is cheaper to do so, rather building its own in-house IT team. Sometimes, an organization may even outsource all of its data storage needs because it does not want to buy and maintain its own data storage devices.

Generally, large organizations outsource only a portion of Most large organizations only outsource any given IT function. Nevertheless, they choose only the top partners to work with, and for decades, India has held the top spot for most preferred outsourcing destinations.

Top IT Outsourcing Companies in India

In a recent survey, 80% of American and European firms ranked India as their most preferred outsourcing destination. NASSCOM also reported that almost half of the Fortune 500 companies choose to outsource software development to Indian outsourcing firms. Despite the rise of many other outsourcing destinations such as China, Philippines, Mexico & Ireland, India has managed to outmaneuver.

Few of the major reasons being:
  • India has the largest technical and professional talent pool in the world
  • India offers flexible pricing options
  • India provides consistent high quality services
  • India boasts of the best in infrastructure and technology
  • The Indian Government is stable and offers attractive IT policies

Naturally, the outsourcing market in India is quite a mature one with several different outsourcing models and companies to choose from. Each one offers a unique set of features that satisfy different requirements.

However, skimming through thousands of websites of IT outsourcing companies before boiling down to one can be quite a challenge.

Our comprehensive list of the top 10 IT outsourcing companies in India will guide you through this perplexing situation.

In a recent survey, 80% of American and European firms ranked India as their most preferred outsourcing destination.

How To Select the Best IT Outsourcing Company?

Today, IT outsourcing is much more than just a cost-centric decision. It is a strategic decision that requires careful analysis and evaluation of a wide range of considerations beyond costs in determining the best suitable outsourcing model and partner.

The ultimate goal of any outsourcing partnership is to select the partner who will help you yield the maximum strategic benefit—combining the best talent, cost structure, infrastructure, etc.—at the minimum risk.

Below are a few factors that will help you select the best outsourcing partner for your company.

  • What’s your requirement?
  • What is your budget?
  • What skills do you already have? What skills will you need?

Evaluate the Type of IT Outsourcing Model Ideal for Your Business Needs

Outsourcing is a highly evolved strategy today. It comes in several models that offer numerous benefits, some of the key among them being – access to high-level programming talent without hiring hassles. faster time to market, lower costs and more time to focus on core competencies.

However, organizations can only completely take advantage of these IT outsourcing models if they select the right model. In fact, the wrong choice can leave you worse off than before. Most business are wary of IT outsourcing for the risk involved and therefore, end up hiring in-house which may be an even bigger mistake. On the other hand, some businesses rush into outsourcing arrangements without considering some critical factors before jumping the gun.

The section below gives you a lowdown on the various models of IT outsourcing to help you solve your dilemma.

Various IT Outsourcing Models

Freelancers Fixed Price Outsourcing virtual development center
Model Description With numerous platforms
available today to hire a
freelancer - it's very easy
for business owners to
just hop on to these
platforms to hire the
available talent
Fixed-price Outsourcing
is a single-sum contract
where the service provider
is responsible for completing
the project within the agreed
sum set out in the bond.
VDC is a custom engagement
model for growth-focused SMBs
in which you can set up your own
extended team that helps leverage
all the benefits of outsourcing while
giving you complete charge of your project.
Time to get the right developers 1 Day - 2 Weeks 4 - 12 Weeks 1- 12 weeks
Pricing Models $500 - $1,000 $600 - $1,099 $899 - $1,299
Project failure risk 4 Out of 5 3 Out of 5 1 Out of 5
Quality Guarantee 2 Out of 5 3 Out of 5 4 Out of 5
Note This model works on a
low cost, short-task to-
project basis style of work.
It can be an effective choice in
cases when requirements,
specifications and rates are
highly predictable, otherwise
the costs can keep fluctuating.
This saves SMBs the hassle of
investing in expensive and extremely
time-consuming process of recruitment,
training and retention. Thereby giving
SMB owners the bandwidth to focus on
the core business needs.

What would it Cost You Across the Globe?

Although small business owners are almost always optimistic about their hiring plans, they aren’t as confident about filling them with the right candidates.

In fact, most small business owners state hiring as one of their biggest challenges, mainly because of the following reasons:
  • Scarcity of local talent
  • Competing with larger organizations for the same talent pool
  • Expensive hiring processes and salaries

As a result, many organizations look to cast a wider by outsourcing projects to experienced offshore developers. However, the increasingly expanding and chaotic outsourcing marketplace makes offshoring a daunting task.

India has been a hot favourite outsourcing destinations thus far. However, other nations like China, Philippines, Indonesia, Vietnam, Sri Lanka and other east European countries are soon catching up. Other upcoming outsourcing destinations include Argentina, Mexico and Brazil in Latin America.
Apart from these, Africa and Australia are the newbies on the block.

Essentially, the outsourcing rates across regions vary depending on 3 main factors:

  • Location
  • Experience
  • Team Size

For example: If you consider outsourcing to countries in North America that have of highly skilled but scarce labour, the cost is likely to be high. Likewise, if you select a premium or an expat vendor who specializes in a niche technology, the outsourcing costs tend to be much higher as compared to hiring a freelancer.

On the other hand, if you outsource to outsourcing hot-beds across the globe where there is a lot of talent, the costs are bound to be low.

n either case, every client must find and engage with an offshore vendor that is right for their individual needs, personality, style, work and of course, budget to succeed in offshore development. Since every project is unique with its own requirements and challenges, it is best to have a discussion with the relevant stakeholders first and then narrow down to the best-suited vendor and geographical region for your outsourcing needs.

Here is a glimpse of the global outsourcing scenario based on experience levels- Learn more.

What Mistakes to Avoid While IT Outsourcing?

Nowadays, the secret ingredient for the success of most start-ups and small businesses is selecting the right IT outsourcing partner. Outsourcing custom software development to the right partner doesn’t just reduce costs but also decreases the workload on your employees.

Although most organizations have figured out a way to leverage this tool effectively, there are still some significant blunders that are made while outsourcing, which can result in outsourcing failures, additional costs, and time loss.

Therefore, it is crucial to be aware of possible traps and have strategies in place that will enable you to avoid them

So, here’s a list of the top 5 mistakes that you must avoid when choosing a software development outsourcing company:

Mistake #1: Lack of research

Mistake #2: Unclear requirements & miscommunication

Mistake #3: Outsourcing to companies that are not in sync with modern trends

Mistake #4: Lack of basic technical know-how on your end

Mistake #5: Underestimating Quality Assurance (QA) or Testing

Are you making any of these mistakes? It’s high time to fix them.

How to Ensure Successful IT Outsourcing?

Outsourcing isn’t new, but, by now several organizations have accumulated enough experience to use this provision more effectively. Certainly, the cost-saving motivation is still significant.

The cost for offshore developers can be less than half of what their domestic equivalents can be. Nevertheless, to get those savings, you have to know how to work with the outsourcing vendor.

The below aspects when combined with 4 factors will ensure success of your outsourcing arrangement are:

Effective Communication

Seamless communication is the key to a successful outsourcing relationship. To give you an example, imagine a scenario where there was a gap in communication between the pilot of your airplane and the air traffic control. Even the slightest miscommunication in this case can cost lives. Similarly, if the communication between the outsourcing vendor and the client isn’t effective, the client is bound to waste resources on something he did not want in the first place!

It is especially very easy for distributed teams to fall into communication traps that shift the project away from its goal. Therefore, distributed teams should take proactive efforts to ensure a smooth communication process.

Flawless Project Delivery

The success of a project delivery is based on getting the delivery process mechanism as finely tuned as possible. A smooth project delivery mechanism ensures that you’re performing at your peak and are delivering to your clients with the highest standards of quality and executional excellence.

To ensure a successful project delivery, you can follow the 6 key steps.

Efficient Project Management

For the above mentioned excellence to be achieved it is necessary to first have a robust project management system in place. Although post-its may seem like they’re enough to small business owners, running any business is no cakewalk.

Moreover, the project management tools these days do not even require a heavy investment for managing projects effectively.


Strong business partnerships have helped several small business flourishes beyond their imagination. Moreover, it is being called as the most critical tool for business success today. Nevertheless, some organizations will always have excuses -

“These outsourcing models won’t work anymore.”
“This doesn’t apply to my industry.”

But what they must remember is that IT Outsourcing isn’t a fixed strategy. It’s a mindset.

If you’ve been waiting for just that push, let this guide be your starting point.

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