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Outsourcing – To be or Not to be?

Date: 2020/04

Your response to this question may well make a difference to your company’s market competitiveness, standing and sustainability. This article enlists top five advantages of both the models (outsourcing and in-house development) that one should consider before making any commitment.

One of the most strategic decision that CEO and CIOs need to undertake is about if, what and how much to outsource. Outsourcing could be one of the key levers for enterprises to gain competitive advantage, besides influencing P&L outcomes. However, there is a need to weigh these benefits against possible shortcomings of outsourcing as well as advantages that an in-house development model brings. So, to be or not to be? To best analyze the opportunities, it is essential to reflect upon the following factors modern leaders should consider when deciding whether to outsource or do in-house development.

For Outsourced development:

The following represents some of the compelling reasons for outsourced development:

1.  Time-to-market:

Most of the industries are now supported by mature product companies offering well-engineered off-the-shelf software and scalable service models. Companies can tap into these options available in the market and drastically reduce the time for market of new business systems and thus support their business more efficiently.

2.  Industry Best Practices:

Many outsourcing solution providers invest heavily in researching on industry standards and best practices, and embedding them into their software. Through outsourcing, companies can adopt to these practices and remain competitive

3.  Innovation:

The pace of digitization in the market demands companies to continually innovate and adopt to new business models. Outsourcing provides companies access to technology and intellectual capital that can help it to quickly respond to the digitization needs of the business and remain at the cutting edge.

4.  Cost Efficiencies:

In-house development requires extensive investments in technology, infrastructure and people. A mature outsourcing market allows access to inexpensive business solutions deliver cost efficiently – for example, through Cloud

5.  Focus on Core Competency:

Outsourcing allows companies to remain focused on its core business competencies and avoid any compromises on management bandwidth. It can look at external vendors with the right expertise to deliver it the business-enabling tools while focusing on what it does best: Conduct business.

For In-House development:

The following represents some of the key advantages for in-house development:

1.  Custom Fitment:

In-house development allows for creation of a unique and bespoke system that can align exactly as per company’s brand positioning, business need and IT strategy. The in-house software team works with the business users and other stakeholders, to develop a tailored system incorporating exactly or most of the direction provided to them.

2.   Seamless:

In-house development model allows the company to have direct access to the development team. There is a relationship between the development team and the user base which helps establish delivery expectations. This mitigates any risk of miscommunication and avoids budget and schedule over-runs because of rework.

3.   Control:

Company retains the control over the pace and direction of the software based on the business dynamics. It also has a control of the business and customer data, which poses significant business risks if a company outsources to an external agency which has access to this sensitive asset

4.   Ownership:

In-house development allows companies to have complete ownership of the final product and its source code. It retains the knowledge gained while developing the software and has an absolute influence over the roadmap of the solution that can be aligned to future business strategies.

5.   Government Regulations:

Globally, there is an outsourcing backlash and governments are working overtime to build regulations that will continually make it difficult for companies to outsource. In-house development allows companies to avoid any business impact of such regulations.

So, what’s the answer to the question – To be or not to be? Most business leaders will say “Somewhere in between”. Traditional theories preach that voluminous and non-critical business tasks are the best, and only, candidates to outsource. However, the growing need to adopt to digital trends are forcing companies to be open minded and undertake a holistic approach for outsourcing. A careful consideration of the business environment, regulatory conditions and cost benefits will help companies to arrive at the right outsourcing strategy.