It is a common practice for many companies, regardless of their size or industry where they operate, to engage with an external service provider to perform certain business tasks and functions. Rather than learning and doing everything, companies are increasingly outsourcing functions from payroll management, to staffing, accounting, inventory management, or customer care services, among others. This common practice allows companies to focus on their niche area and deliver better results to their clients. Technology and software development companies are more open to outsource administrative, book keeping and accounting functions but might not be so open to engage with a third-party company to improve their software development processes and other related activities such as testing, maintenance and support. By not doing so, they are ignoring some potential benefits that could help to streamline their development processes by establishing a working relationship partnership with a contractor that has the specific knowledge needed, the experience and best practices and a team of multidisciplinary professionals.
Increased In-house Efficiencies
When a company outsources some business functions to a reputable service provider, they gain access to experts who have in-depth knowledge of the work domain. The subcontracting partner does what they know best, with experts and experience that is shared with the company. Accordingly, the company internal teams are build and used more productively. The ultimate goal is to define a model that avoids any underutilization of resources or over allocation of tasks to the internal teams that can as a result jeopardize the team effectiveness.
Access to Skilled Experts
Technology is changing in such a rapid pace that it’s hard for companies to keep track of the trends, frameworks and tools needed in today’s software development centers. Gone are the days when a company had to learn, hire the right people and become an expert in every single technology they use. And of course, to keep up to speed with the agile evolution of the technology.
Software development contractors, many of them with offshore development centers, have trained and experienced professionals that are experts in several technology domains. Partnering with a software development company, the business benefits from the skilled experts, the experience and expertise to do a better job, quicker and more efficiently than if the company would embark in such as tasks with their internal teams.
Opportunity to Concentrate on Core Competencies
In every business, every department and every software development process, there are core and non-core activities. When developers have to perform core and non-core functions, their workload increases, the productivity decreases alongside their motivation and satisfaction and the quality of the results may suffer. Upon subcontracting some of the non-core functions, internal development teams are freed to focus on the fundamental business work with more time for strategic planning, creative and innovative thinking.
Subcontracting part of the non-core functions has implications also to the bottom line, therefore the need to craft a model and business relationship with your subcontracting partner that is aimed to be efficient and cost effective too. Subcontracting part of the development functions to an outsource company does not imply a hit to the quality of the company’s product or services, exactly the opposite. The increased efficiency and better quality associated with the expert subcontracting partners, and the specialization in the core competencies, helps optimize overall business productivity.
Increased Competitive Edge
Strategic subcontracting contributes to the attainment of a competitive edge in the market. When a company uses a hybrid resource model than combines the expertise from internal and external teams it drives the delivery of high-quality products and services. The superior combination of expertise with efficient business processes and optimal utilization of internal resources defines a winning formula that improves productivity, with focus on each party core businesses and building as a result a competitive advantage.
Craft a business relationship for sustainable competitive advantage.
- 1) Have an outcome based contract
- 2) Focus on the what and not the how, the supplier bring the expertise
- 3) Define success, manage and pay success
- 4) Model with incentives
- 5) Governance model built on insights
- 6) Goal alignment.