We are wrong about what Outsourcing is all about
I started working about 5 months ago for Jobsity, a nearshore development company, as the business development and sales manager. As any new job you start off by reading everything you can about the company and the industry it is in and talking to others in your same line of business to learn and understand the industry. Then I started talking to prospective clients and listening to what they were saying. I signed a few clients and started working with them to setup our services. That’s when I realized that everything I learned and read about outsourcing is wrong.
I was surprised that many of the people I talked to (potential clients, others in the industry) looked at outsourcing mainly as a way to reduce costs. I understand why they see it that way. Our industry as a whole has marketed itself as a cost saving service and made it almost like buying a commodity. Development is not a commodity, it’s not like buying apples or oranges and it shouldn’t be. I know, I actually did development work a few years back. Development is not a cost center to be trimmed and sliced every which way to reduce cost, and we in the industry are guilty of pushing that idea. We have been selling outsourced development for what it is not and that is a commodity or even a strategy. It’s neither one.
Almost every website of outsourcing outfits pretty much all market themselves and market outsourcing the same way. They will talk about design, technology, process, project management, and experience. They will put up case studies (projects that were successful but what about projects that failed and lessons learned), rave about their happy customers, their technological savviness, share a fun uplifting story about themselves and promise to build the best apps and sites. Some, which is rare, will talk about the importance of their people and talent (like Jobsity) and think of themselves as recruiters that have invested in developing the processes to find and groom great developers.
But how does any of that help you as a company that is trying to figure out if outsourcing is right for you? When companies are exploring if they should or should not outsource development they should not even ask themselves how much am I going to save or what services I need or like a recent person I talk to and said “but I already have developers why would I need you?” (This was the catalyst for this article actually. It was a great question). They should, first ask themselves what is my business strategy and then would outsourcing help me meet the goals of that strategy. Outsourcing is not just about costs or services but about meeting a business strategy and its goals. So what is the strategy your company is following?
Growth Strategy: A growth strategy entails introducing new products or adding new features to existing products or quickly expanding to increase market share. How can outsourcing help? Imagine you are a startup and you are trying to beat your competition to roll out a new application or build out features. Outsourcing can help you scale up quickly and increase manpower in a very short amount of time. It also gives you the flexibility to add on the skills sets that you need when you need it. One month you need to build out a UI and then the next make the back end more robust, and then another month build an API or new features. Outsourcing can give you the flexibility to switch resources and grow quickly especially when finances are limited. Even for large firms without financial constraints, recruiting, training and equipping a new team takes time and a lot of effort and outsourcing can be a solution to quickly ramp up when time is of the essence. Outsourcing is not the strategy, growth is!
Focus Strategy: Say you are intent on differentiating yourself from your competitors and decided that you will be the quality leader or you will be the best at customer service. How can you meet that strategy with outsourcing? By letting you focus on the processes that are the core of your business. Say that you are a digital marketing company that does a lot of Drupal development but you are getting clients asking for WordPress. It’s a minor part of your business but you like the revenue stream but hate the fact that your team has to split time/duties. Well outsourcing the WordPress development could make sense especially if your team can now focus exclusively on the big Drupal development and can apply more manpower hours and focus on quality by, for example, spending more time on QA. Outsourcing is not the strategy, focus is!
Differentiation/Risk mitigation Strategy: Outsourcing can also help your company in accessing specialized talents needed to meet your strategy of differentiation. Imagine that you would like to build up the features of a new app or make it more accessible by using an API but you don’t have the know how. Add to that, the problem that direct hiring takes time and building your knowledge base. You have to search, interview, and hire the right person(s) and then only down the road can you determine if you are getting a good developer(s) or team and with all the skills you need. Sometimes you can even misjudge what skills you required in the first place since this is a new technology or maybe the scope of the project changes along the way. Outsourcing can reduce the risk by contracting with a firm that specializes in that specific technology and if the firm has full stack developers it can reduce the risk of requirement change. Sometimes it’s Murphy’s Law that comes at you out of nowhere and bites you. One time, we had this client that was releasing a huge Drupal site that we helped build but the site kept having slow load times and their team couldn’t figure it out. It didn’t seem to be a code issue so our developer exclusively assigned to them was at an impasse but since Jobsity has over 60 developers we pulled everyone in to look at the issue. We had UI/UX, IoT, Database, QA, Backend, DevOps, you name it developers all looking at the issue and collaborating to find a solution. After brainstorming and doing some testing the problem was found and resolved and we never charged our client. Why? Because it takes a village to build a great site or application and outsourcing can make that village a little bigger. Outsourcing is not the strategy, differentiation and risk mitigation are!
Cost Leader Strategy: This strategy is pretty self-explanatory and basically calls for being the lowest priced in the industry. This is the situation most people think of when talking about outsourcing and where it gets its bad reputation from. Most start picturing the closing down of factories and the shipping of jobs to low cost areas around the world like China, or India. But there are two ways to become a low cost leader. One can either slash/reduce cost and go the India and China route or increase productivity. How can outsourcing increase productivity? You might think by scaring the rest of your employees to work harder or lose their job. But that is the wrong approach and honestly ruthless and bad for moral. As in the focus strategy, you can take the work that you are not very efficient at, low value, that your team doesn’t like doing and let them concentrate on the things they love to do and what they are great at. Given them more hours to focus on their main duties and work that is high value would not only increase their productivity but increase the quality of their work. Honestly we are good and fast at things we are good at and procrastinate and are sloppy with the things we dislike. It’s human nature. Also does it make sense to use your $180k PHD computer science guru to code a landing page versus coming up with new algorithms to increase efficiency? Outsourcing is not the strategy, increasing productivity and manpower utilization are!
Based on each type of strategy, outsourcing can be used in different ways to further the company’s strategy. It is the strategy that pushes how outsourcing is used and not the other way around. Outsourcing is not a strategy but a tool/tactic among many to consider. Nearshore staff augmentation to build distributed teams is becoming a highly popular approach. Once you have determined your business strategy and come up with the goals and timelines, only then can you ask yourself is outsourcing right for me? Does outsourcing make sense as a solution among others for my organization? Maybe it will or maybe it won’t but you will be better prepared to know if it is right for you and more importantly how to use it. Once those questions have been answered, you can explore all those case studies and read those fun uplifting stories and ask me how my services fit in your strategy. You can ask me how this or that service will get you one step closer to achieving your goals? How am I going to help you meet your growth, focus, differentiation, risk mitigation or cost leader strategy?
If you think or would like to explore if outsourcing could be a solution for your organization's strategy, then I am here to brainstorm with you and see if and how Jobsity’s nearshore model can be integrated into your business strategy. I might even recommend you to go a completely different way if I believe that is the best option for you because I am here to consult and advise you and work with you to find the best solution to meet your strategic goals. If we conclude that nearshore is the best solution for you then we can go in more detail about culture, time zones, experience, technology, development methods, organizational structure, reporting, accounting, risk management, service model, project management, mitigation plans, communication and more. I would be happy to help you develop a tailored Strategic Talent Management plan that would be best suited for your organization. We could look at different hiring models and find the best custom fit for you. I forgot to mention "pricing" the last thing to discuss because outsourcing is not a commodity. Feel free to contact me via LinkedIn or by email at firstname.lastname@example.org if you have comments, suggestions, or would like to get your free consultation on how to implement a Strategic Talent Management plan.