5 Steps to Create an Outsourcing Strategy For Your Business

Create a Successful Outsourcing Strategy

Nowadays, every company is looking for a competitive advantage in the market. An outsourcing strategy that works can easily give you an edge over your competitors.

According to Statista, revenue in the Segment IT Outsourcing is projected to reach US$395 billion in 2022. Meanwhile, a Deloitte survey in 2021 stated that 84% of the respondents have already discussed outsourcing options or have delegated outsourcing solutions to third parties.

So, having a strategy for outsourcing, for a portion of your business's operations can help you save money and keep your team focused on your primary goals.

In this article, we will discuss how to build a successful outsourcing strategy by following 5 simple steps. But before that let’s first discuss what outsourcing is and its advantages and disadvantages.

What is outsourcing?

Outsourcing is a strategic decision made by a company to reduce costs and increase efficiency by hiring another person or company to perform tasks, provide services, or handle operations..

In simpler words, it is having certain job functions performed outside of a company. Companies use the outsourcing strategy to reduce costs and increase their efficiency.

Advantages of outsourcing

Some proven advantages of outsourcing are:

  • Outsourcing lowers operating, labor, and overhead expenses.
  • Saves time by outsourcing time-consuming processes to external companies; the company can focus more on its core competencies, improving its competitive advantage.
  • Strategic outsourcing reduces the business risk by sharing it with third parties and forming meaningful partnerships.
  • Improves flexibility and efficiency by delegating difficult-to-manage and-control responsibilities to outside companies.

Disadvantages of outsourcing

Outsourcing strategy also has some downsides, and it is always good to know both sides. Let's see what risks are associated with outsourcing to manage them effectively.

  • Outsourcing activities or processes to third parties increases the risk of losing sensitive data and compromising confidentiality.
  • Outsourcing firms may impose unexpected or hidden costs by drafting lengthy contractual agreements with a lot of fine print.
  • Lack of quality control, as outsourcing firms are most profit-driven and might not deliver expected results.

Step-by-step process to create a successful outsourcing strategy

Outsourcing has the power to help your business grow exponentially, but only if your strategy is right. Here is a five-step process to create an on-point outsourcing strategy.

Layout precise outsourcing objectives

A company that employs strategic outsourcing and defines outsourcing goals clearly from the start is already one step ahead of the competition. Companies that carefully outline their outsourcing objectives step by step will be in a better position to choose the right staff augmentation model.

By establishing well-defined outsourcing goals early on, a company can use IT staffing as effectively as possible to increase productivity while saving money by scaling up or scaling down supplemental staff as business or budgetary concerns dictate.

Select the appropriate outsourcing engagement model

Companies should always prioritize the specialized skills they're looking for when developing a comprehensive outsourcing strategy. By clearly defining the technical or creative expertise required, management teams can more easily select an outsourcing engagement model that meets their specific staffing needs.

There are numerous outsourcing models, including onsite, onshore, nearshore, and offshore engagement models, with benefits and risks. A company looking to offload non-critical technical operations would likely be interested in a different outsourcing model than a software firm looking for a niche programming skill.

Businesses can put additional staff to work as quickly and efficiently as possible by choosing the right outsourcing engagement model, in consultation with an experienced technical staffing firm, without wasting time or resources or reducing productivity.

Reduce the risks of outsourcing

While outsourcing has many upsides, it also has some risks that must be addressed (as already briefly discussed). Companies can reduce their financial exposure while increasing the efficiency of the outsourcing model they choose by understanding and mitigating these risks.

Here are the most important things to be taken care of:

  • Trust and control: A company often loses control when it outsources mainly using the onshore, nearshore, or offshore models. In this case, HR managers can build trust by learning as much as they can about the IT staffing firm they're working with, speaking with previous clients, and ensuring that their vendor's outsourcing strategies are comfortable with them. These simple steps can help a company and its outsourcing partner establish clear communication protocols, fostering a sense of cooperation and trust.

  • Quality issues: In addition to a reduction or loss of operational control or oversight, outsourcing can pose quality concerns. Companies can reduce this risk by working with vendors who have demonstrated a commitment to quality control with previous clients and projects. And have a comprehensive process to quickly resolve any quality issues on-site or offsite with a creative or development project (using augmented staff).

  • Confidentiality and intellectual property rights: In present times, intellectual property is important. Rather than raising concerns about intellectual property issues (such as copyrights, patents, or trade secrets) that HR and legal executives may have about supplemental staff, companies should make every stakeholder sign exclusive work ownership agreements and NDAs. These contracts address clients' confidentiality concerns while protecting their intellectual property rights.

Monitor outsourcing progress and added value actively

It is critical for a company or development team to have clearly defined key performance indicators (KPIs). These indicators can assist executives in determining whether their outsourcing strategy is working for them or not. And while these performance indicators can vary, a reputable outsourcing vendor should be able to provide multiple indicators (assuming the client has already established clear outsourcing objectives).

Create solid client/vendor communication channels and relationships

Companies should look for an outsourcing provider who invests the time to understand the internal business culture of a client and the management style of engineering and creative teams. This strong relationship enables IT staffing companies to offer the best company-specific staffing solutions while remaining adaptable (due to ongoing client/vendor dialogue) to anticipate and address a company's future personnel needs.

Companies will be better able to maximize the benefits while lowering any associated risks if they lay out a clear blueprint for what they want from their outsourcing agency. Managers should put up a clear route to implementing a sustainable and successful outsourcing strategy, which will help them better fulfill their business goals by developing a deliberate, precise approach to outsourcing from the outset of a project.


It is a no brainer that outsourcing can help your business grow exponentially and reduce functional load enabling you to focus on core objectives. However, it is important to mitigate the risks involved in outsourcing. So we can say that outsourcing has the power to help your business, but only if your strategy is right. This is why it is important to devise a custom outsourcing strategy that works for your company.


  • Author

    Mohit Chaudhary

    Mohit is an Engineer turned tech blogger. He loves to dive deep into the tech space and has been doing it for the last 3 years now. He calls himself a cinephile and plays badminton in his free time. For more information, you can connect with him on Linkedin or Instagram.

Frequently Asked Questions

Outsourcing strategies are plans based on analysis and assessments of functions that an external service provider should perform.

The main challenges of strategic outsourcing are building trust, taking care of quality, and securing intellectual property & data security.

It is possible to outsource any business function; however, common examples of outsourced functions are manufacturing, customer service, business development, and IT projects.

View more FAQs


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