Clearly the new global circumstances have forced many businesses to rethink their direction. Technology seems to be moving, not fast, but at breakneck speed and market uncertainty is at an all-time high. Outsourcing and the need for effective outsourcing strategies have been around for years, yet now they have become an almost mandatory step for the many businesses who need to either start their digital transformation journey or advance technologically in various ways.
In such an environment being able to adapt is essential for any organization. A good outsourcing strategy can be the thing that makes or breaks the future of a company. Is there only one? Of course not. Outsourcing strategies are as numerous as there are businesses, but they all have some ingredients in common. Even the same company can have different strategies for two different projects. This all comes down to all the factors involved in the process.
What types of outsourcing strategies and needs exist at the moment?
In the past, outsourcing was only focused on cost reduction and filling gaps in the capabilities of a company or increase productivity through delegating work not in the core interests of the business. It was used when there was an increase in demand for a service, or product when projects not at the core of the business were taking too much time.
Business impact
In recent years information and communication technologies have taken almost center stage and many companies face the pressure to bridge the disparity between the way they were doing business before and the capabilities they require to reach business goals in the current environment.
Nevertheless, now there are other ways to look at outsourcing, outside of the classical needs. IT outsourcing is the main ingredient in reengineering, in knowledge management, and in creating innovative electronic channels of distribution, as well as in the development of strategies toward a digital presence, so, the focus has shifted to business performance.
When using it for business impact, there isn’t a lack of digital resources that need fixing, but the existing lines of business are expanded to incorporate more tools and gain a competitive advantage in the market. In this case the companies strive to develop complementary skills and abilities that will ensure the best management of the newer technologies and a reconfiguration of workflows by incorporating dynamic forecasting, efficient response systems, logistics optimization, customized marketing, and products. Outsourcing becomes a way of keeping up to date with the latest technology.
Commercial exploitation
Commercial exploitation centers around making the most of the technologies already on the market and branching out into offering digital services or products that were not the initial focus of the organization. Leveraging applications, operations, infrastructure, and know-how is a great way for companies to reinvent themselves as providers of technology-based products and services. Its goal is to improve the return on any massive IT investment. Not only does it technologically re-energize the business, but it can create extra revenue and offset most of the costs of changes related to technology. Organizations can do this through licensing systems or technologies built for internal use and have matured enough for an outside audience. They can sell information systems, services, or similar products to other firms or they can start new IT-based businesses.
These strategies are generally cumulative, not mutually exclusive and can be implemented at the individual level of possibility and desire of each organization.
Models for outsourcing strategies
When creating an outsourcing strategy, it is important to know how many types of models are available to be able to choose the one that is right for your organization.
Onsite
Onsite outsourcing means hiring a team that moves to and works on the premises of your organization. It is very easy to manage because all departments are in the same location and there are no delays in communication.
Offsite
In this model, the team has its own headquarters and only attends periodic meetings. Because all the people involved are not that far away, but in the same city, or nearby cities, communication can happen easily enough and smooth collaboration is more possible.
Offshore
Choosing to offshore has marked advantages because the organization has access to and can benefit from the knowledge of a highly-skilled international team, it can get access to specialists maybe not be available in proximity. At the same time, communication and collaboration are a bit trickier to accomplish without bumps. This team needs to manage the whole project and the lack of control can be problematic.
Nearshore
The teams work in a different country, but not on a different continent and the time zone does not pose so many issues. Meetings can be synchronized better and overall management of the project goes smoother.
Onsite/offshore
Your in-house team works in collaboration with a team in another country. The management of the project is the responsibility of your team who delegates the necessary tasks to the offshore one.
Offsite/offshore
The team you hire does not work in the company, but they are tasked to work together with the offshore team of your choosing. Business and technology need an intermediary to make sure everyone is in the loop and things go according to plan.
Global delivery
In this instance, the team is complex and has an onsite branch, offsite team or teams, and offshore developers. The management is more challenging, but it is a good model if the company has to use a large team and can distribute tasks to each of these components of the larger team.
Outsourcing strategy
Outsourcing happens on a scale, from modest goals to a complete reengineering of the business processes. In the latter case, work practices morph, the staff is reskilled, company culture suffers major changes and all that is no small feat. Regardless of where the company is on this scale, building a road map ensures a higher degree of success.
Every project is a risk, outsourcing increases this risk so, building a very clear strategy is an effective method of finding the right balance between risk and reward for the company and the vendor.
Business case
The first step is to create a detailed business case that will support company objectives. Deciding the what, when and why of the project makes it easier to have a global vision of the project and to plan the next steps that can accomplish your goal in the most effective way. This is crucial since outsourcing requires multiple departments (legal, HR, operations, business, IT) to work together so they all need a clear direction and actionable steps.
Budget
The second most important move is to establish a very carefully thought-out budget. The project should not drain existing resources, at the same time it should not be extremely strict. In the contract state clearly conditions for any supplementary charges. The nature of such endeavours requires planning for both estimated and unexpected costs.
Choose compatible partners
Prioritize the skills and know-how for the project to be able to find the right team for the job. These have to include both technical and creative expertise according to project requirements. Learn as much as possible about the outsourcing partner you intend to choose in order to build trust and ensure you agree with their methodologies. Discuss means of communication, how cooperation will work, deadlines, extensions, how success is measured, the ratio between expenditure and productivity, and any other details necessary for successful collaboration. Also, your organizational culture and work practices should match that of the vendor.
Blended stability and flexibility
Design a governance model that states expectations, how the process will be documented, what are the best practices of the collaboration, that establishes a platform and schedule for meetings to address issues and discuss progress, changes, and other necessary communications. It is important to remember to create partnerships that are flexible enough to allow for modifications in your company if they arise. Businesses have to think about creating continuity by anticipating change and thinking ahead about how to approach and manage it.
Takeaways for great outsourcing strategies
An outsourcing strategy can offer immense benefits if done well. Delegating tasks and projects can increase core productivity and allow the organization to innovate while keeping current with technology and staying afloat, even thriving in the face of global change. Working with teams that are located in other countries or that are not part of the company fosters flexible business modeling and speeds up the adoption of agile practices. The quality of the products and services increases since there are teams focused only on them, and you can manage any changes or issues as they arise. Your flow can improve continuously to reach the highest standard while also being present on the market when the time is right. A good outsourcing strategy can help an organization scale successfully and with reduced risk while developing international connections and taking advantage of the latest technologies.