The Pros & Cons of Outsourcing Technology Development
In discussion with Frazer Bennett, PA Consulting‘s Chief Innovation Officer
Building a business is notoriously difficult. It’s a struggle to find the expertise and resources needed to start out in any industry, let alone make a considerable impact. But even once a business does make a name for itself, these challenges become even more pressing. As markets evolve, so must the companies within them. . . and this is a daunting task. When it comes to developing quality software, there are two main options. Either a company can take on the burden themselves, or they can find somebody else to do it – in other words, outsourcing. More and more businesses, especially young startups, are now turning to big consultancy and tech firms to provide technological resources. In a survey of global business leaders carried out by Deloitte, 59 per cent of respondents stated that they chose to outsource to reduce operating costs. But this, of course, is just one consideration.
Why do companies outsource?
According to Frazer Bennett, Chief Innovation Officer at PA Consulting, companies choose to outsource development because they want help when moving into a new technological frontier –
“Every one of our clients has their own R&D organisations, so why do they come to us? They might come to us because the thing they’re trying to do has never been done by them before. So they want someone with the experience of having done it before.”
Back in the 1980s, Frazer explains that clients would ask how to put microprocessors into devices because it was a new technology and they wanted to keep up. Today, that need is different, and surrounds the areas of IoT, AI, data insights, AR and VR. But, of course, this has its challenges. Two of the main obstacles that technology labs face are to do with marketing and technology itself –
“The way that you solve the market challenge is by being creative and testing things. The best way of understanding customers is to talk to them and get to know them and work out what they might want to buy. Solving the technology challenge is more about experience and the willingness to experiment, to try stuff out and get it wrong. We’re quite good at getting things wrong, but you have to get things wrong very efficiently to get things right.”
In other words, if a company is willing to experiment but doesn’t want to handle the actual process of doing so, outsourcing is a good move.
Another main reason to outsource is to encourage a collaborative strategy which takes expertise from different industries to formulate a more effective product or service –
“In my presentation at Disruption Summit Europe 2017 I talked about diversity, which comes from sharing. The way that you mix up the gene pool of ideas is to share stuff across a diverse sect. Although I’m in charge of the technology area, I sit next to a food scientist, and she happens to be reinventing the gummy bear at the moment. We sit cheek by jowl with people with very different skillsets, we deliberately do this to help encourage diversity.”
So, enlisting the resources, help, and expertise of a consultancy definitely has its perks. However, there are instances where pursuing independent, in house development can be just as attractive.
The DIY approach
For many businesses, it makes sense to create their own IT systems, digital analytics platforms and other software applications. The benefits of in house development include a close relationship between the systems and the team that uses it, easier customisation, individuality, and of course control. By opting for in house development, the company is entirely responsible for the products and source code that they produce. It’s also a way of distinguishing the business from competitors. Of course, there are other ways to get hold of vital resources, including incubator and accelerator schemes, as well as government advice. There are also various forms of investment that can allow businesses to work on in house systems without incurring a huge financial burden. This approach to development also acts as a defensive move, securing the company’s IP from malicious influences. Whilst consulting firms may be fiercely passionate about serving their clients’ needs, bigger tech firms could have less benevolent intentions for the data of their corporate customers.
There are pros and cons to every single decision that businesses make, and when it comes to outsourcing, this depends on the company’s size, market, influence, and strategy. But no matter which avenue a business chooses to take, they are taking a leap of faith. However, so long as they make the right decision, the risk can pay off.
Does your business outsource development? From you or your company’s perspective, do the pros outweigh the cons? How else could a company find the resources and advice they need? Share your thoughts and experiences.