We now live in the most decentralized work space ever in history. Here outsourcing has become an organic next step – no more an essential evil or a profit-boosting process. Still, as with every business decision, there are advantages and disadvantages.
As an IT management company, we obviously encourage outsourcing. However, we always make sure that our clients understand this decision holistically. That’s why we’d like to share all the pros and cons one should keep in mind before making this important step.
Outsourcing is not offshoring
First of all, let’s look at what outsourcing exactly is.
Outsourcing is the process by which an organization entrusts external companies or individuals to perform full or part of a job. It can be a development process involving a series of tasks or a single service job.
The parent organization just oversees the progress of the job and implements the results within its business processes. The company or individuals who receive the outsourcing order carry out the actual work on their own.
Outsourcing is sometimes confused with offshoring. Offshoring is the process by which an organization starts its operations in a foreign place. Here the personnel of the same organization carry out and manage the entire operations directly.
Both outsourcing and offshoring provide their own advantages. Outsourcing is the easier of the two in terms of implementation and management.
Here are some good things and potential bad things about outsourcing.
Good things first.
Brings more profits
This is what management loves about outsourcing. It multiplies profit. Outsourcing reduces managerial costs, labor costs and infrastructure costs associated with a product development or service significantly. How is it possible?
Outsourcing flows to destinations where desired specialists are more available and cost-effective. However, outsourcing shouldn’t compromise the quality of work! There certain IT-hubs bursting with qualified specialists, such as Kiev, Ukraine.
Cuts costs and development time
Reducing the cost of development is not only possible by hiring cheaper workforce. It’s also about the process. Outsourcing companies are specialized in their specific fields. For your company, some activities may be time-consuming, because of the learning curve. For IT companies, certain tasks are relatively easy, so they won’t cost you as much as e.g. training an employee or learning it yourself in order to conduct a specific project.
There’s a saying: “If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur”. It’s especially true in the IT business. Correcting pieces of code is often more expensive than writing it from scratch. It’s not just the figures, it’s also the time.
Also, let’s not forget that it often takes a long time to hire an in-house engineer. Using outsourcing companies, you can kick-off projects even as fast as in 1-2 weeks. And the faster you start, the sooner you start making profit.
Allows focus on core areas
Outsourcing can help you focus on the two core areas of success: making your product/service as good as possible and sales. It’s better to spend more time on the core activity, rather than incorporating all processes, at all costs. And if you manage to save money – spend it on marketing. In other words:
Do what you’re best at and let the specialists take care of everything else.
It probably took you years to make a quality product or provide a valuable service. It’s the same with us, project managers and IT professionals. At Bunch, we conduct an orchestra of IT specialists every day, and this is what we’re best at.
It’s usually the most beneficial to synergize with subcontractors. For example, a financial institution that wants to develop a new mobile service is probably not an expert in app development. That’s where outsourcing comes in handy – and it doesn’t only provide the actual product. It’s also ongoing support, customer service, maintenance, implementing new features, etc.
Greater chance of success
Outsourced teams are usually more flexible and diverse. As opposed to hiring employees and conducting the whole process internally, outsourcing firms have many specialists to choose from within the same project.
Companies like Bunch Consulting are involved in many processes at the same time and we know who exactly will be the best person for a certain task. Forming a team to develop a new banking app functionality is a huge task for the owner. For companies like ours it is a usual Monday morning 😉.
Delivering projects is just what outsourcing companies do. That’s our business. Therefore, it is much safer to let the dirty work to the pros and focus on key activities.
Remedy for talent shortage
It’s not easy to find developers these days. Especially in the most competitive countries and regions, such as the U.S., Germany, Scandinavia, or the UK. At the same time, there are places with talented and well-educated specialists, where the IT services market isn’t as saturated yet. One of the examples is Kiev, Ukraine, where our development centers are.
Of course, outsourcing also has some drawbacks. However, they have been around for a long time, so professional outsourcing providers already know how to manage them. Nevertheless, you should be aware of the potential problems before you commit your budget to a contractor.
Leaving your comfort zone
It’s not easy to put important parts of your company and a significant amount of money to someone, who you don’t personally know and is located in a part of the world you’ve never been to. Online meetings are just not enough for everyone. Try thinking of the benefits and look for companies with a proven track record and a valuable portfolio. If they helped others, why wouldn’t they help you?
Different time zones and remote management
You want to leave the office and call it a day, but your remote team has just had their first morning coffees. And, just like that, you’re stuck in an important call in the evening. Or the other way around – your team desperately needs your decision and it’s 3 a.m where you live.
Such thoughts could make you doubt your outsourcing choice. No one wants to work overtime.
At Bunch, it works in a bit different way and this wouldn’t be a problem. As teams and project managers arrange meetings with clients when working hours are crossed. For the rest of a workday, they work within a team on technical tasks, write code, requirements analysis, UI mark-up, and so on.
So that, a communication issue is resolved. The working schedule of a team adjusted to the client’s working hours. And both sides work with no overtime and overwhelm, in usual working hours.
Concerns about product or service quality
There is a serious concern that outsourcing reduces the overall quality of a product or service. Yes, sometimes such concerns are reasonable. But if you choose a professional team it won’t happen.
At first, you will get access to the team of developers and will be able to attend team meetings.
Secondly, in the properly arranged development process, the client always has an option to control the progress at every single stage. To make it possible, each tech team is led by a project manager. The PM closely communicates with the client, provides full reports on works done, regularly controls and reviews the budget and timeline. Project managers should also arrange demos of developed features.
Such transparency allows the client to see all the work and keep things under control.
Do I even know you? Concerns about trust
Modern legal system allows us to control international contracts and be sure that both parties are safe. Signing an NDA and Service Agreement is a common way to protect your business from the legal side.
Choosing a trust-worthy bank or payment solution to protect the transaction secures the process even more.
It’s also important to test your supplier with small chunks of work to reduce the first prepayment. Usually, payments are divided into bi-weekly periods based on project management reports.
And remember: all of the financial terms are negotiable as you’re the customer!
Even the “big guys” outsource
Do you think that Volkswagen produces all their car parts? Or that Apple and Samsung know how to make Gorilla Glass screens for their mobile devices? Think again. Such companies are focused on delivering the final product and rely on hundreds, if not thousands of subcontractors.
Think how you could implement a winning strategy and become the next “big guy” in your industry!
Let’s talk about outsourcing
Does the good outshine the bad? We leave that to your assessment. However, if you’d like to talk it through, we’re here for you. Leave us a message at firstname.lastname@example.org to set up an online meeting with one of our project managers.
In this article you can read about outsourcing in Ukraine, where our development centers are based.