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Think You’re Too Small for Outsourcing? You May Be Surprised

Posted on October 8th, 2012

Business Outsourcing

Appointment-Plus CIO Stephen Booze provides his insights on outsourcing in the technology industry.  Serpico DEV maintains a great working relationship with Appointment-Plus as a software development provider for their online scheduling application.

While the term “outsourcing” is permanently etched in the business lexicon, there is still an overriding sense of uncertainty that flows throughout a company at the prospect of moving in that direction: CIO’s worrying about intellectual property, project managers refilling their ulcer prescriptions, and developers updating their LinkedIn profiles. While this is clearly tinged with a bit of sarcasm, the belief is that many companies feel that outsourcing is only a viable option for larger organizations. However, that is far from the truth, and any anxiety can oftentimes be tempered once the true cost-benefit analysis is performed.

The horrors and triumphs of IT Outsourcing (ITO) are well-known. Everyone knows someone who knows someone whose company went down the outsourcing road, only to have things go dreadfully wrong or incredibly well. Gartner, a leader in providing technology research, shows ITO service spending has grown from 247 billion in 2011 to 251 billion in 2012, which makes it clear that the positives are outweighing the negatives for many companies. While the number obviously is comprised of many large organizations, I have experienced many small businesses getting the same, if not more, benefit from choosing the outsource model.

Typically with small businesses, if there is any outsourcing, it is done on the front end, e.g. a prototype or proof-of-concept, and is almost solely with software developers on a time and material basis. While there is value in this approach, it is often shortsighted. If the product or service is proven to be a success, there will be ongoing development and maintenance needs. Yet, the developers contracted are usually off to another project for another company, and the business is left with either sub-par developers or spending time, effort and money ramping up a new contracting team.

To counter this result, more outsourcing companies are focusing on full-time, long-term placements. This is an obvious benefit to the outsourcing firm in regards to predicable revenue, but it is also a plus to the small business, as they are able to have the same resources allocated solely to them at a lower cost than standard contracting and at a fraction of the cost of a full-time employee. Additionally, there is value in training these individuals, as the knowledge won’t be lost, and the risk of losing control of proprietary processes goes down.

When considering what to outsource, ITO always comes to mind. However, some of the more progressive near-shore and off-shore firms also offer resources for Business Process (BPO), Knowledge Process (KPO) and Legal Process (LPO) — all of which can extend the small business dollar while introducing a high level of expertise. Even within ITO, other areas such as cloud computing make solutions such as Data Centers (DCO) and Application (AO) outsourcing significantly less expensive with the added benefit of almost immediate cost savings and greater system availability, scalability and security.

Besides the benefit of costs savings by outsourcing, there is also another significant value for the small business — focus. Utilizing individuals to take on the items that are lower level in nature will allow your permanent team members to spend their time and energy on providing more substantial impact to the business by focusing on the higher value strategic initiatives. Not only could this positively impact revenue, it could also increase motivation and morale for those permanent resources.

Getting started is relatively simple and similar to entering into any other partnership. Complete the regular due diligence, looking for firms that are in line with your business size and needs and that will let you “dip your toes in the water.” If your need is on the resource side, select a smaller project with a predictable outcome and a realistic set of expectations. If it is more solution/services-oriented, choose a component of your business you are comfortable placing outside of your walls (e.g. data storage, customer relationship management, etc.). And always keep in mind that the true benefit of outsourcing is not in replacing internal resources or hires, but rather lessening their daily burden so that they can be fully utilized for their talents and skills.

For more information on our outsource business model or software development services, please contact Serpico DEV.