In today’s competitive marketplace companies increasingly need to focus on their core goals, outsourcing anything that is extraneous. That means if specific technology and IT fields are not the core functions of your business, to try to develop in-house solutions might be costly and result in sub-par outcomes.
The case against in-house
And wasting them you would be. Outsourced labour can significantly reduce your human resource overheads, and even if you don’t factor in cheaper labour from typically renowned outsourced countries, the cost of employing a new in-house developer could be 2.7 times more than their base salary.
Not to mention the problems of lack of clear goals to newly established IT functions, office politics, training, lack of knowledge and the need to concentrate on daily operations, all of which can push back timeframes and increase costs. Which is why, according to the Project Management Institute (PMI), organisations waste an average of $97 million for every $1 billion invested due to poor project performance.
IT is an industry with a severe shortage of talent. That means demand is high, so you could end up paying up to 20 per cent more, according to Forrester, to attract the right people for your project. And of course there’s no guarantee they won’t be tempted away by the next, more attractive offer that comes along. In fact the annual CIO Survey found that 65 per cent of CIOs claim that hiring challenges are hurting the industry.
Sourcing the specialist talent
There are lots of companies already out there whose specific job it is to do exactly what you need for your IT development. They have the skills you require or the technical know-how to advance your goals and waiting to take the headache off you. In fact annual global revenue from IT outsourcing is estimated at $60 - $70 billion, according to the Information Services Group.
These companies are already investing in the latest innovative trends and developments so they are already ahead of the curve. That means they can not only implement developments but predict future needs, effectively future-proofing the relevant infrastructure for your in-house IT team. As well as implementing new processes, they offer ongoing support and training for in-house staff. When you consider that the world spent $359 billion on in-house training in 2016 alone, and this has been increasingly annually, it gives you some idea of its financial drain.
Projects can have far greater flexibility when surrounding yourself with sector-domain specialists and platform and application experts where the work is tailored, scaled and adapted to your business's changing needs and timeframes.
It is also a far more focussed strategy. With a team dedicated to your project, there are no distractions of internal activities from the specific goal at hand. The security of your IT developments is also enhanced because specialist developers will implement industry best practices to make sure your information is secure. And the same goes for compliance.
Outsourcing to a country nearby – known as ‘nearshoring’ – cuts down on problems caused by time differences. You have access to a talent pool that can work alongside you to your schedule, while acting as a second local office that is accessible and more economical to work with. And by selecting a company based in a growing tech hub such as Lisbon with a burgeoning community of invested startups, comes with the added bonus of all those additional contacts and connections that might lead to other fruitful partnerships.
But perhaps the most important advantage of all is the benefit to your core business. Outsourcing IT and tech developments means you can allocate more resources to the core focus of your business. Freeing staff from development roles, which may not match their abilities, allows them to concentrate on more central strategic goals. And this in turn helps streamline your processes and free up resources for other projects and business goals.
Choosing the right partner
All of which doesn’t mean outsourcing will fix all your problems with one email. You need to work very carefully on selecting the best partner to work with. Different consultants have different specialties so the first job is to find the one that best suits your needs.
Then comes ability. Cost might be a big advantage of outsourcing but it shouldn’t be the main focus of your search. The consultant needs to have the specific skillset to achieve your goals as well as the ability and experience to complete on a quality and timely product.
Treat outsourcing exactly the same way you would employing a new high-level senior employee. This is a serious investment in your time, money and reputation so you need to get it right. Do your initial research and shortlist a group of companies whose skills match your requirements. Now do your due diligence into how they operate – what is the feedback from other clients? How many years’ experience do they have in the industry? What is the proportion of junior and senior level employees within the team? When you are satisfied, hold interviews and get references before honing your list down to the final choice.
Specific areas to focus on are security, HR, company culture, communication and by no means least - training and development, especially in new technologies. Rigorous security and testing is the key to a quality product so make sure the consultant has a proven track record of security and QA.
Projects can be seriously stalled if a senior team member suddenly ups and quits so you need to look into the company’s hiring and HR processes and what their track record is in regards to retaining talent. Do they have shadow workers ready to jump onto a project at a moment’s notice if an issue with staffing comes up? Understanding the rates they pay their developers and the employee benefits will give a good indication of how well their staff are valued.
Company culture is a big clue as to the quality of the work they will provide. You want a partner with a commitment to innovation, talent and communication. But you also need a partner that can align to your company’s values and engage with your existing business processes. An on-site visit can often give you an immediate and powerful insight into the health of a company’s culture.
Finally, communication is key. You need a fast and responsive line of contact between your company and the partner. That means time zones need to be in close alignment and English needs to be widespread and proficient – both of which can be solved by nearshoring.
Separating core and enabling functions
So, assuming you carefully select the right partner, outsourcing or nearshoring is the way forward.
The business world is becoming increasingly streamlined and efficient in line with its core competencies and goals. In order to remain competitive, companies need to understand what is worth investing in internally and where growth can be achieved by selecting the right business partners – the core functions from the enabling functions.
So if IT and tech development is an enabler rather than a core function, you should outsource it to someone else whose core function it is. They will do it better, faster, at a lower overall cost and without the headaches.
Tiago Catarino, CEO and Co-founder, Lisbon Nearshore