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To outsource or not to outsource?

As a company owner or a C-level manager, you probably asked yourself more than once: Should we outsource some of our activities?

This is one of the fundamental questions for each company, since it has a major impact on its strategy and culture. So let’s take a closer look at the topic of outsourcing and try to objectively gather pros and cons.

Pros:

1) Reduce costs

Each company has to be profitable in order to survive on the market. Being able to massively cut costs - up to 70%! - is a huge competitive advantage and an argument in favor of outsourcing.

2) Be faster than your competition

In a large number of industries the competition is fierce. Achieving faster time-to-market can in most of the cases be crucial in outperforming your competitors.

3) Avoid on/offboarding, training & workplace costs

Expanding your team is a great thing to do but it comes with some unavoidable costs of onboarding and training. For each new employee a workplace needs to be created. Hardware and Software must be bought. If you lose an employee you also have count in the offboarding costs.

4) Save time & resources for recruitment

Another aspect of enlarging your team is the long and costly process of recruitment. It does not only take a long time - 3 to 4 months on average - but it also ties some off your resources and thereby causes not only external costs for headhunting but also internal costs.

5) Faster product innovation

Especially in well established companies, which are 20 or more years old, employees tend to stick to their old tools and routine tasks. They are not willing to move from their comfort zone, learn new technologies and innovate. Outsourcing is an excellent tool for boosting your product innovation since outsourcing companies are forced to keep the pace with all modern, widely accepted but also bleeding-edge technologies.

6) Leverage state-of-the art know-how

Even if your employees are interesting in learning new technologies, this whole process takes time and - in the worst case - you can lose those costly trained employees and the know-how.

7) Scale up/down on demand

Sometimes you just need some extra workforce in order to finish your project on time. External teams are an excellent mean to scale up on demand. Project is finished and you do not need extra manpower and want to scale down your team? No problem with the outsourcing provider!

8) Mitigate risks

All arguments stated above actually aim at one thing: mitigate risks of not being profitable or competitive.

An EU-based outsourcing partner like Laniteo gives you a legal security and thereby mitigates the risk of sub-optimal collaboration with the outsourcing partner.

Cons:

1) Costs for finding the right outsourcing partner

Let’s be honest: Finding the right outsourcing partner will definitely cost you some time and money, but these costs are moderate since only one or two management members are involved.

2) Arouse uncertainty among employees

Usually the first thought that comes into the mind of an employee when it hears a management decision to outsource is fear of losing its own job. Hence the management has a very important task to clearly communicate to its employees that their jobs are not at danger and that outsourcing is a an opportunity for all to improve their skills and learn something new.

3) Culture clash

Unintentionally establishing double standards for your own and external employees is a common trap some management members fall in. In order to ensure a best possible collaboration between internal and external employees, the same standards must be employed.

4) Not owning the know-how and dependency on outsourcing partner

Some negative aspects of outsourcing can simply be overcomed by proper management actions. This is a nice example of such a case. If our clients have their own software development team, we always strongly advise them to tightly integrate their team with ours and therefore ensure that at least some of the employees have embraced new know-how from our team and can keep maintaining the software product long time after our involvement in the project has ended. Also this risk is present within your own organisation. Your employees may leave your company and thereby “export” the know-how and product experience.

How to choose the right outsourcing partner?

In today’s global and connected world you can find outsourcing providers all over the planet, so the choice is huge. Before making a decision some major criteria must be taken into consideration like the location of the provider which implicitly defines the operating time zone, communication culture, level of education, legal security and the price. Beware of the cheapest services since they imply that the outsourcing company probably does not invest in continuous improvement of its employees and their working conditions. Only well paid professionals working in excellent working conditions are satisfied with their job and can provide you the maximal value.

Executive summary:

Fulfilling all project requirements on time is a hard. Keeping costs under control is even harder. As a manager you always have to try to get the best value for the given budget, but still keep in mind that your company’s culture and employees are consonant with your decisions.

With outsourcing you can:

  • save up to 70% on costs
  • achieve faster time-to-market
  • avoid hiring, on/offboarding, training and workplace costs
  • save time & resources for recruitment
  • boost your product innovation
  • leverage state-of-the art know-how
  • scale up/down on demand
  • mitigate risks

If you have any further questions, or simply need help by the analysis to make your decision, please contact us. We offer you a free consulting.