Should you choose outsourcing or in-house IT development?
Typically, a business chooses the type of model based on its objectives, internal regulations and budget. Those organizations that have chosen the outsourcing development path most often do this so that they can optimize financial and time costs and concentrate their own resources on higher priority tasks. Companies that successfully use the outsourcing model often report a decrease in the total costs of the organization by up to 25%.
In 2018, according to Deloitte, the business used outsourced development services primarily to reduce their time-to-market, scale quickly and improve product usability. Statistics for 2020 showed that priorities have changed and now the reduction of financial costs is playing a key role as well. According to the Global Outsourcing Survey report, 70% of companies use outsourcing development in order to optimize costs; 40% gain more flexibility by using external resources; and 20% continue to use external experts to increase the speed of product releases.
Data from the analytical agency Statista confirms the trend. More than half of business leaders, namely 59%, talk about the widespread use of outsourcing in order to reduce costs. The rest of the respondents use the outsourcing model in order to move away from micromanagement and focus on more important business activities.
The events of the past year, the shift in focus to global digitalization, the growing volume of IT tasks, especially in the fintech industry, and the shortage of competent personnel, have forced many companies to take a closer look at the outsourcing development model and increasingly attract external expertise for the implementation of internal projects.
At the same time, there remains a segment of companies that do not use IT outsourcing services or use them to a limited extent. Some of these believe that working with external teams limits the control over development processes and that it is more difficult to manage such processes than internal ones. Others believe that outsourcing is expensive and more profitable to use the resources of full-time specialists. The opinion that only internal development will provide a high quality product is also widespread.
As a rule, these common judgments have frequently been caused by a negative experience gained when using outsourcing services at the dawn of this type of activity in the early 2000s. But modern outsourcing development of IT products has nothing to do with the practices of 10–20 years ago. So what should a modern IT outsource be like? And why is the experience of progressive companies using these services today radically different from the experience of the early adopters of the 2000s? Let’s figure it out.
What kind of work is most often outsourced?
Let’s consider the most common types of outsourcing services used by companies today:
- Execution of separate blocks of work, often on an irregular basis. This can be both the modernization of existing systems, taking into account current changes and market conditions, and the creation of often complex products. This format is convenient when the work is temporary, and the staff does not have the necessary expertise and resources to implement the task.
- Outstaffing project teams or individual specialists for a specific type of work, for example, auditing IT systems or testing new product functionality. Outstaffing for specialists is used when you need to close urgent tasks or strengthen your own team.
- Technical support and the development of software solutions, including maintenance of previously created IT services. This can be either temporary technical support or permanent, if, say, an application needs regular updates.
A wide range of opportunities shows that outsourcing specialists today can cover many business needs. But the companies that have a reliable, proven outsourcing team in partnerships that are most comfortable and productive to work with are able to appreciate the advantages of the custom development format.
Peculiarities of relations with outsourcing teams
Often, the interaction of the customer with external development teams takes place within the framework of the client-temporary worker model. The next project, whether it is the creation of client solutions, a web service or a mobile application, means a relationship with a new contractor. In each case, the project work is preceded by a procedure for checking the service provider, agreeing on formalities, signing a package of documents and an inevitable period of adaptation to the specifics of the customer’s business.
Unfortunately, this way of working often does not bring the expected productivity and can leave a negative impression on the customer. The product owner spends time and resources on organizing the process, but as a result does not get the desired result, due to the lack of proper involvement of external developers in the client’s tasks.
These difficulties can be avoided by choosing a reliable external contractor for a long-term relationship. A successful partnership with a responsible outsourcing team will not only dispel typical fears, but also develop into a comfortable and beneficial trusting relationship for both parties. The customer will receive a proven contractor who already knows the internal processes well and is ready to provide the necessary resources on demand.
What should a reliable IT partner be like?
How can you identify a responsible and conscientious partner when the market is saturated with hundreds of outsourcing companies? And what qualities of an IT partner should an organization pay attention to when outsourcing a product might be a key competitive factor?
The competence and qualifications of IT specialists
The most important thing is the people and business processes within the partner company. High hard skills of developers can lead to flawless code and architecture, but not always to create a successful product. First of all, the success of a software solution depends on the specialists who create it. It is important that the outsourcing company forms project teams not only with relevant experience, but also with high soft skills. All members of the project team should be aware of the client’s business goals, and not implement the project strictly according to the terms of reference.
Only this approach will allow specialists to develop a product that can exceed the customer’s expectations. Employees of the developer’s company should regularly take advanced training courses, learn new practices and methodologies, and also pay special attention to the development of soft skills. The developer’s company should systematically conduct internal meetups, training sessions, detailed analysis of projects for completion and training sessions focused on the development of personal competencies.
It is also good practice to work with an outsourcing partner with distributed teams around the world. This allows IT contractors to operate with the world’s best practices, since in such companies, developers have the opportunity to regularly exchange experience and new knowledge and use it in projects.
Focus on the customer and listening skills
It is a common practice for IT developers to replace a custom solution with their own pattern, sometimes referred to as “industry” or “generic”. Such solutions are far from always suitable for the customer, so the outsourcing company should focus primarily on the needs of the client. It is extremely important to be able not to listen, but to hear and delve into the client’s tasks in order to offer the client the optimal and effective solution from all possible ones.
It is necessary to be well oriented not only within the terms of reference, but also at the level of understanding the customer’s business. When receiving an assignment, you need to conduct a deep analysis of the product, study the requirements, and immerse yourself in all processes. A reliable outsourcing team, even at the stage of analysis, will be able to predict and necessarily signal the client about potential difficulties in the further development of the product or identify blind spots, even if this task was not there. Such a partner will be guided by the interests of the client and will always offer the best solution — including the vision of the product, its architecture, the composition of the team and the optimal calculation of the cost.
Engagement and motivation of the partner’s team
The motivation and involvement of the performer influence the final result of their work. Therefore, the heads of the outsourcing company departments must closely monitor the emotional state of their specialists. Daily calls, stand-ups, synchro and 1:1 sessions will help to feel the general mood of the outsourced developer and, if necessary, adjust their workload and tasks, form new KPIs, determine priority vectors of movement in work, develop an IPR (individual development plan), and other such activities. The higher the motivation of a specialist, the more efficiently they will be able to work.
The degree of developer involvement in the client’s tasks is formed, among other things, by the development of soft skills. Therefore, the HR department of an outsourcing company should pay attention not only to improving the professional qualifications of employees, but also to focus on the development of personal qualities. The task of the HR department, in this case, is to set up teamwork with a focus on the client and, of course, on the quality of services. Conducting specialized training, modular training and profile meetups should become a regular practice.
Openness and willingness to create dialogue
Very often the “entry point” in an outsourcing team is a project manager who directly manages developers, analysts, testers and designers. Some customers are comfortable with this interaction model. But most of the clients want to communicate directly with the everyday executors of the project.
Unfortunately, not all outsourcing teams provide such an opportunity for fear of specialists hunting. Sometimes outsourcing companies introduce project team members through interviews, but further communication is still carried out through the project manager. The task of a reliable partner is to provide the customer with a comfortable format of interaction and provide an opportunity for direct communication with developers, if necessary.
Flexibility and transparency
No matter how competent, motivated and open the outsourcing team may be, a flexible approach to solving problems and transparency in the implementation of tasks have been, and remain, serious requirements for an IT partner. Within a single project, the current requirements may change several times. In such conditions, flexibility is required on the part of the outsourcing partner, as well as speed in adaptation to any changes, and the prompt generation of new solutions based on current conditions.
One of the main fears of the customer when transferring the project to outsourcing is the lack of transparency. To provide the client with a comfortable and simple collaboration, the IT developer must be ready to work in any task tracker convenient for the client. Project management in a single service will allow the company not only to promptly transfer new data to the contractor or change the requirements for the product, but also to see the current statuses of the completed subtasks at any time. This format of interaction will provide the customer with complete control over the project and secure work with the IT partner.
These days, the IT services market offers various development formats. The customer has the opportunity to choose a truly convenient model for solving specific business problems. There are already companies on the market that are ready to provide not just a service, but a fully-fledged partner ecosystem, where the client does not need to worry and control the quality and timing of tasks. For many customers, such a partnership is becoming the only working model for conducting IT projects — and this, in turn, motivates outsourcing teams to offer the client even more convenient formats of cooperation.
Keeping up with the needs of your business requires a consistent and reliable partner who can provide a quality resource to help you meet your business goals and clean up your backlog on demand. Such a partnership will remove operational issues from the customer and allow top management to focus on the strategic goals of the business.