Outsourcing Trends And Engagement Models: Which One Is Right For Your Business

Offshoring and outsourcing are now quite established phenomena that businesses have used for decades. Companies have adopted offshoring for several reasons. It allows companies to operate more efficiently, and at a lower cost. Rapidly developing companies can ramp up faster with an effective arrangement with outside consultants and vendors. One of the most obvious benefits is that of a leaner business model. However, business processes and technology have become more complex, more digital, and more competitive and the outsourcing industry has also witnessed many challenges and emergent trends. Here are some recent developments that has changed the face of offshoring practices.

Offshoring Value-Added ServicesA recent study shows that most organizations offshore back office processes and other value-added tasks. They choose to offshore these for two reasons:

1. Quality of work from offshore partners2. Savings on operational costs

Owing to this, offshore service providers now offer a whole gamut of services apart from the conventional ones to include more value-added services like creatives, graphics, web development, marketing, payroll, accounting and so on.

New Offshore Locations EmergeThere are several new locations and countries that have become offshore hubs now, especially in locations like Asia and Latin America. With more options to relocate services, organizations now see higher gains and opportunity to scale up. India, China and Malaysia continue to remain popular but newer locations like The Philippines have emerged to be highly popular in recent times.

Increasing Use Of Collaboration ToolsThe use of productivity and collaboration tools has seen a tremendous rise in the past few years, thanks to offshoring. Constant communication and better team-work are the cornerstones of an offshore initiative and technology is playing a more important role than ever in doing so.

Entrepreneurs Invest In Outsourcing or OffshoringMany people have recognized the potential of outsourcing or offshoring as a lucrative business and are setting up offshore centers providing value-added services and back-end processes. Companies are investing in offshore centers that provide data entry services, BPO centers, seat and employee leasing, office space, Recruitment Process Outsourcing, accounting and so on. The trend to outsource ASP.NET development is also on the rise.

Delivery ModelsWhile the popularity of outsourcing and offshoring is not about to wane in the foreseeable future, it is important to select the right engagement model for your business purposes.

Here’s a brief introduction to some of the most popular models for outsourcing.

1. Fixed Cost ModelThis is one of the most popular business engagement model chosen by most clients. It is mainly used for projects or processes that have a clear and definite outcome. The workload is estimated correctly and thus the project hours are billed correctly. It is ideal for scenarios when the scale and specifics of the software development project are set in stone (more or less).
2. Time And Material ModelIn this model, clients pay for the hours used up on an assignment, as opposed to specific services that are described in fixed cost projects.

This approach is useful when the total effort can’t be predicted in advance and the scope of work may alter at some point in the development course. The development work is billed at regular intervals in the build/development cycle.

3. Dedicated Hiring ModelDedicated hiring model allows clients to hire skilled employees for the project or development and meet their requirements. This model is used for medium to long-term projects. One of the primary benefits of this model is the access to dedicated teams and skilled experts for your ongoing requirements.

4. Hybrid ModelHybrid model uses a combination of approaches for billing, allowing the customer to benefit from different pricing models at different stages in the development. A project may start with time and material approach and gradually evolve to a fixed cost or dedicated team pricing. This model often uses principles of Agile method.

SummaryIt is important to establish clear and open communication channels with your outsourcing partner and choose the engagement model/models that is a good fit for your business. As the market evolves and businesses transform digitally, so do the offshoring and outsourcing processes. What is your experience with outsourcing? We would like to hear your views in the comments section below.

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