What Not To Outsource – Is There A Right Answer?

August 31, 2016 5:29 pm | Updated 5 years ago.

Outsourcing and Technology

The fact that companies need to outsource parts of their technology requirements is no longer a topic of debate as in today’ competitive environment

  1. No business can develop all required technology skills within the company
  2. It is almost impossible for the businesses to continuously keep re-skilling the employees in new technologies, given the pace at which technological innovations are taking place
  3. It is almost impossible for the businesses to manage the headcount optimally as new projects ramp up or existing projects ramp down and
  4. Last but not the least, in today’ global scenario, it will not be prudent for any business not to leverage global talent, global innovations and the cost benefits from labor arbitrage.

Given, therefore, that it is almost a necessity for every business to outsource some portions of its technology requirements; the debate is now focused on what and how much to outsource to maintain a balance between business goals and employee sentiments.

Recently there was a lot of discussion on “Offshore Outsourcing Cuts Facebook Page Costs 60%“, with a recommendation that possibly the Social Media management of a Business could be outsourced to offshore vendors to obtain significant cost advantage. While it was agreed that there will be significant cost advantage from outsourcing social media management to offshore vendors; the discussion, however, concluded that only routine activities (like operating facebook page, developing apps, writing content etc.) should be outsourced and the critical activities relating to Brand Management of the business must be retained in-house, as the offshore vendor will not be in a position to assess what the brand of the company stands for and what the brand means to the customers of the Business.

While the answer to “What to outsource and what not to outsource?” will depend to a large extent on the size and internal capabilities of the business and also the strategic direction of its management, some very high level guidelines can be used to start the thinking process on the technology outsourcing initiative.

1. Infrastructure management:

Traditionally Infrastructure Management has been the area that is considered as the first candidate for outsourcing by any business. In D2E’ opinion, the entire Infrastructure management should be outsourced, especially given the advances in Remote Infrastructure Management (RIM) technologies leading up to Zero Incident Management Framework that combines Predictive Analytics with IT Operations Management.


2. Custom application development:

Custom applications are usually developed by the businesses to gain competitive advantage leveraging IT systems and technology innovations. In D2E’ opinion, the application requirements specification and application design should be kept in-house and the remaining functions including the methodology to capture the requirements in a structured manner, technical design, coding and testing including QA can be considered for outsourcing.


3. Packaged software (ERP, CRM, SCM etc.) Deployment:

With the advances in Cloud technologies providing high levels of security and data protection and the number of packaged solutions available in the cloud environment, businesses must consider outsourcing all their routine BAU (Business As Usual) functions, not only to reduce cost, but also to free up their resources for business critical functions. In addition, most cloud platforms like IBM Bluemix, Microsoft Azure with Cortana Intelligence Suite etc., offer a development environment for the businesses to develop analytics and application modules that can be integrated with the packaged software deployed on the cloud to provide an end to end solution.


4. Business processes:

In D2E’ opinion the business processes that are core to the business e.g. strategic account management, new product launch etc., should be kept in-house. Routine functions like payroll, collection etc should definitely be considered for outsourcing.


5. Knowledge processes:

Here the outsourcing option should only be considered to generate the data and information that is required for the business to take strategic decisions. The actual processes involved in strategic decision making should be kept in-house.

In conclusion, while there is no right answer to the questions what functions should be outsourced and what functions should not be outsourced, as a rule of thumb any function that does not add competitive advantage to a business should be considered as a potential candidate for outsourcing.

In D2E’ Aggregator platform, D2E’ onsite partner Affinity Inc., based in Milwaukee does the assessment along with the customer on what functions should remain in-house, what functions should be performed onsite in the USA and what functions should be outsourced to offshore specialty vendors.