Top reasons why American companies outsource

Anastasiia Vlasova
Marketing Manager
Nov 29, 2018 4 min read
Team Extension
Team Extension Nov 29, 2018 4 min read

In 2016 Global Outsourcing Survey by Deloitte, 78% of respondents stated that they feel positive about their outsourcing relationship.

Living in the 21st century you obviously have heard a lot about pros and cons of outsourcing as a global phenomenon. Despite all the controversies, the companies in the USA as well as all over the globe, race for the efficiency and ultimately re-evaluate every strategy opting for the best format to generate their ROI and make their customers happy. Organizations of different sizes and capabilities take up software development outsourcing or offshoring for diverse reasons depending on their business vision.

The companies outsource because:

  • Business structures get an access to a vast pool of talents globally, often not available internally
  • A substantial cut of the operational and labor expenses with cheaper and efficient human capital
  • Efficiency with a focus on the core business activities by delegating additional and difficult-to-manage processes to the industry-oriented professionals
  • It’s a viable chance for expansion to new market areas and getting closer to the consumers and users

Is outsourcing still a trend in the USA? Does the strategic utilization of the external resources work?
American companies increased the use of outsourcing by 57% in 2016, Micro Sourcing states.
Outsourcing is definitely not a panacea. There are several serious drawbacks especially in terms of a human factor. The loss of jobs in the US because of the outsourcing tendencies gets extensive publicity in recent years. The fact that the professionals in other countries are getting job opportunities they haven’t had before for much lesser money is not comforting enough for those who lost their jobs.

Outsourcing is a trend in the USA

Some outsourcing critics point out a fact of the lack of transparency. Production conditions, conformance to regulations and consumer standards, environment, and quality protection – with outsourcing or offshoring it’s the quality control and labor efficiency that are often missing in order to gain real insights into the company processes and value-adding activities.

Leaving behind the US political ingredient, outsourcing is primarily about increasing profit margins and improving core focus of the business. In recent years outsourcing and software development outsourcing, in particular, tends to become a global innovations driver as well.

American companies and corporations include Ukraine into the list of countries for outsourcing services. Numerous studies show that they have some good reasons to outsource to specifically this country among all others. Besides the access to affordable IT resources unavailable internally, redirecting company’s own human capital towards its main customer-serving activities and reduced time to the market, there are some more appealing reasons why the American companies outsource software engineering services to Ukraine.

Quality and Trust driving the improvements
The USA is one of the largest buyers of IT services outsourcing, nearly 80% of the IT projects are outsourced to Ukraine.
The American industry giants like Intel, eBay, Apple, SolarWinds leverage the rich Ukrainian IT and software development ecosystem because they value teams’ expertise level providing cost-effective and reliable IT solutions. This is mainly because local dedicated software development teams with the profound educational background and a valid skill set paired with mature management teams prove to produce a high-quality end product and service to meet all the needs of the customers.

Moreover, the country contributes to the value of innovation to the outsourcing relationships as more and more outsourcers concentrate on achieving enhancement of service and product quality. One can find almost every cutting edge technology or tool here, be it AI, robotics or IoT, highly customized application development, predictive software development techniques or modern mobile app development – all these give a weighty reason to outsource. R&D initiatives are booming within the tech and software engineering sector in Ukraine and the companies like IBM and Microsoft are already adopting the improved tech and field-specific advancements of the local IT market for their own research and development.

Loyalty and Flexibility matter
Practice shows that when evaluating a development vendor, the American businesses choose to outsource not just cost-efficient software engineering experts and processes, today it’s about relationships. Ukrainian outsourcing market provides some quite influential offerings for businesses in software and technology. Take for example culture compatibility, proficiency in communication throughout the project in order to understand the client’s needs thus accelerating the project or shared risk arrangements.

Business owners note that positive dynamics of the Ukrainian ICT and related legislation paired with data protection and security regulations as well as comprehensive flexibility provisions add more incentives to capitalize on the tech potential of the country; that is why more and more companies outsource to Ukraine.

Optimal development Cost
Reduced labor expenses and controlled production costs are traditionally considered to be driving factors by the business owners to outsource their development. Ukraine ranked 5th among the top IT services exporters according to PwC, not merely due to quality and scalability of the software engineering and software testing services, but also due to the development costs in the country that are much lower than those in the USA.

Cutting down production expenditures and staff salaries ultimately contribute to effective revenue and consequently business improvements, modernization services, and accelerated company transformation.

Despite the research by The Economist that 90% of the studied firms consider outsourcing as a part of their development strategy, outsourcing is definitely a complex issue that takes a lot of considerations and careful research to calculate if it’s an affordable move with long-term profit potential or a disaster. Finding a good service provider, picking up the destination alongside clear communication of your business requirements, your investment in outsourcing is deemed to be a success. In return, you will receive deep industry-specific knowledge, dedicated software development teams, professional management team, implementation of the innovative practices and capital-preserving techniques that make it possible for the outsourcing partners to deliver the best results within time and budget.

Is Ukraine right for your next software project? At Relevant Software we help our partners to analyze the reasons to outsource and offer a relevant response to modern market demands by growing their business value and ultimately bring better customer satisfaction.