Application Outsourcing Services And It’s Benefits

What is Application Outsourcing?

Applications outsourcing is an outsourcing arrangement for a wide variety of application services including new development, legacy systems maintenance, offshore programming, management of packaged applications and staff augmentation. Application outsourcing in IT is a rather general term for outsourcing processes involving business applications. This can involve many stages of the application life cycle, as well as consulting and related services.

Recent advances like cloud computing have made possible application outsourcing, which gives many businesses the option to delegate the work of building and working with applications to a range of third-party vendors and service providers. Vendors can utilize an "economy of scale" to specialize in certain application work that would be costly and burdensome for companies to source in-house. Modern Internet technologies like software as a service (SaaS) allow for more Web-delivered application handling and other kinds of third-party services. It leads to Reduced Overhead Cost, Reduced Cost of Labor, Freedom from Tools and Technology License Woes, Freedom from Infrastructure and Resource Maintenance Woes and Outsourcing Saves Time, Money and Resources.

In this era of immense intrinsic and extrinsic competition, it is the sole mantra of a business to be innovative, dynamic and the best in class. And to this, organizations need to focus on their core competencies and implement latest technologies available in the market. But no matter, however large and efficient capabilities organizations may have, it may still not be possible for them to implement an entirely self-reliant model that takes care of everything from start to finish. Somewhere, during the conduct of business, there are tasks such as back office, IT, accounts, HR etc that may end up taking more time and inputs than actually companies may prefer. Such important yet time consuming tasks can stall the business growth of an organization.

To meet this challenge, organizations have been now adopting application outsourcing as a new strategy to meet their productivity, growth and bottom line targets. So companies have started outsourcing the bits and pieces in their process model to third party and started leveraging their own expertise while these third parties have the onus of delivering time bound and quality services which added to the overall performance of the final product or services. The trend caught up with the IT industry boom and gradually spread to different services which could be outsourced and later plugged in or used to create value for the organizations.

According to the report ‘Outsourcing: driving efficiency and growth’, published by Grant Thornton International Business Report 2014, around 40% of global businesses currently (or plant to) outsource their business processes. The report also states that IT services is the second most likely function to be considered to be outsourced globally, after tax services.

The bar diagram shows the outsourcing market size trends over the last decade.

Why Companies Should Opt Application Outsourcing Services?

Foremost it is cost effectiveness and time optimization. Companies might not have the required expertise on a particular flow in their process and considering the dynamic business environment, it would neither cost to time effective to ‘home grow’ that talent which reduces their time to market considerably. Organizations consider outsourcing as a strategic incorporation to improve customer service and quality and reduce operational cost and overhead. IT, Finance and Accounting are the major dominant processes which are outsourced.

Here, we breakdown key benefits of outsourcing

  • Cost Reduction
    One of the foremost and probably the most perceived return of outsourcing is reduction of overhead cost. Cutting down cost by outsourcing certain process whose decisions are predicted at the bottom line has a huge impact on the company’s revenue and can yield considerable savings. Most of the times, outsourcing converts fixed expenses into variable costs, in turn allowing to use that capital in core functions.

  • Operational Efficiency
    By outsourcing, organizations get exposure to vendor specialized systems. Specialization helps to improve efficiency and allows quicker turnaround time and helps delivering higher levels of quality. Migrating to an outsourcing partner helps share the workload which in turn gives organizations opportunity to nurture their internal task force for a better talent management and also staffing flexibility. This also allows organizations to focus on re-engineering.

  • Focus on Core Business
    Allocation of non-core activities to a third party allows key resources to focus on primary business task. This is like companies do not have to know it all and can only leverage on their core competencies while letting others do the rest which in turn increases their overall efficiency and performance.

  • Improved Quality and Customer Satisfaction
    Since outsourcing partners have the necessary skill set both in terms of knowledge and workforce, so they can deliver a better job. In time delivery by third party vendors increases the turnaround time to customer and helps provide quality deliverables which enhances customer delight and satisfaction thus increasing to the repeat customer base of an organization. Outsourcing also helps to provide 24x7 customer support in different time zones.

  • Risk Management
    This helps organizations mitigate the risk of unknown technology or platform and continue a hassle free business flow and at the same time make the best use of external expert base to handle certain contingencies. Delegation of some critical flows to an outsourced partner with proven expertise also helps organization provide better and in time customer support and maintenance.

  • Access to External Knowledge Base
    Outsourcing gives organizations the advantage to get access of a huge skilled knowledge base and skilled expertise which would have been otherwise difficult to develop internally. This also gives them access to latest technologies or versions and expertise which might not be cost effective to train internal employees. Or they can also use third party services to learn about new trends and implement them in an optimal way through the outsourced services giving them a competitive edge in their business.

  • Stay in Competition     
    If you are a small enterprise, outsourcing can assist you to level the playing field and give a tough competition to your counterparts and large firms. You can route same efficiency, expertise and economies of scale as the large companies through outsourcing.

    To make outsourcing reap benefits for you, ensure that you chose the right outsource partner. Apart from having necessary expertise in the outsourcing field, the partner should be able to align services with your business expectations, goals, guidelines and framework.

    Outsourcing is no longer restricted to cost saving. Rather, it is a trend that will help you to do things efficiently and quickly.