Safe outsourcing 2024

Outsourcing has become an integral part of modern business strategy. Many companies outsource to focus on their core business and benefit from cost-effective solutions. However, safe outsourcing is crucial to minimize risks and maximize benefits. This article reviews what you need to know about safe outsourcing and how to use it in your business.

What is outsourcing?

Outsourcing occurs when a company transfers certain activities or services to an external provider. Below are three standard outsourcing models: offshoring, nearshoring, and blended outsourcing.

Offshoring involves moving parts of the business to countries with lower labour costs, such as India, Vietnam, Sri Lanka or the Philippines. India is particularly prominent for its high IT and software development expertise level, English-speaking, well-trained workforce, and cost efficiency. However, this can pose some challenges related to cultural differences and time zones.

Nearshoring refers to outsourcing to neighbouring countries, which for Sweden often means Baltic countries or Poland. This model offers advantages such as shorter distances, fewer time zone differences and cultural similarities, which can lead to smoother communication and collaboration. However, prices can be higher than for offshoring to cheaper countries.

Blended outsourcing combines local resources with offshore capabilities. This can balance cost efficiency and local expertise, which is particularly beneficial for projects requiring in-depth local knowledge and large-scale budget efficiency.

Each model has its pros and cons. Offshoring can offer significant cost savings but can also present communication challenges. Nearshoring reduces these barriers but can be less cost-effective than offshoring. Blended outsourcing maximizes benefits by combining local presence with the economic advantages of offshoring but requires careful coordination to ensure consistency in workflows and quality.

When managed correctly and with a clear strategy, outsourcing can offer companies a powerful route to efficiency and innovation, primarily through collaboration with countries such as India, where one can simultaneously benefit from high qualifications and cost efficiency.

Benefits of outsourcing

Reducing costs

Outsourcing can lead to significant cost savings. Companies can benefit from lower labour costs in other countries and reduce the need to invest in infrastructure and technology.

Focus on core business

By outsourcing appropriate functions, companies can focus more on their core business and achieve their strategic goals, increasing efficiency and competitiveness.

Access to skills and expertise

Outsourcing gives companies access to expertise that may not be available internally or locally. This can improve the quality of the services and products delivered. In addition, hiring Indian experts on a consultancy basis can sometimes be cheaper than hiring your staff.

Flexibility and Scalability

Outsourcing allows companies to adapt quickly to market changes and scale up or down their operations depending on demand.

Risks of outsourcing

Security risks

Of course, transferring data and information to a third party can always involve security risks. Therefore, robust security measures are essential to protect sensitive information.

Quality control

Ensuring the outsourced service maintains the same quality standards as the internal operations can be challenging. Continuous monitoring and quality control is essential.

Communication and Coordination

Time zones and cultural differences can create communication problems. Effective coordination and clear communication are necessary to overcome these obstacles.

Dependence on the Supplier

A company can become too dependent on its outsourcing provider, which can create problems if the provider does not perform as expected or goes bankrupt.

Safe Outsourcing: Strategies and Best Practices

Choosing the right supplier

Choosing the right supplier is crucial for safe outsourcing. Companies should thoroughly evaluate potential suppliers and their capacity to deliver reliable and secure services.

Security and Compliance

Ensure that the outsourcing provider complies with relevant security standards and laws. This includes the General Data Protection Regulation (GDPR) and industry standards for information security.

Ensuring compliance with EU legislation when outsourcing software development outside the EU is crucial for large and smaller companies. This is not only a legal requirement for larger enterprises under EU regulations but also a strategic measure for smaller companies aiming to mitigate risks of reputational damage.

Various legislative frameworks mandate stringent auditing of non-EU suppliers for larger companies within the EU. This ensures that external suppliers adhere to standards on par with EU norms, particularly in data protection, environmental sustainability, and labour rights.

1. General Data Protection Regulation (GDPR): Perhaps the most significant piece of legislation, GDPR imposes strict data protection and privacy rules for all individuals within the EU and the European Economic Area. It also addresses the transfer of personal data outside the EU and EEA areas. Software companies must ensure that their non-EU outsourcing partners are GDPR compliant to avoid hefty fines and breaches that could lead to severe reputational damage.
2. Directive on Security of Network and Information Systems (NIS Directive): This directive requires companies in critical sectors, including digital services, to maintain high levels of security for their network and information systems. While not directly targeting all software development outsourcers, it sets a precedent that impacts contractual obligations for IT outsourcing, emphasising the need for robust cybersecurity measures.
3. EU Cybersecurity Act: Strengthening cybersecurity across the EU. This act establishes a framework for setting network and information security standards across all member states. Companies involved in software development and outsourcing must ensure that their suppliers comply with these standards to maintain integrity and security continuity.
4. Labour Laws: EU companies must ensure that their non-EU outsourcing partners adhere to labour standards that at least meet the International Labour Organization (ILO) conventions, which cover a range of issues from unfair dismissal to discrimination and workers’ rights to unionize. Although local labour laws will vary, EU companies should seek to work with suppliers who provide fair working conditions, appropriate wages, and reasonable working hours consistent with globally recognized labour standards.
5. Modern Slavery Act: Originating from the UK, the Modern Slavery Act requires companies to disclose actions taken to eliminate slavery and human trafficking in their supply chains. For EU companies, even those without a legal requirement under UK law, ensuring that outsourcing partners do not engage in or facilitate such practices is vital. This includes scrutinizing suppliers’ labour practices to ensure no use of forced, bonded, or child labour.
6. Other Legislation: Similar to the Modern Slavery Act, other EU legislations and directives focus on enhancing transparency and ethical practices in business operations. For instance, the EU Non-Financial Reporting Directive requires large companies to disclose information on managing social and employee aspects, respect for human rights, anti-corruption and bribery issues, and diversity on company boards. Although this directive applies directly to large companies, smaller firms benefit from aligning with these practices to ensure comprehensive compliance and ethical operation.

Even smaller companies, while not always legally obligated to conduct formal audits, benefit significantly from ensuring their suppliers comply with these regulations. Doing so aligns with best practices and enhances their appeal to potential clients concerned about compliance and corporate responsibility.

For example, a European tech startup might outsource app development to a firm in India. To maintain GDPR compliance, the startup should ensure that the Indian firm has adequate data protection measures, such as data encryption and secure data transfer protocols that meet EU standards. They should also have clear contractual agreements that define how data is handled, stored, and protected against breaches.

Another example could be an EU-based software company outsourcing to a service provider in Southeast Asia. The company should ensure its partner complies with GDPR and adheres to the EU Cybersecurity Act by implementing rigorous cybersecurity policies and response strategies aligning with EU expectations.

In conclusion, whether legally mandated for larger entities or as a best practice for smaller firms, auditing non-EU software outsourcing suppliers for compliance with relevant EU legislation is essential. This practice ensures legal compliance, protects against potential reputational damage, and enhances business integrity in global markets.

Technical solutions to create more Safe Outsourcing

Ensuring compliance with the GDPR and generally creating the conditions for safe outsourcing requires comprehensive security measures, some of which are about processes. Still, others are about an appropriate IT environment.

• Encrypted channels for all communications,
• VPN connections and ensuring that all communications are Transport Layer Security (TLS) encrypted communications.
• Use individual restrictions and controls to distinguish each user’s behaviour in logs.
• Only those who need to are allowed access to personal or critical information.
• Update all software regularly.
• Only use recognized antivirus software.
• Encrypt all hard disks to secure systems both locally and remotely.
• Ensure all USB ports are blocked.
• To ensure that data privacy and security are prioritized, all staff must receive regular GDPR training and have signed confidentiality agreements.
• Limit the use of communication software to verify secure alternatives.
• When outsourcing outside the EU, be aware that some countries’ legislation may allow public authorities to access data stored in cloud solutions.

Read more here on how to protect your data.

Contract terms and conditions

Clear and comprehensive contract terms are essential to avoid misunderstandings and conflicts. The contract should specify service level agreements (SLAs) for support functions, including security measures and intellectual property management.

Continuous Monitoring and Evaluation

Companies should continuously monitor and evaluate the performance of their outsourcing providers. Regular audits and feedback meetings help to ensure that all parties meet their commitments.

Crisis management plan

A crisis management plan is essential to address potential problems with outsourcing. The plan should include measures to address data breaches, supplier issues, and other unforeseen events.

Gislen Software: Your Partner for Safe Outsourcing

Gislen Software is a trusted Swedish-owned IT outsourcing company with extensive experience delivering high-quality, secure IT services. We offer customized services and solutions tailored to your specific needs and goals. We provide several different services. From product development, upgrading and migrating legacy systems to newer, more modern technologies, development of mobile applications and apps, support and maintenance, and other IT services such as customer support, accounting and support for various HR functions. The aim is to streamline operations, reduce costs and improve quality. Together with our partner, Epical Group, we also offer first-class blended outsourcing, especially in systems integration.

Expertise and Experience

With 30 years of experience in the IT industry, Gislen Software has developed a strong expertise in software development, cloud solutions and IT support. Our team comprises highly qualified professionals with deep knowledge in their respective fields. Perhaps more importantly, with our solid Swedish connection, our staff has a lot of experience in understanding the Swedish market. We also train our staff on cultural understanding. Because we are so “Swedish”, we believe we are one of the best at working with Swedish customers.

We also have many good references. We work with well-known companies and organisations such as ABB, Epical Group, European Association for Cardio-Thoracic Surgery, Kantar SIFO, PostNord, Scandinavian Airlines, Svensk Byggtjänst, Swedish Match, and Volvo Cars, as well as small and medium-sized companies such as Clarendo, Planter Norden, and Dineflow.

Safety and Compliance

Safety is one of our highest priorities. We follow strict security standards and data protection rules to protect your information. We are used to working with high-security standards. Our employees are trained to understand GDPR and other security requirements. The applications we build are designed for security and with security as a default. We also have a third-party supplier code of conduct signed by all our suppliers, and we are a carbon-neutral company.

Flexibility and Adaptability

We understand that every business has unique needs. That’s why we offer flexible and scalable solutions that can be customized to your specific requirements. Whether you need a small team augmentation or a comprehensive IT solution, we can help. We can also help with administrative services such as accounting and some HR-related services.

Quality Control and Continuous Improvement

Quality is a cornerstone of everything we do. We use proven methods and tools to ensure our solutions meet the highest standards. We strive to improve and optimize our services through continuous feedback and evaluation. Our testers are capable of both manual and automated testing.

Frequently Asked Questions about Safe Outsourcing

Below, we have collected some frequently asked questions about Safe Outsourcing.

Summary

Safe outsourcing is a vital strategy for succeeding in today’s competitive market. It can be achieved by focusing on core business and building a relationship with a trustworthy partner. Companies can maximise benefits and minimise risks by understanding the benefits and risks of outsourcing and implementing security and compliance best practices. Gislen Software stands ready to be your trusted partner to deliver high-quality and safe outsourcing services tailored to your specific needs. Together, we can help your business reach new levels of success!

Contact us to discuss safe outsourcing!