Economists’ predictions for an upcoming recession from the summer of 2022 are slowly becoming a reality. Besides preparing for what is coming next, businesses are still challenged by the pandemic-related disruption and geopolitics while adjusting plans to the current talent shortages and developer costs. The uncertainty in recent years seems to be the new normal, and businesses must find ways to navigate it.
To leverage every opportunity in times like this, it is essential to manage internal resources according to the business needs. And sometimes, this means Outsourcing. Doing everything all alone, reaching the desired goals, looking for ways to optimize processes, building teams – why juggle between all these tasks instead of delegating some of them to an external 3rd party service provider?
This blog post outlines the importance of Outsourcing with a strategic partner in difficult times.
Strategic Sourcing takes over Outsourcing
This is not a battle; let’s consider it an evolution of the partnership, where the added value for business makes the difference.
As Outsourcing has become a common practice across industries and service lines, combined with high labor costs and IT talent shortages – it becomes even more critical for companies to tie a strong bond with a reputable business partner.
Strategic IT outsourcing is a proactive and well-planned approach to acquiring IT services, products, and solutions. It aims to ensure the delivery of quality services that support the growth and success of the organization. On the other hand, Outsourcing is a more general approach to procurement that focuses primarily on reducing costs and improving efficiency.
Outsourcing often involves the transfer of business functions to a third-party provider, with a focus on cost savings, without considering the long-term impact on the business. As a broad term, Outsourcing encompasses a range of arrangements and can be utilized for specific projects or continuously.
In contrast, Strategic Outsourcing in the IT industry is a well-considered approach to Outsourcing to align the procurement of specific knowledge and services with the organization’s overall business strategy. This approach requires a thorough evaluation of potential third-party providers, considering their capabilities, quality of services, and alignment with the organization’s goals and objectives.
The primary goal of Strategic Outsourcing is to establish a long-standing partnership with the client to ensure the delivery of high-quality services that are the main driver behind strategic changes. As a result-driven approach, Strategic Outsourcing prioritizes the long-term impact on the business, how it navigates business cycles, and considers potential risks, ensuring that outsourcing activities are aligned with the organization’s broader objectives.
How to choose the right partner?
In Strategic tech outsourcing, the selection of an IT supplier is done with careful consideration and a thorough evaluation of the supplier’s capabilities, quality of services, and alignment with the company’s goals and objectives. This approach enables organizations to ensure that the IT services they receive are of high quality and meet their specific requirements. Here are the main signs to look for a perfect IT partner match:
- Compatibility: Ensure that the outsourcing partner’s company culture and values align with yours and that their communication style matches your preferences.
- Expertise: Look for a partner with relevant experience and skills in the outsourcing area and with a proven track record of success.
- Reputation: Research their reputation in the industry and ask for references from their previous clients to determine their reliability and quality of work.
- Price vs. Quality: Don’t compromise on quality for a lower price, but at the same time, be sure to get a fair value for your money. Consider the total cost of Outsourcing, including hidden costs and long-term benefits.
- Contract Terms: Clearly define the scope of work, deliverables, timelines, and payment terms in a written agreement to avoid misunderstandings and potential legal issues in the future.
- Cost savings: reduce costs by outsourcing non-core functions, freeing up resources, and accessing lower-cost labor markets.
- Increased efficiency: Bring specialized expertise and improved processes, increasing efficiency and productivity.
- Focus on core competencies: concentrate on core competencies and strengths, leading to improved competitiveness.
- Access to new technologies and expertise: Outsourcing helps organizations stay ahead of the curve and be competitive in uncertain times.
- Flexibility: to scale up or down as needed and to respond quickly to changing business needs without incurring the costs associated with hiring and training new employees, giving them a sense of control.
The Current state of Outsourcing
According to Statista, in the segment of IT Outsourcing, revenue is projected to reach US$430.50Bn worldwide in 2023. It is expected to show an annual growth rate (CAGR 2023-2027) of 8.07%, resulting in a market volume of US$587.30bn by 2027. The average Spend per Employee in the Segment IT Outsourcing is projected to reach US$123.60 in 2023. Managers must consider the geopolitical uncertainty regarding the war in Ukraine and how it affects the IT outsourcing service market. 98%* of the 141 000** tech personnel from Ukraine are known to be involved in cross-border projects accounting for $6.8 billion worth of services annually. Combined with the unlikelihood of substituting the need for IT talents from neighboring countries like Russia and Belarus, it seems obvious - the talent gap gets deeper while costs keep rising.
The strategic outsourcing map does not look that scary if we view it a bit south of Eastern Europe (EE) – namely, the Balkans. The high-quality talent comparable to the domestic outsourcing time, professional services level maturity and associated cost saving at lower risk offers many opportunities to find your outsourcing partner.
Sirma has been among the pioneers in the Bulgarian IT industry for three decades, established as a reliable strategic business partner in the Balkans. Specializing in many verticals, we pride ourselves on many ongoing long-term engagements in Europe and offshore – in the Americas. Peak our success stories for reference, and contact us to discuss a fruitful strategic IT partnership.
*IT Ukraine Association
**DOU software professionals community, April 2022