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Smart business owners know that one of the best ways for businesses to succeed today is through digital transformation. As we embrace this continuously-evolving digital era, businesses are constantly seeking ways to optimize IT operations, while still managing business costs. It is precisely because of this that offshore IT outsourcing became a popular solution for businesses of all sizes worldwide.
Organizations — from agile startups to well-known corporations — have been tapping into international talent pools to get access to specialized IT skills, round-the-clock data security & productivity, and of course, lower operational costs.
In this article, we take a comprehensive look at the offshore IT outsourcing industry: from the concept itself, its key business benefits, the advantages, challenges, cost considerations and, ultimately, how you can apply industry best practices to maximize ROI and make sure that choosing an offshore outsourcing service works in your favor.
Let’s get started.
What is Offshore IT Outsourcing?
Simply put, offshore IT outsourcing (also see: information technology outsourcing) broadly refers to contracting IT services or functions to a company or team located in a different country. Gartner reports highlight that 80% of CIOs are planning to invest more in their business’ IT and cybersecurity functions. As opposed to onshore outsourcing where IT professionals are still within the US, businesses today often opt to outsource IT to countries with lower labor costs and a strong pool of skilled professionals, like the Philippines.
Like most services completed through business process outsourcing, offshore IT outsourcing often involves engaging a third-party company who will handle the hiring, onboarding, and management of your offshore IT team member, while you focus on helping them integrate with your existing team.
What are the current global trends in Offshore IT Outsourcing?
According to recent data by Statista, the global IT outsourcing market is projected to reach around $512 billion by 2030, a significant growth that can largely be attributed to the rise of offshore IT engagement models.
India, the Philippines, and Vietnam remain top destinations, driven by competitive pricing, industry-recognized offshore outsourcing companies and large pools of IT professionals. With a wide pool of talent options and strong reputations in business process outsourcing, the Asia-Pacific is currently the go-to for businesses looking to hire remote IT experts.
In addition to working with an offshore provider, there are also organizations that opt for hybrid models. That is, hiring both inshore, nearshore, and offshore for their IT teams — allowing them to balance costs, collaboration, and overall operational efficiency.
There is also a demand for niche information technology skills including, but not limited to cloud computing, AI, cybersecurity, and DevOps. With businesses needing specialized expertise across all IT functions, it’s no wonder the offshore IT outsourcing industry continues to grow exponentially.
Today, quite a number of IT functions are being outsourced, mostly because processes like software development, cybersecurity management, and overall IT support among others can be completed remotely. In our years as a provider of offshore IT outsourcing solutions, we have observed some of the most commonly outsourced IT services.
Common offshore IT outsourcing services include:
- Software & Web Development
Offshore software development includes the conceptualization, design, development, and sometimes, ongoing maintenance of web, mobile, and enterprise applications.
- IT Support & Helpdesk
24/7 technical support for users and infrastructure is also one of the most in-demand offshore IT outsourcing services.
- Cybersecurity
Since advancements always come with risks, businesses also look for outsourced IT staff who will handle threat monitoring, penetration testing, and compliance.
- Cloud Services
Migration, deployment, and maintenance are also among the functions that businesses delegate to offshore teams.
- Data Analytics & AI
Business intelligence, automation, and machine learning (among other similar business activities) are also being outsourced to leverage tech advancements.
There are more IT functions that you can get remote teams for, depending on what your business needs are. At the end of the day, it’s just about finding the right people for the right IT function — so your business can continuously thrive.
How does offshore IT outsourcing work?
Here’s a quick illustration of how working an offshore outsourcing partner works:
A US-based tech startup wants to hire a development team to build a mobile app for their new service. Is offshore IT outsourcing a good option for them? It is! The good thing is, it’s actually a very smooth process, especially if you are working with a trusted outsourcing partner.
Here’s how that would typically go:
Once they have chosen a Philippine offshore IT outsourcing company to work with, the next step is to discuss staffing needs, so the hiring team can find the right talent that will match the team. They can then interview candidates, choose from a pool of qualified options, and let the local team handle the onboarding for them. That’s it! They will already have an offshore team with the core competencies they need to build the new mobile app, at a fraction of the cost of hiring an in-house team (or even inshore outsourcing).
Leveraging cost savings while ensuring high-quality output — that, in essence, is what offshore IT outsourcing is for.
What are the pros and cons of Offshore IT Outsourcing?
Very much like every other hiring option, working with a remote employee for your business IT comes with a multitude of advantages, and inevitably, challenges. To give you a clear overview of what you’re in for when you choose to work with remote IT teams, here’s a rundown of the pros and cons of working with an outsourced IT expert.
Starting with the advantages of outsourcing your IT:
- Cost Savings
Labor costs in offshore hubs like the Philippines, India, and Eastern Europe can be up to 70% lower than in the U.S. or Western Europe. This enables companies to reallocate budget toward innovation, marketing, or product development.
- Access to Global Talent
Offshore IT outsourcing opens doors to highly skilled professionals with specialized expertise such as data processing, content creation and emerging technologies skills. The skills that may be scarce or expensive in domestic markets are often easier to find with a more diverse pool of IT talent options.
- Scalability & Flexibility
Need to ramp up your IT team for a product launch, website (re)design, or new software development? Offshore outsourcing services allow quick scaling without the long recruitment cycles and overhead costs of local hiring.
- 24/7 Operations
By leveraging time zone differences, companies can ensure continuous progress on projects, faster turnaround times, and uninterrupted IT support. This way, there is no downtime when it comes to protecting your valuable business data through cybersecurity as well.
- Efficient Task Delegation
Outsourcing software development, cybersecurity, and other IT tasks allows internal teams to focus on strategic initiatives that directly impact business growth. Once you have delegated tedious IT functions, you can reduce bottlenecks and empower your existing teams.
While the benefits are many, the risks are also part of the deal. However, most of these can be mitigated through strategic planning and working with the offshore outsourcing company,
Here are the cons & risks when outsourcing IT functions:
- Communication Barriers
Time zone differences (although quite advantageous, too), language nuances, and cultural differences can create misalignments if not proactively managed.
- Data Security & Compliance Risks
Sharing sensitive business information across borders introduces data security and regulatory compliance challenges. Because of differing regulations, these aspects may need realignment to ensure smooth business function.
- Quality Control Concerns
Without clear KPIs and monitoring, the quality of deliverables can vary. You can, however, set clear parameters when you discuss your staffing needs with your provider. It’s just a matter of setting clear expectations.
Since we have already discussed cost-savings as an advantage, let’s discuss that further. If you’re wondering how much hiring an IT team offshore will cost your business, here's the answer.
How much does Offshore IT Outsourcing cost?
When comparing offshore IT outsourcing in the Philippines to in-house hiring in the US, the cost differences are substantial. Let’s use the cost of hiring software developers as an example:
In the Philippines, experienced software developers typically charge roughly $20 per hour, depending on their specialization and years of experience. The total rates of offshore IT outsourcing would then be around $30 to $35 an hour, including other expenses such as office space, utilities, and benefits (that your company would otherwise shoulder).
By contrast, a mid-level software engineer in the US earns an average annual salary of around $120,000, which translates to roughly $60 per hour before factoring in benefits, payroll taxes, and other employment costs. When these additional expenses are included, the effective hourly cost in the US can exceed $75 per hour.
This means that hiring a skilled developer in the Philippines can save US-based companies 50-65% on comparable talent, without compromising on quality. Given the Philippines’ strong English proficiency, cultural alignment with US business practices, and well-established IT infrastructure, this cost comparison further strengthens the position of offshore IT outsourcing as an ideal solution.
Beyond cost-savings, outsourcing your software development, cybersecurity, and other IT functions offers more benefits to your business that you can take advantage of today and long into the future.
What are the business benefits of hiring offshore IT teams?
- Speed to Market
Offshore teams allow faster product launches by parallelizing work and leveraging time zone differences. Not to mention that even before they work for you, the speed of hiring offshore staff is also significantly faster than hiring (and onboarding) in-house teams.
- Access to Specialized Technologies
Offshore hubs often specialize in niche tech stacks, enabling companies to innovate without heavy internal training investments. In the Philippines, there are specialized tech hubs across Manila, Makati City, Cebu, and Davao where you can find IT experts.
- Risk Diversification
Spreading IT operations across multiple geographies can reduce risks from local disruptions. In case of natural disasters, economic challenges, and political issues the fact that you have teams all over the world might just be able to cushion the blow.
- Enhanced Competitive Advantage
Now that IT is no longer just used for compliance, outsourcing can help you take it to the next level. Lower costs, faster delivery, and broader skill access will enable your business to compete more effectively on a global scale.
Now that we have covered all the aspects of offshore IT outsourcing, we’d like to leave you with some tips that will help you fully take advantage of its benefits.
What are the best practices for Offshore IT Outsourcing?
- Your offshore IT outsourcing partner matters, possibly just as much as the IT team you’re hiring. So, evaluate potential vendors based on experience, case studies, client testimonials, and cultural fit.
- Just to reiterate a point already made earlier: set CLEAR expectations. Define KPIs, timelines, deliverables, and communication protocols before starting the engagement.
- Invest in collaboration tools. When you have remote employees, it’s important to keep communication lines open. Use platforms like Jira, Slack, Microsoft Teams, and GitHub to ensure smooth coordination.
- Prioritize your business’ security. To mitigate the risks of information and data breaches, you can safeguard your business by implementing NDAs, access controls, and encryption to protect sensitive information.
- Lastly, don’t be afraid to start small. You can always scale gradually afterwards. Begin with a pilot project to assess quality, reliability, and communication flow before committing long-term.
Fortunately, at KDCI Outsourcing, we’re a team that practices what we preach.
We implement these protocols thoughtfully, ensuring that offshore IT outsourcing can accelerate innovation, improve agility, and position businesses to compete globally. If you’re ready to explore how offshore IT outsourcing can transform your operations.
Whether you need a dedicated offshore IT team, specialized developers, or end-to-end IT support, our expertise in software development & IT offshore staffing services ensures you get top-tier talent aligned with your unique business goals.
Find your next offshore IT staff at KDCI Outsourcing.
At KDCI, we specialize in finding developers & IT experts who have the skills and experience you need, as well as the attitude and cultural fit that will allow them to easily integrate with your in-house team. Whether you’re looking to hire one full-time offshore IT specialist or looking to build a dedicated software development team in the Philippines, KDCI has the right tailored outsourcing solution and engagement model for you.
KDCI has options specifically made to support your business’ day-to-day operations and overall growth in the long run.
Contact us today to discuss your offshore IT outsourcing needs.
