Outsourcing is no longer merely about cost-optimization. Time was when companies contracted out peripheral, minimal value-add activities and processes to low-cost solution providers with the competency to deliver to predefined metrics of performance.
Today, cost optimization does not even make the top five list of reasons companies rely on outsourcing. Neither is it any longer solely about peripheral activities. To paraphrase from Deloitte’s recent Global Outsourcing Survey, executives today look at outsourcing as a strategic partnership that provides access to cutting-edge talent and thinking and drives innovation and collaboration.
Today, these strategic partnerships touch almost every aspect of enterprise IT strategy. Even software development, often seen as a core enterprise competence even for non-tech companies in a software-centric world, can benefit from exposure to the right external collaboration.
So, does your organization need to look beyond enterprise boundaries for software development? That depends on a lot of variables but here are a few of the key considerations that should influence your final decision.
YOU WANT TO FOCUS ON YOUR CORE BUSINESS:
Today every business is a tech business. Though software may be central to business performance, you would rather focus on innovating around core business processes rather than wrangle a sprawling software development department. Outsourcing enables you to free up resources that could be deployed more productively in other activities.
- YOU HAVE A CORE TEAM BUT…
- YOU HAVE CAPACITY CHALLENGES – Managing capacity, delivering software against a burgeoning backlog with stretched capacity, is the biggest challenge facing developer managers in 2019. You have the skills but not the bandwidth to take on new development projects. Another form of this issue is when companies cannot afford to distract their core team with new challenges.
- YOU NEED RESOURCES FOR A ONE-TIME PROJECT: Outsourcing is the best option for companies that need resources for a limited time development project. In this scenario, it makes little sense to sidetrack your in-house development team or to bring in new hires to handle this one-time activity.
- YOU NEED NEW TECHNICAL SKILLS: Sometimes new development projects may require technical skills that may not be readily available in-house. In these circumstances, companies can either invest the time and the resources to upskill existing talent, bring in new hires and train them or look for outsourcing partnerships that can deliver trained and experienced technical talent on-the-spot.
- YOU HAVE ESTABLISHED THAT YOU NEED NEW TALENT BUT…Hiring is the second biggest challenge facing developer managers and it may often be the only recourse available, be it for the expanding requirements of running projects or for new projects.
- YOU HAVE BUDGETARY CONSTRAINTS: Quite often the need for new talent is challenged by the resources available to recruit and train new talent. Not all companies have the budget to realize their expectations for new recruits either in terms of numbers or preferred proficiency levels and end up compromising on both. Then there is the add-on expenditure of on-boarding new hires. With outsourcing, companies can hone in on the exact skills that they require at a budget that fits their outlay.
- IT IS EITHER NOT AVAILABLE LOCALLY OR IS PROHIBITIVELY EXPENSIVE: There is a growing shortage of tech talent with an estimated one million programming jobs expected to go unfilled in the US alone by 2020. This means that either you will not find the specific talent you are looking for locally, or they may be available only at a premium. Outsourcing provides companies with access to a global talent pool from which to pick and choose the most relevant project-specific resources at the same budget and without having to compromise on quality.
- YOU NEED A FLEXIBLE AND SCALABLE HIRING MODEL: Outsourcing is not just about rapid deployment but also about scalable deployment. Companies can decide to start with a team and a work schedule that fits their requirements and their budget and decide to ramp up or down as these factors change. Once companies have identified the right outsourcing partners, it becomes much easier to scale their teams based on near-real-time development needs. Companies can even decide to reorganize the broader skillset profile of the development team midstream.
- YOU NEED TO ADDRESS SPECIFIC DEVELOPMENT-RELATED ISSUES SUCH AS…
- ACCOMMODATING PEAK LOADS: This ties in with the scalability factor mentioned in the previous section. Every project has peaks and troughs when it comes to workloads and delivery schedules. An outsourced staffing model allows companies to scale the development team based on workloads with zero impact on cost or efficiency.
- MANAGING RISK: As if the tech talent shortage wasn’t challenging enough, software has one of the highest job turnover rates of any sector. Outsourcing allows companies to reduce personnel-related risks because the responsibility, as well as the liability for timely delivery and deployment, rests with the outsourcing partner. Outsourcing also enables companies to address a range of other software development risks by partnering with service providers with robust project management skills and systems and by distributing development components across different partners.
- ACCELERATING DELIVERY CYCLES: The flexibility of outsourcing means that companies can now focus on accelerating delivery cycles and time-to-market rather than on budgeting, recruiting and training talent. The requisite timelines and outcomes are written into the outsourcing contract and the onus of managing talent to it these commitments rest entirely with the outsourcing partner.
- INNOVATING: With access to the best talent from across the globe, companies are able to push the envelope on software capabilities and features and emphasize innovation as a key requirement for development.
YOU NEED TO MANAGE COSTS
There are several layers of cost savings that come with outsourcing. At the outset, it eliminates the need for one-time expenses such as recruitment and training as well as recurring payroll outflows, without compromising the budget or quality of personnel. Companies only pay for development services with their outsourcing partners, who take care of investing in and upgrading all development-related tools. Outsourcing software development can deliver savings of up to 30% in terms of operating costs.
Deployed strategically, outsourcing can add a lot of value to a company’s software development efforts. Of course, deciding to outsource is often the easier task given the extraordinary range of benefits that the model affords. But not all outsourcing partnerships are created equal. In our next post, find out how to choose the right outsourcing partners.