Today's technology professionals are rediscovering the benefits of working with vendors outside of their companies. Moreover, they’re beginning to define value and satisfaction around criteria beyond price.
As a recent Global Outsourcing Survey by Deloitte attests, today’s CIOs increasingly emphasize how outsourcing provides access to new and better talent, accelerates development speed, offers added value through partnerships, improves product quality, and provides companies with the freedom to focus on core competencies (1).
This evolution in thinking begs the questions: What are the benefits of the various outsourcing strategies? And how does one choose a model that will meet one’s strategic goals?
Per the survey, today the top four reasons companies outsource are to:
Reasons to Outsource Percentage of Respondents
Cuts Cost 59%
Focus on Core Business 57%
Expand Capacity 47%
Enhance Service Quality 31%
Cost, of course, has always been a primary consideration when making a decision about outsourcing, but not always in the same way to every outsourcer.
Invariably, outsourcing is less expensive than building an internal team to develop a piece of software. However, as with most things, you typically get what you pay for (i.e., the cheapest option will often deliver the poorest quality).
The main advantage of outsourcing when it comes to costs is not necessarily the end sum — it’s more about how outsourcing facilitates cost control. With solid contracts based around clear expectations coupled with good management, development costs can be made predictable and even deferred through the skillful negotiation of payment terms in an outsourcing agreement.
Through smart outsourcing, capital expenditure on operations can be reduced since the outsource partner assumes the costs for long-term capital investments such as equipment purchases.
Outsourcing should be strategic in a company's technological evolution. It can give a company access to talent and technology that might not otherwise be accessible in its area. It also allows a company to be nimble when it comes to resourcing. Third, it relieves company employees to focus on core competencies and more strategic initiatives.
With the right outsourcing partner, a company can benefit from resources that they otherwise couldn’t access, such as rare talent and the most current technology.
Outsourcing provides companies with the ability to command significant resources when they need them.
Outsourcing can be effective as a strategy for “handing over noncore activities to a trusted third party” so that a company can focus on core competencies. Deloitte’s most recent study echoes this idea with 57% of respondents citing this freedom to focus as one of outsourcing’s main benefits.
With a dedicated, qualified outsource team focused on a single project, development can happen much more rapidly while also producing a better quality product thanks to the expertise and depth accessible through outsourcing, as well as the focus it enables.
If one connects with the right outsource provider, product development can be much faster.
Working with an outsource provider specialized in a certain type of product will yield a better result. They’ll be able to apply their experience and expertise to create something that functions on a higher level than a product put together by an in-house team with multiple projects and priorities — or a generic IT outsource provider.
1 Deloitte, “2016 Global Outsourcing Survey” https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/operations/deloitte-nl-s&o-global-outsourcing-survey.pdf