The year 2019 has changed outsourcing as we know it. With the advent of cloud computing and artificial intelligence, outsourcing is no longer confined to software development and human resource activities.
We live in a time when the individual needs of companies have become more specific and call for more personalized business solutions.
Outsourcing is on the rise because it allows for hyper-specific, tailored solutions that can meet any client’s requirements. As per research, the global outsourcing market reached around $85 million in 2018, and this figure has been on the rise ever since. 65% of these companies have been outsourcing their business processes since 2017.
In this post, we will be discussing outsourcing in detail, with a special focus in Latin American markets.
Why does the term ‘outsourcing’ entail?
The umbrella term, ‘outsourcing,’ is as extensive and broad as you want it to. Companies can outsource anything and everything—if doing so has cost and resource benefits.
Some of the most commonly outsourced business functions are as follows:
Accounting and finance tasks:
Accounting is one of the most resource-intensive and time-consuming tasks for any business. It requires accuracy, precision, timely delivery, and compliance with regulatory frameworks. If accounting is your core area of expertise, you’ll have to hire a fully-fledged accounting department—which is not always financially viable.
Other than that, most accounting processes are basic and don’t hold as much value in terms of revenue generation, as opposed to something like financial analysis. So, it’s very beneficial to outsource basic tasks like tax reporting, bookkeeping, and payroll.
This allows your in-house accountant to use their time and resources to focus on budgeting, financial analytics, and decision-making.
Hiring, recruiting, and training employees take up far too much time. Filling up a single vacant position triggers a chain of sequential events. You need to place an advertisement across multiple channels, screen hundreds of applications, conduct assessments, and interviews, carry out reference checks, and then train new recruits. Other than being highly time-intensive, all these processes also lead to companies to incur high costs.
Outsourcing this department is especially important if your turnover ratio is high, and there’s a need to hire new recruits every now and then. Your in-house workforce can focus on making business operations better, while the outsourced team will cater to HR functions.
Outsourcing digital marketing is less about controlling costs and more about expertise. Digital marketing helps your brand get its message across to the right target audience. If you’re a small business whose core area of expertise is confectionary, you most likely won’t know much about SEO and online marketing channels. This is where outsourcing comes in.
Since digital marketing agencies have vast experience in working for a wide array of industries, they know how to devise winning marketing strategies. Their expertise includes social media management, media planning, web content, brand management, web analytics, and public relations. For the most effective results, choose a nearshore agency so they’ll able to understand your target market better.
Not only is IT one of the most commonly outsourced business functions, but it’s also a highly diversified one. IT is not a core business activity. It’s not something you can easily train your in-house team to deal with. It takes years of coding experience, expensive infrastructure, and knowledge of the latest trends to manage all IT needs.
Further benefits of outsourcing IT functions will be discussed in the latter part of this post.
The lowdown on IT outsourcing
Here is a list of the most commonly outsourced IT functions:
Application development:According to a report by Forbes, the future of retail is not brick-and-mortar, but mobile. The same study also suggests that 53% of our daily purchases are digitally influenced. To keep up with this change in consumer paradigms, businesses are investing in mobile applications.
What was considered a point of differentiation once, has now become a point of parity. To keep up with market competition, businesses need to be accessible via the Play Store and the App Store. These apps could be both mobile and web based.
Web Development Services:The World Wide Web has given birth to the concept of E-commerce. E-commerce refers to engaging in business transactions online and facilitating your customers to make purchases from the comfort of their homes. For this, you need a user-friendly website that supports these transactions.
Web development refers to designing a website for any business. Your web designer can perform several tasks ranging from designing a single webpage to designing complex web applications. They also deal with all the technical aspects of your website, including the functioning capacity, speed of processes, and the amount of user traffic it can handle.
IT staff augmentation:Over the last few years, IT staff augmentation has been a widely used buzzword in the world of software. It refers to a staffing strategy through which you outsource IT staff for specific business objectives and goals. This way, you can extend your existing workforce without paying their monthly salaries.
You’ll only pay the vendor and they’ll take care of all other costs and expenses. All the staff belong to the vendor and work on your projects from the vendor’s office facility. You get to choose the exact skillset you want and the time duration you want them for.
Is IT outsourcing worth the hype?
The benefits of IT outsourcing are endless, we have listed down the ones that are the most important:
To understand how outsourcing helps you save costs, you first need to consider all the costs that are associated with IT functions.
To begin with, you need the latest software and coding platform. The software should not only have all the necessary updates, but the latest features too. In order to do so, you need to pay for licenses and other rights of usage.
Then comes the training part—each organization uses a different software development platform. If you have a new developer on board, they might not be well-versed with the software that your team has been using. To train them, you will have to pay for external trainers and consultants and arrange for them to carry out regular lessons—extra time and costs.
Let’s come to the infrastructure now. Having an in-house software team means you need to have a full-fledged office facility for them. This includes workspaces, office equipment, access to the internet and other resources, and computers. And let’s not forget the costs associated with power and energy. You also need to pay for data servers to store all your information.
In the case of outsourcing, it’s up to the vendor to take care of all the infrastructure needs. You only pay periodic charges that entail all the services.
We’ve already discussed how software development might not be every business’s forte. Now, let’s talk about what happens when a software system goes down. Your business can’t afford to sit idle for hours until the issue gets resolved. At the same time, not every business can afford to have a backup data recovery and technical support team that will fix the issue immediately.
On the flip side, a nearshore IT outsourcing company has all the resources and expertise to deal with connectivity issues and system outages. They have the people who know how to reduce downtime and get the work done as soon as possible. Since they are a professional group of IT specialists, they don’t always need external help to ensure the smooth functioning of the systems.
From carrying out your IT tasks to taking care of all the system updates and dealing with everything that can go wrong, nearshore companies have a lot more expertise than your in-house staff.
Businesses outsource tasks when they feel like their own IT practices aren’t yielding the desired results. Research has proven that in most cases, IT outsourcing has led to higher service quality, more innovation, and a more professionally managed final product.
The reason they can pull off higher levels of innovation is a higher budget and a pool of highly skilled professionals. Working for a diverse set of companies gives them the experience and exposure that your in-house team will never have.
Years of working on varying levels of challenging projects gives them more practical insights into how things are taking place around the world. This is especially true for nearshore developers. Since they work for clients from different countries, they have rich knowledge of what makes a project successful globally.
Why you should choose a nearshore outsourcing company?
When you choose an outsourcing service, you’ll find yourself facing two basic options:
- Offshore companies
- Nearshore companies
Here’s why it’s easier to join hands with a nearshore service. Here’s why:
Proximity affects your relationship with a company in a myriad of ways.
One of the biggest benefits is time. If your outsourcing vendor is located on the other side of the globe, it won’t be easy for you to coordinate with them, given the massive time differences. When the time difference exceeds 12 hours, you’ll find it hard to catch up on project details, deadlines, and instruction.
Either you or someone from your team will have to stay up all night to coordinate and convey instructions. If you fail to do so, the communication will be affected, and the project objectives might not turn out as you expected them.
Another benefit that proximity brings to you is that of language barriers. As you move far away from your country of origin, the differences in language increase. Other than just the basic language, the dialects also differ. This makes it hard for both the client and agency to coordinate. In the case of nearshore outsourcing, all sorts of language barriers can be eliminated.
Understanding of the culture
If you have a nearshore outsourcing company on board, you don’t need to start explaining your culture from scratch. It’s more relatable for them to understand your target audience, their buying patterns, shopping preferences, and online interactions. They’re aware of the media channels that people in your geographical jurisdiction use—and the effective ones.
As for the language, they know the kind of web content that sells—the kind of web content that your audiences can relate to. In other words, they’re more aware of things that are happening in your country compared to an offshore agency sitting thousands of miles away. This makes it easy for them to use more relevant language and features in the application and software that they develop.
For obvious reasons, nearshore services will cost you a lot less compared to offshore outsourcing. This is because there is less effort on the part of the nearshore company. They don’t have to go extra lengths to stay awake all night to correspond with your team or invest time researching your country’s culture and values. Please note that hiring sales personnel that serve night-duties is a lot more expensive than having employees who come in during the day.
The nearer you are to your outsourcing agency, the easier it is for them to reach out to you and get your work done on time. On the flip side, being far away means the company will have to put in extra resources and effort—both of which will reflect in higher bills.
Also, let’s just not forget the inflationary pressure that’s brought about by currency exchange rates. Exchange rates of countries that are geographically nearer are not as drastically different as the same for a country that’s far away.
Why choose Latin America?
It is no secret that Latin America is the hub of emerging IT activities. The region is home to a vast pool of highly qualified IT professionals that excel in all possible IT functions. Over the last 15 years, their internet-using population has grown by over 1644%—that’s saying something! Furthermore, their universities have been increasingly introducing robust IT programs that are aimed at adding to the IT knowledge base of the region.
Here are some more benefits:
As per a report by the IMF, economic activity in Latin America is on the rise, as we speak. All of this has led to an abundance of technical talent. Even most online freelancing websites are dominated by developers from Latin American countries. By the year 2040, these tech opportunities are expected to rise by 12%. These tech opportunities include those related to data science, artificial intelligence, and software development.
Let’s talk about the workforce. You’ll be surprised to know that around 163 million people are between the ages of 15 and 20! This means that there is a huge potential of producing a greater skilled workforce there.
Similarities to the American markets
As discussed earlier, finding the right cultural fit is very important when it comes to outsourcing. The people in Latin America are highly proficient in the American way of speaking in English. Their English language skills surpass those of people hailing from India, China, and other Asian regions.
Following President Obama’s call for expanding higher education exchange programs, Latin America has been increasingly investing in English language courses. This has enabled their students to pick up on skills from an early age.
Speaking of culture, both the USA and Latin America get their influences from the European civilizations. Other than the everyday lifestyle, business approaches and work ethic is also a lot similar. This makes it easier for them to collaborate.
The people of Latin America are a lot more assertive in their work behavior compared to their Asian counterparts. They take employer/subordinate relationships very seriously and go by existing hierarchies. This manifests in their work. They use hierarchal status to clarify job descriptions and their corporate culture. This trait is also common among the people of the USA. On the other hand, Asians are quite the opposite.
As a US-based business owner, you’d find it easier to relate to the workplace practices of the Latin Americans in comparison with the Asians.
If you’re on the lookout for a nearshore software development company in Costa Rica, look no further than EX² Outcoding. Some of our most commonly sought-after services include web and mobile development, IT staff augmentation, Microsoft Dynamics solutions, QA automation services, and software development.
No matter what the scale of your business is or what your requirements are, our IT professionals will deliver the right results. Contact us to learn more about our services.