To build a house that will withstand the test of time, you must have solid foundations or your structure will undoubtedly crumble. So, when creating your dream house, you need to ask yourself – Do I take the risk and lay the foundations myself? Or do I call for help?
When building a business, the same questions still apply. Do you take the risk and build a product in-house bespoke to your business? Or do you outsource?
Knowing when to build and when to buy is a struggle for many businesses, but to fit in what nowadays is a highly collaborative economy, a shift in mindset is needed. In order to be successful, you need to be honest about where your business’s limitations lie and look for solutions. Outsourcing is a great alternative to the costly and time-consuming task of building technology in-house and is becoming increasingly common. Rather than attempting to out-do competitors on the efficiency of their technology solutions, companies should consider outsourcing services to specialists.
Consider the cost
Outsourcing some aspects of technology development can offer a wealth of benefits, one of which is cost reduction. If a business were to embark on the challenge of building technology completely in-house, they should consider the long-term financial investments that are required. For example, since technological advancement is constant, it is imperative to stay on top of it to remain competitive. Businesses should think about the cost of continually improving, updating and fixing any problems that arise. There is also the cost of repeatedly training your new and current staff on your product and any advancements that will occur. By outsourcing the creation of technology, or purchasing a pre-existing product, you can replace these often unpredictable and costly burdens and focus on the integration of the product into your system instead – a minor expense in comparison.
As well as cost, businesses must ensure they are managing their time effectively in order to remain competitive. Building technology in-house is a time-consuming undertaking, where more often than not, the time required is grossly underestimated by business owners. It can eat into other more pressing business priorities. So, ask yourself this, do you really have the time spare to invest in building technology? Neglecting key aspects of your business such as maintaining key customer relationships or compliance regulation, in favour of the pursuit of new technology for your business can have disastrous consequences in the long-term.
Arguably the biggest attraction of outsourcing is that it gives your business access to new and innovative technology that would not have been possible otherwise. For example, some technology may not yet be available in the country your business operates in, or you may not have the funds to build the product you desire. Businesses should also consider the possibility – although difficult to accept - that if they were to build the technology in-house, their business may not have the knowledge or skill set to create the same calibre of products that is available in the market. But through outsourcing you can have access to the world’s best technology offerings that are not limited by time constraints, skill limitations or geography. There are an endless number of exciting technology companies out there, and by outsourcing you can cherry pick the best products for your specific needs, ultimately improving your business.
Another important point to consider is the shift in regulatory policies in recent years, with the focus now being on balancing the scales of power between the consumer and businesses, by ensuring increased transparency about how and why organisations collect and use customer data. Through the implementation of new regulations such as GDPR and PSD2, the government is now cracking down on businesses and taking a closer look at company policies, in order to ensure they have satisfactory compliance procedures. With the heavy sanctions in place for compliance breaches (GDPR penalties can be up to €20m or 4% of annual global turnover!), is it worth the risk? As the fintech industry is heavily regulated, if you were to outsource your technology, you can often pass the regulatory burden to the business you’ve outsourced to instead of dealing with it internally – saving you from the stress of getting to grips with complex regulation.
Economy of scale
Economy of scale is another advantage to consider in the in-house/outsource debate. The premise of economy of scale is that you save money when unit costs go down as volume increases. In the context of technology, this means that by using an established company’s product, you are decreasing the cost as the fee involved in creating the technology has already been covered. This is great news for your business, but also has a knock-on effect for customers as the price of the product you can offer is lowered.
Yet despite the wealth of benefits, many organisations are still hesitant to embrace outsourcing out of fear of giving away their secrets, or through the misconception that it’s the only way to create something unique to their business. This type of thinking is detrimental as outsourcing can create different avenues for a business to explore or strengthen any current service offering. In a business environment where the platform economy is thriving, outsourcing is just another form of collaboration. Across a variety of sectors and organisations, people are waking up to the fact that business can progress further if they are more open to sharing ideas and working together to achieve a common goal. There is nothing wrong with healthy competition, but through outsourcing you can level the playing field to compete fairly and drive each other to a higher standard.
In the technology world, outsourcing can be a lifeline for a business. There is an increasing demand from the consumer for the quickest and most seamless service available, and behind the scenes there is a lot of work required to make this demand a reality. Many businesses simply do not have the capabilities to compete with the standard of technology that is required to keep the consumer satisfied. Outsourcing technology offers a business the opportunity to have the best service available regardless of time, funds or skill limitations, keeping the door open to success in a competitive business space.
Ed Addario, Chief Technology Officer at Currencycloud
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