outsource software development

Outsourcing 4.0: From Cost Arbitrage To New Untapped Opportunities

In the era of machine learning and RPA solutions, the fact that traditional IT outsourcing models are obsolete is no big news. This legacy, the long-established model used to offer tangible benefits based primarily on territorial price arbitrage.  Although we believe predictions of the downfall of an entire ITO industry are far from reality, it’s evident that the sector is adjusting to new demands and undergoing a major shift towards new operating models. The smartest and fastest outsourcing companies are increasingly embracing the cloud, DevOps, machine learning and AI in a bid to meet new tech standards.

Businesses, on the other hand, are now approaching the choice of third-party contractors from a strategic perspective; there’s a growing understanding that successfully forged partnerships can propel them ahead of competitors.

What ’s shaping up right now is Outsourcing 4.0, which has all it takes to become the hallmark of the 4th industrial era. This new movement in business process outsourcing has a number of key features:

Offshore R&D vs managed projects (fixed price, T&M)

Across multiple industries, companies are starting to leverage R&D outsourcing to gain a competitive edge. In IT, outsourcing is no longer about hiring cheaper workforce; companies, even established industry giants like Google, are increasingly turning to outsourced R&D to get hold of otherwise unattainable technical prowess. The trend towards outsourced R&D has emerged as early as 2004 and has now gained momentum. Most importantly, the trend in itself is an indicator of how influential ITO has become, since, for most companies, R&D is the core of their business. Still, the price remains a decisive factor: most in-house managed projects can’t stand competition to predictable, fixed price outsourced solutions based on T&M model.

DevOps/Cloud and automation

In the past, many enterprises used to cooperate closely with managed service providers, which had offered infrastructure management and end-user services continuously and on a subscription basis. With the advent of cloud services, many businesses are now moving their operations to the public cloud, at least in part.

The reasons behind this are clear – being faced with so many digital era challenges like big data, the IoT, heightened demands towards security and performance, organizations are attracted by cloud scalability and low cost of entrance. In fact, IDC predicts that by 2022 most enterprises will move their operations to the public cloud, whereas, MSPs will end up providing cloud shift consulting and cloud management services to their clients. The majority of businesses known today as IT MSP companies will turn into managed cloud service providers (MCSP), serving as mediators between public cloud and enterprises, says IDC.

Public cloud has also enabled the shift towards agile methodology and continuous development practices, serving as a perfect infrastructure for DevOps. Сollectively, cloud services, DevOps movement, and robotic process automation (RPA) have set entirely new standards for software development and IT operations in general.

Rapid time to hire

It’s no secret that hiring experienced software developers locally takes time not only because of the lack of graduates majoring in math and IT but also, because the best of them are already employed and have to be convinced to leave their current jobs. Such employees are also likely to request six-digit salaries and fancy compensation packages, including (depending on your country of residence) medical insurance and retirement plans. With Outsourcing 4.0 granting instant access to talent pools worldwide, this is no longer an issue.

Offshore team development plan

Outsourcing 4.0 is no longer reduced to just hiring developers: the ITO providers are committed to building dedicated teams from scratch, running their employee documentation, taking care of legal and payment issues as well as motivating them and constantly perfecting their skills. Managing a dedicated software team distributed across different time zones can be an exhausting and time-consuming task, not to mention communication issues and cultural differences. Outsourcing 4.0 lets you choose a cooperation model which includes an offshore team development plan custom-built to suit your needs and requirements.

Leverage mature tech (Web 3.0): AI, machine learning, VR, blockchain

Outsourcing 4.0 is set to meet the market demand for mature tech: as businesses are starting to acknowledge the lack of time, money and expertise to build their own AI, VR, ML, and blockchain-based tools, they are increasingly demanding that their outsourcing partners deliver Web 3.0 solutions and refine their skills. The most client-oriented and competitive ITO industry players have now complemented their offerings with IoT, AI, blockchains and distributed ledger systems that bring enhanced personalization and trustless security only Web 3.0 solutions outsourcing can provide.

So when do most enterprises seek to enter lucrative ITO partnerships? Insiders agree, it may depend on company size – while bigger enterprises may turn to ITO providers instead of running a large managed project in-house, startups may leverage outsourcing when they need to quickly develop and launch an MVP (minimum viable product). In both cases, Outsourcing 4.0, driven by cloud, AI, Web 3.0 solutions and DevOps offers one crucial benefit – faster time to market.  

Outsourcing 4.0 is a powerful asset giving businesses a serious competitive boost, helping them achieve increased flexibility and speed up product development by leveraging mature tech. Today, organizations turn to strategic outsourcing and strive to incorporate this important partnership into their existing business model. There’s a growing understanding that ITO benefits are not just reduced to lower cost: its faster time to market and better quality that add value to successful third-party partnerships, and ultimately, help companies gain the upper hand.

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