Outsourcing is cheaper, results in higher quality work, and simplifies your organization, allowing you to focus on what matters most – your core business.
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A question all companies, small or big, ask themselves is – should we outsource our platform?
Let’s take a bank wanting to develop a platform for its customers as an example. The bank could spend millions of dollars building its own software development team to develop and maintain the platform or it could outsource it to a partner.
What makes most business sense?
In this case, the bank should focus on its core business and leave the coding to the software developers.
Let’s explore why the bank should outsource platform development and maintenance.
Advantage 1: It’s Cheaper
It’s much cheaper to outsource the platform to a company that specializes in it. Yes, they will charge you for their services, but you will also save yourself a lot of money.
Here is why it’s the right move:
- Reduces labor costs: only hire help when you need it
- Reduces overhead costs: no training, office space, HR, maintenance, or administrative costs associated with the platform
- Outsource overseas: if appropriate, further reduce costs by having partners abroad
Advantage 2: Get a Better End Result
A company that specializes in banking platforms will do a faster and better job than the bank. This is no secret. As its core business, the software company will have the know-how and experience to develop and maintain the platform.
In contrast, to achieve the same result, the bank would have to spend a lot of time and resources.
Here is why it’s the right move:
- Gain on efficiency: Your partner’s expertise will lead to quick delivery and quality work
- Bigger and more-skilled teams: Your partner’s teams are bigger and better prepared to respond to issues
- Access to the latest technology: Your partner will be the most prepared to incorporate the latest technology
- Reduces risk: End result is guaranteed
Related Article: 6 Collaborative Open Innovation Websites
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Advantage 3: Simplifies Your Organization
Outsourcing means fewer people to manage. People management is time-consuming and difficult, leave this work to your partner. By simplifying its organization, the bank becomes leaner, more focused on its core business, and more agile.
Here is why it’s the right move:
- Focus on core business: Managers have more time for project management and strategic planning
- Less administrative work: Fewer employees means less HR, payroll, and other ad-hoc tasks
- Employee retention: Your company have more time to focus on employees
What Not to Outsource
Some activities should not be outsourced, even if they are not part of your core business. Most things related to strategy, company identity, and employees should be kept in-house.
Here are activities you should never outsource:
- Business development and strategy
- Top management
- Employee development
- Internationalization
- Building a company culture and identity
Regardless, this doesn’t mean you can’t hire consultants to share best practices and insights. However, you should make sure you understand the reasoning behind the decisions made.
Outsourcing Lets You Focus on the Things That Matter
Outsourcing non-core business activities means you can focus on the things that really matter. To minimize outsourcing risk, choose the right partner. Be picky and take your time.
Be cautious especially when you are thinking of outsourcing work your company doesn’t really understand. This can lead to you choosing the wrong partner or not having the capabilities of judging if your partner delivers quality work.
About the Author
Jonatan Santillan Delgado
Jonatan is the Digital Marketing Manager at Startup Flow. He's intrigued by the ever-changing pace of innovation, and how it's shaping our way of life. He's on a mission to see the world, one country, and one dancefloor at a time.
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