“In God We Trust. All Others Must Bring Data.” – W. Edwards Deming, Statistician, Professor, AuthorWhat is it that you imagine when you think about a futuristic world? Influence from Hollywood movies and science fiction have often found us thinking in a cliched direction... Read More
How Slack and other businesses are winning because of Outsourcing.
A word that seems to have both positive and negative connotations in the corporate world.
For some, it is a huge risk to even ponder over the possibility of the practice.
For others, it is the heartbeat of their business.
The truth, however appalling it may seem, is that some of the major organizations of the world owe their success to outsourcing.
To start out with, take the case of Slack.
Slack is the world’s number one application for seamless workplace communication.
What Slack is known for is its minimalist and non-intrusive app design that evenly integrates into your operations.
Little do users know is that the app design that they love is nothing but a picture-perfect moment of outsourcing done right.
This and numerous other cases only go on to prove the prowess of outsourcing, and particularly offshoring.
Instances of Major Global Companies that Grew from Outsourcing
Let’s take a look at some of the major outsourcing examples of companies that deployed outsourcing at an early stage and eventually outgrew all their competitors.
Yes. You read that right.
Right from the day of its inception, the Minimum Viable Product of your beloved chatting app was developed through outsourcing the software and core development processes to an independent offshore contractor.
Throw in the facts that the marketing budget at Whatsapp is literally ZERO and that it was bought by Facebook for $19 Billion, and the situation already sounds like a fairy-tale.
There may be no greater testament to the viral nature of WhatsApp than the fact that the company has accomplished all this without investing a penny in marketing. Unlike their smaller competitors, it hasn’t spent anything on user acquisition. The company doesn’t even employ a marketer or PR person. Yet like the world’s greatest brands, it’s created a strong emotional connection with consumers. All of WhatsApp’s growth has come from happy customers encouraging their friends to try the service.
— Jim Goetz, on behalf of Sequoia
If you focus on the last line of this quote, you realize that this is not at all possible without having a robust application in the first place which, in this case, was developed through successful offshoring.
2. GoogleThis list gets more exciting by the minute, ain’t it?
The technological giant Google has long been a connoisseur of the outsourcing industry.
The company made huge headlines back in 2011 when it decided to offshore the customer service process of Adwords, amounting to 1000 jobs, to call centers all around the world.
And it didn’t end here.
Google went on to partner with software companies to develop the highly coveted Project Ara and other related software.
Nothing can validate an industry like a Fortune 500 company placing its trust in it.
3. Ford Motors Company
Ford Motors is yet another major American player that has placed its trust in the process of offshoring overseas to India.
While it started out slowly by outsourcing only back-office processes to India, like accounting, the demand soon grew to include a software development center that took care of its e-commerce solutions.
This was followed by a huge information technology project that motivated Ford to invest about $5 Million in the Indian economy!
This included various e-business solutions and shifting much of its software development projects to India.
4. SlackAnother major communication channel triumph, Slack owes its success to the user interface of the stunning product that it sports today.
The company successfully outsourced every major aesthetic appeal of its popular platform, including the logo design, design of the marketing website, web app design as well as mobile app design.
In other words, the entire look and feel of the service was outsourced, which seems like an impossible task to outsource in the first place!
This proves that while redundant and low priority tasks are often outsourced, companies can also rely on the practice when strategic tasks are in the picture.
Outsourcing to the right external talent can help you refine crucial elements of your software product which has never been possible with in-house hiring.
And numbers at Slack reiterate the same.
Within 2 weeks of the app’s launch, 15000 users were already using it. Today, the company is valued at a jaw-dropping figure of $5 Billion.
Talk about an amateur bagging the bulls-eye with a top-notch gun.
5. AlibabaWith a market value of $440 Billion and analysts predicting it to be the first $1 Trillion online firm by the year 2020, Alibaba may seem like the technological giant that it is today.
But the truth is that even this e-commerce pioneer would not have made it here without external help.
As revealed by Jack Ma himself, the founder of Alibaba, in his autobiography, Alibaba decided to outsource its web development back in 1999 when it was nothing more than a toddler.
Since it aimed to have a global presence right from its inception, this helped the company develop a bilingual presence in the virtual backdrop, which later reaped benefits in the form of the growth that we see today.
Primary Benefits of Outsourcing that Helped these Companies Clock Insane Growth
1. Cost-EfficientThe 2017 Reports from Accelerance reveal intriguing details.
The hourly cost of a software developer in Asia lies in the range of $20 - $40.
The cost marginally goes up to $25-$50 per hour in Eastern Europe.
This places the outsourcing cost for American companies to these regions in the range of $40 - $50.
Compare this with the cost of maintaining an in-house developer at the rate of *$150 per hour.
This translates to savings of more than 66% of the costs, which scales according to the number of outsourced team members you make use of.
Had Slack decided to take the path of in-house designing, the initial cost of developing the MVP would have skyrocketed, maybe even denting the initial tracking that it otherwise experienced.
It is pivotal to keep the cost of starting up as low as possible in order to maximize the results and ROI. Outsourcing, and particularly Offshoring, empowers you to do just that.
*Source - Kissmetrics
2. Round the Clock WorkImagine an office that runs 24/7 round the clock.
While this was just a dream for some workaholic managers a few years back, Offshoring has made this dream come true.
When the team on one end of the world spends a productive day at the office and goes to sleep, the second team on the other end of the world wakes up and goes to work to pick up where the first team left off.
Although this requires a highly functioning and experienced project manager, the practice can reap tremendous benefits once operations are optimized and in place.
For instance, effective and daily communication is key in such a model that needs to be set-up from day one.
Moreover, a culture to prioritize deadlines has to be inculcated.
3. Large Talent PoolBuilding the perfect in-house borderlines on being a myth.
It is not easy to find the right talent at the right time for the right price.
And even if you do, there is no guarantee that they will last as long as you need them to, or work as hard as you want them to.
As Richard Branson, the founder of Virgin Group puts it, “Hiring the right people takes time, the right questions, and a healthy dose of curiosity.”Offshoring offers a high dose of talent in this respect. 64% of the software developers in the world reside in Asia and Eastern Europe.
Thus, this large talent pool can be effectively leveraged at your disposal anyplace and anytime to maximize the benefits that you are exposed to.
This is exemplified by the case of Fab.com that outsourced their website development to Pune in India to access the large talent pool of the city at low costs.
Soon after that, they received their first investment worth $1 Million!
4. Driven InnovationWhile outsourcing started out as a profitable means to outsource redundant tasks, the industry has grown to become one of the major driving forces of innovation.
According to the recent Deloitte Global Outsourcing Survey, 59% of the survey’s respondents accepted that “Outsourcing offers an opportunity to reduce costs, while the savviest organizations, according to Deloitte, are using outsourcing to increase the top-line growth by driving innovation into the business itself.”
This is reiterated by a report from IBM which reveals some interesting numbers.
According to it, only 27% of companies outsource to cut costs, whereas 36% are innovators and 37% are growth-seekers, using outsourcing as one of their tools to optimize their businesses.
5. Resource OptimizationIf the founders of Slack had been busy designing their app, they might have fallen behind in the core development process.
Similarly, if Alibaba had given higher priority to developing the e-commerce system, they might have taken far more time to optimize their logistics.
Thus, the biggest takeaway from outsourcing is that usage of company resources are optimized.
This, in turn, means that companies can place their primary focus on delivering their core competencies, instead of dealing with tasks that they are not adept at handling.
Why Should Companies OutsourceNow that we have looked at the various benefits and case studies of success found with outsourcing, here’s a synopsis of why companies should outsource their technical requirements:
- To reduce the cost of developing expensive software products or websites by balancing the in-house staff and overhead expenses
- To meet tight deadlines of projects where delivery becomes a priority and the in-house team is not capable of handling the requirement
- To improve the productivity of processes by improving the quality of outsourced products and processes
- To access a large pool of talent that is impossible to nurture as an in-house team and is capable of catering to a wide range of varying demands
- To manage company resources better and focus on core competencies instead of handling something that is out of scope
- To get experts on board who have managed similar projects in the past and know exactly what to do and when to do
We are giving away an Exclusive copy to " Executive's Guide to Outsource Software Development" You can get a copy by clicking on the below image.
ConclusionTo sum it up, outsourcing is a way of running a business which may take some time to perfect when you are starting out with it.
But once you find the right partner who can be relied upon, is equipped with all relevant resources and understands the timelines involved, outsourcing can be the most rewarding practice yet for your business.
Afterall, as Lee Kuan Yew puts it, “If you deprive yourself of outsourcing and your competitors do not, you're putting yourself out of business.”
We'd Love to hear your comments on this! Do you have any more examples? Comment now!