Three Occasions When You Should Outsource

24 July 2019
By Andrew Sanders, VP, Travel & Hospitality North America

Three Occasions When You Should Outsource_1”

The reality of today is that software is part of almost every single business in the world and no doubt technology has contributed too much of the progress and the success humanity has experienced in the 20th century. Up until the 1980’s, most of the enterprise software was custom made and was developed entirely in house by tech engineers. As time went by many such internal teams began to feel overwhelmed with the demand. They were also expensive to fund and slowly but surely became outpaced as it was increasingly difficult to keep pace with the evolution of technology. Custom enterprise software was being built by giant tech firms like Microsoft, Sun Systems, IBM and Oracle that had the infrastructure and capacity for innovation and for handling large, complex projects. However, with the advent of the personal computer, more and more people began to be interested in learning programing. During the Dotcom bubble (1994-2000) as business moved onto the internet, the demand for custom software development skyrocketed. This caused more and more new tech companies from Eastern Europe and Asia to ride the wave and cover the demand in the market.


Not much has changed since. The demand is still high and the supply abundant and available. There is so much choice out there. When is it actually feasible or profitable for a company to hire a technology consulting firm? Here are at least three times when outsourcing can benefit your business and you should seriously consider it:

  1. When you cannot find the right (packaged or ‘off the shelf’) software on the market
  2. When your internal IT team is overstretched or lacks the skills
  3. When you need to reduce IT costs

Considering the pros and cons for each:

 

Off the shelf applications

There is so much choice on the market in terms of software applications that sometimes it can be challenging to assess and compare different ready-made solutions. There are two inherent problems to be aware of, if this is your preferred option. Primarily there is a license purchasing cost followed by regular costs of updates. Secondly, the buyer does not own the source code, nor the IP (Intellectual Property) but merely uses it. Since no application is actually built to suit your specific business needs, chances are that a sizeable portion of the functionality will never be used by your organization resulting in training overhead on wasted functionality and essentially paying for something you don’t need. Therefore, commissioning custom-built software gives you total ownership with no monthly or yearly fees and it will fit your business like a glove.

Most importantly, if you are in a competitive environment, using the same “me too” software as others reduces your ability to offer innovation and unique services to your customers and potentially cedes control of your own destiny to a third party.

 

Overstretched internal teams

Regardless of the industry, it is common to hire an internal team of developers to maintain and update all software applications. Competitive companies are generally quick to adapt to new trends in the market and always look for innovation. This can quickly cause the internal IT teams to become overstretched and unable to expand fast enough to keep up with the demand. In fact, the lack of in-house engineering talent is set to become one of the main reasons to outsource. A survey shows that over 70% of technology employers in the United Kingdom, for example, will face a talent shortage over the next 12 months.

A study published by Coding Sans showed the state of affairs in 2018 and what to expect next. The Bureau of Labor Statistics indicates that by 2026 the entire IT workforce need will exceed 1.2 million while the previously mentioned 545K software engineers will have left the market by that time. Business development and digital transformation are impossible without new talent, which intensifies the gap between the tech talent supply and demand.

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Source: Global Sourcing Association

Hiring can become very challenging when you suddenly need a small number of developers for only six months. This is the right time to consider outsourcing as it enables you to inject the right amount of vitality in the team without increasing the overheads. This is often referred to as an out-staffing model and it enables you to manage the resources and the project internally while using outside resources.

 

Reduce IT costs

For large and demanding enterprise projects, the cost of having an internal team as well as out-staffing can be pretty costly. A wise move is to outsource IT projects to specialized companies overseas where developers are less expensive than on-shore teams. The greatest advantage of this model is that the client pays for the output of the team, not a monthly salary for each developer with benefits and perks, as it would be with an in-house team. IT outsourcing companies are typically abreast of the latest new technologies and trends and can also offer a unique perspective and approach to solving problems. In truth, an internal team will struggle to compete with an overseas outsourcing team in terms of cost and breadth of skills. This is what we call great value for money and this is perhaps the essence and the most compelling reason why you should consider outsourcing: better quality for less money. If done right, outsourcing has many benefits and this is why so many companies embrace it.

Outsourcing is great for when you cannot find the right off-the-shelf application, great to augment your internal team and fantastic in terms of cutting costs. It is money well spent. If you are considering outsourcing and want to know where to begin, we are happy to advise. Also, if you outsourced before and it didn’t quite work out the way you expected we can arrange an exclusive meeting and share the magic formula of outsourcing done the right way.

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