August 01, 2023

Global Reach, Competitive Edge: American Businesses’ IT Outsourcing Strategies Explained 

1. Top 8 reasons why companies worldwide outsource
2. #1 Significant cost savings
3. #2 IT talent pool expansion
4. #3 Internal workforce reduction
5. #4 Business conditions improvement
6. #5 Digital transformation stimulation
7. #6 Development acceleration
8. #7 Access to project management expertise
9. #8 Faster time-to-market
10. What American companies outsource their software development
11. Google: the leading multinational company
12. Slack: the workplace communication platform
13. GitHub: the cloud-based software development platform
14. How effective IT outsourcing can be: a calculation example for the US and Eastern Europe
15. Tips for choosing a suitable IT outsourcing vendor
16. Final thoughts

The idea of outsourcing may appear daunting to some businesses as there are many concerns about complexity, costs, and time investment. However, the reality is that software outsourcing has emerged as a game-changer, elevating overall quality, driving cost efficiency, and enabling companies to focus on core priorities.

This is especially true for small-sized companies and startups that are forced to compete with large enterprises for technical talent. Just think about it: the average base salary of an entry-level software engineer in the US starts from $67.000 per year. These are sizeable amounts even for enterprises.

That’s why, according to a recent survey, 68% of American businesses delegate their tasks to third-party vendors. Moreover, the IT outsourcing segment is set to surpass $156 billion in 2023. But there is enough with statistics.

In this article, let’s see why leading American companies often outsource their development to other countries, explore telling examples, and even calculate your savings. Keep reading!

Top 8 reasons why companies worldwide outsource

Each company pursues its goals when choosing to outsource its software development. For some, it’s crucial to save their money while others are willing to streamline their time-to-market. To be concise, we will rely on the Statistics Brain research institute and its survey. So, why do actually American companies outsource programming jobs?

• Cost savings — 44%
• IT talent pool expansion — 34%
• Internal workforce reduction — 31%
• Business conditions improvement — 28%
• Digital transformation stimulation — 22%
• Development acceleration — 15%
• Access to project management expertise — 15%
• Faster time-to-market — 9%

Below, let’s consider each aspect in more detail.

#1 Significant cost savings

Maximizing value while minimizing costs is an essential principle to embrace. When it comes to outsourcing, the ability to achieve significant cost savings stands out as the top motivator for companies. A striking 44% of respondents concur, recognizing that outsourcing offers a more affordable alternative to hiring and training new employees for short-term projects. Moreover, outsourcing partners are equally capable of delivering the high-quality products and services that businesses seek.

For example, an average annual iOS developer’s salary in the US is about $109.000 while the same position in Poland is approximately 13.000 PLN (~$38.000 per year). And that’s only one position, at the same time one project can require three or more technical specialists. Calculate how much you can save on your own.

#2 IT talent pool expansion

The global consulting firm Korn Ferry predicts that over 85 million jobs could remain vacant due to a severe shortage of qualified individuals by 2030. One of the most significant challenges companies are anticipated to face in the coming years is the scarcity of tech talent. As daily headlines highlight the growing dominance of robots, machine learning, and artificial intelligence in the workplace, organizations find themselves grappling with the difficulties of adapting to this new paradigm. The need to bridge the talent gap has become more crucial than ever to navigate the evolving landscape successfully.

Here’s where dedicated team services come in handy. To learn more about this option, look through our article.

#3 Internal workforce reduction

When all tasks are kept in-house, the available manpower becomes limited. After all, this poses challenges in managing multiple ongoing projects or handling pending ones. However, by leveraging external assistance, additional hands can be brought in to address these projects. This will allow you to free up internal employees who would have otherwise been constrained and focus on critical core competencies.

#4 Business conditions improvement

Proper delegation goes hand-in-hand with the concept of minimizing distractions. By alleviating the pressure of completing all projects simultaneously, you gain the freedom to redirect your focus toward other critical initiatives. Consequently, not only does your production rate soar with a higher number of projects delivered, but actively engaging with customers and addressing their needs generates a positive perception of your company. This virtuous cycle of delegation and customer feedback creates a substantial net gain.

#5 Digital transformation stimulation

Digital technologies hold the key to unlocking the next phase of modern business. However, for many organizations, the transformation process is an ongoing journey. By embracing outsourcing, you can fuel your digital transformation initiatives with a fresh labor pool of talented professionals. This enables a strategic realignment of core competencies and a dedicated transition from traditional business practices to modern digital activities. Outsourcing becomes a catalyst for driving business transformation, propelling your organization into the forefront of the digital era.

#6 Development acceleration

When you entrust a project to an outsourced company, its sole focus revolves around successful completion. This undivided attention is not always guaranteed with in-house teams, who often juggle multiple projects and competencies simultaneously. By engaging a dedicated outsourcing team for a specific project, you can expect faster turnaround times and heightened efficiency.

#7 Access to project management expertise

Working at outsourcing companies, employees bring a wealth of experience to the table, with years of software development expertise under their belts. Their extensive background in handling numerous projects for diverse organizations equips them with invaluable management skills. This wealth of experience becomes a significant asset in a partnership, as their seasoned expertise and adeptness in navigating complex projects add tremendous value.

#8 Faster time-to-market

Software development can be a time-consuming process, particularly when it comes to resolving bugs and addressing code intricacies before a product launch. This tedious and often frustrating aspect can significantly delay time-to-market. However, by engaging a dedicated outsourcing team for your project, you can drastically reduce the overall time it takes to complete development. The specialized expertise and focused efforts of the outsourcing team expedite the debugging and refinement process.

What American companies outsource their software development

Many prominent American companies have recognized the advantages of outsourcing and have chosen to collaborate with external partners to enhance their development capabilities.

Google: the leading multinational company

The remarkable success of Google is undeniable, with staggering revenue figures that continue to soar. Behind this achievement lies a lesser-known secret: Google’s seamless operations were ensured through IT outsourcing services.

In 2011, Google made a strategic move by outsourcing 1,000 AdWords support jobs to call centers spread across different corners of the globe. This initial foray into customer service outsourcing set the stage for further developments. Subsequently, in 2014, Google solidified its commitment to outsourcing by partnering with Globant, a Latin American-based technology services provider. This nearshore outsourcing collaboration proved instrumental in the successful development of Project Ara and its associated software.

Slack: the workplace communication platform

Slack is widely recognized as a leading workplace communication service. On the other hand, it stands as a shining example of the benefits of outsourcing app design. They entrusted the creation of their logo, marketing site design, and web and mobile apps to a reputable agency based in Canada. The outcome? A streamlined and visually stunning product that has set Slack apart from its competitors.

GitHub: the cloud-based software development platform

This renowned platform for collaborative open-source coding has made a significant impact in the tech world with its thriving community of over 100 million users. However, before achieving this remarkable feat, the company faced a crucial challenge: designing its website.

To bridge the skill gap and ensure a strong foundation, GitHub made a strategic move by hiring Scott Chacon as a consultant to develop the backend of their website. This decision exemplified their software outsourcing strategy, enabling them to tap into the expertise of an external professional. The result was a robust and reliable backend that laid the groundwork for the platform’s growth. Since its establishment in 2007, GitHub has hosted an impressive 330 million projects, a feat made possible by the solid website infrastructure from the outset.

You also might be interested in how to choose an appropriate IT outsourcing model.

How effective IT outsourcing can be: a calculation example for the US and Eastern Europe

To let you independently verify the cost-effectiveness of software development outsourcing services, we decided to make a calculation example. Here, we compare salaries in the case of appealing to technical specialists in the US and our team. The Coreteka Driver App project was selected by way of illustration.

To finish a similar project, you will require:

• Middle UI/UX designer (200 working hours)
• Middle project manager (500 working hours)
• Middle Android developer (700 working hours)
• Middle business analyst (200 working hours)
• Middle QA engineer (120 working hours)

The approximate project duration is about 4 months, with 1730 working hours for all the team required.

Let’s calculate your savings with an outsourced software development team in Europe in comparison with hiring professionals in your country. The figures are provided based on the project estimation.

Position	In-house USA, $	Coreteka, $
UI/UX designer	8,600*	5,000
Project manager	34,000*	12,500
Android developer	49,000*	24,500
Business analyst	10,400*	8,000
QA engineer	6,760*	2,400
Total:	108,760	52,400
Your savings: $56,360 per project

*The project estimation for the USA was calculated based on average hourly rates from Talent.com. The calculation is current for August 2023.

Take into your consideration that maintaining a team is not only about salaries. This includes onboarding, HR service, financial assistance, providing office workspace, and so on.

We also haven’t specifically included tax burdens because each country provides different conditions. With Coreteka, you can independently choose from which destination, like Poland or Ukraine, to hire technical specialists. This brings you more space for financial planning.

Need to outsource your software development needs or do just want to get a detailed calculation for your project? Drop us a line.

Tips for choosing a suitable IT outsourcing vendor

There is no perfect option for each company because every business has its own challenges and tasks. However, we recommend you consider these factors:

1. Core services cost. Outsourcing work to a foreign country offers significant cost advantages compared to a local company in the United States. While native IT service providers can gain you a sense of familiarity due to sharing the same location, it does not guarantee superior outcomes compared to more affordable alternatives. To make an informed decision, it is essential to analyze the cost benefits and savings associated with local, nearshore, and offshore outsourcing companies. Factors such as labor costs, communication expenses, remote team management, and facility requirements should be carefully considered.
2. Talent pool available. While the United States may be facing challenges in meeting the demand for skilled team members, other countries offer an abundance of talent. It is essential to thoroughly assess the size and quality of the labor pool to ensure that the outsourcing partner can provide highly skilled professionals who align with your teaming approach.
3. Time zone and cultural nuances. Ensuring smooth and efficient collaboration with your outsourcing partner requires careful consideration of communication and cooperation capabilities. Factors such as the time zone difference and cultural alignment can significantly impact the working relationship. Regardless of the chosen outsourcing destination, it is crucial to establish a high level of interaction, constant collaboration, and real-time communication and information exchange to facilitate the seamless progress of your project. By prioritizing effective communication channels and fostering a collaborative environment, you can overcome any potential hurdles and ensure successful outcomes.
4. Technical skills. Ensuring the availability of technical skills is a crucial factor to consider when evaluating potential outsourcing companies. It is essential to partner with a company that possesses specialized skills covering various fields relevant to your company’s work. This ensures that your project is entrusted to capable hands and guarantees the delivery of work that meets your expectations and specifications. By verifying the technical expertise of the outsourcing companies you approach, you can have confidence in their ability to successfully handle your project and deliver the desired outcomes.
5. IT infrastructure development in the selected country. The quality of work provided by an outsourcing partner is significantly influenced by the level of investment and support their country dedicates to the IT industry. It is crucial to ensure that the chosen outsourcing destination has a well-established commitment to investing in the IT framework. This investment plays a vital role in determining the level of development and resources available to potential IT partners.
6. Confidentiality and data protection. Staying informed about the state of legislation in potential outsourcing countries is vital, particularly in areas related to intellectual property protection, data privacy, and copyright, trademark, and patent laws. Being up-to-date with the legal framework of the countries you are considering for outsourcing helps safeguard your intellectual property rights and mitigates potential risks associated with data breaches or unauthorized use of your proprietary information.

As you can see, plenty of decisive factors depend on outsourcing location. That’s why you should familiarize yourself with our overview of the best countries to delegate your IT tasks.

If you’re still in search of a reliable IT service partner, consider Coreteka. We’re technical experts with over 6 years of experience in the logistics, retail, and agriculture domain. Our team can cover various development spheres, such as web, mobile, and custom software development. When collaborating with us, you can also rely on business analysis, design, and project management support. Currently, we have offices in Poland and Ukraine, going to expand our presence.

Final thoughts

Software outsourcing has proven to be a game-changer for companies. This approach offers benefits like cost savings, access to a wider talent pool, and accelerated development. American companies, in particular, have embraced outsourcing as a strategic approach to overcome challenges and enhance their development capabilities.

Prominent American companies like Google, Slack, and GitHub have successfully utilized outsourcing to achieve their goals and drive innovation. They have leveraged the expertise and resources of external partners to enhance their operations, design captivating products, and ensure efficient project delivery.

We’d love to hear from you! Drop us a line if you would like to get a detailed project calculation, check out our prices, or just have a nice chat.