How the Pandemic Changed Outsourcing for the Foreseeable Future
Because of the vulnerabilities that the pandemic has laid bare, many companies are re-thinking their sourcing strategies. While these issues have been most apparent in goods produced overseas, companies are also re-evaluating the wisdom of relying on providers in far-off locations with different time zones and geographies for outsourced services, such as AI and software development. For this reason, according to consulting firm MJV Technology & Innovation, the interest of Fortune 500 companies in nearshoring has significantly increased during the pandemic.
Whether they choose to work with a nearshore provider or not, companies are realizing that risk can be mitigated when work and collaboration occur closer to home. For this reason, many are beginning to re-imagine how outsourced work gets done, and there are five key areas they are considering:
- Building their own teams. Some companies might decide to bring operations in-house to avoid the issues that can arise with outsourcing. While it may give them peace of mind and a sense of control, these companies now face a new challenge: the talent shortage, particularly when requiring high-level talent, such as data scientists. According to ZD-NET, the data scientists and AI professionals needed to develop and maintain AI applications are in high demand, and this trend continues to grow.
- Getting outsourcers nearer to operations. More than ever, companies want greater visibility and control over their outsourced activities. Many want to avoid the communication challenges they’ve experienced when working with providers across time zones or that have different languages, regulations and culture. Also, as companies have experienced during COVID-19, regions have been hit with severe outbreaks at different times, so it’s easier to predict what is required when you are all going through the same thing.
- Working closely together. As part of taking a more strategic approach, many companies want to collaborate with their outsourcing providers, and engage in more frequent back-and-forth communication. According to Kevin Keegan PwC Strategy Consulting Principal, companies that had deep, cross-functional communications were able to speed up problem-solving when issues arose during the pandemic to innovate solutions.
- Reshoring. Reshoring or bringing outsourced manufacturing and services back home has become a consideration of some companies. While this would help them overcome the geography, time zone and cultural issues, it doesn’t address the number one reason that spurred them to outsource in the first place: cost.
- Finding a nearshore partner. Many companies are finding that choosing a nearshore partner checks off many boxes on their wish list, while still enabling them to benefit from lower costs often 30-50% less than mainland U.S. companies. And, compared to moving development in-house, nearshoring allows companies to boost productivity and output during the times that they need it without having to hire and train employees. Working with companies that are part of the U.S. – such as Puerto Rico, U.S. Virgin Islands and American Samoa – provides further benefits. As U.S. citizens, workers share a common language, the same work culture and understanding of your business environment. Unlike other outsourcers, they can provide services in healthcare, defense and other highly secure and regulated industries where data must remain within the country.
Choosing the Right Software Development Partner
If a company has made the decision to continue outsourcing its IT development, or decides to do so for the first time, there are several best practices to follow to make the experience successful. First of all, meet the outsourcing team that you are considering in person. By seeing their office and how they conduct operations, you’ll get a better feel for the firm, as well as gauge the chemistry between their team members and yours. With a close working relationship, it’s important to ensure that you can work together seamlessly.
Next, take a good, hard look at their processes and practices, and check their security measures to make sure they can safeguard your data. Find out not only about the technology certifications they have, but also that they meet the same high standards that you do. What is their educational background, technology expertise and track record of success? Also, consider how they train and educate their staff. All of this due diligence will give you insight into the caliber of work you can expect on an ongoing basis as well as how the company, as an extension of your team, can help upgrade the skills of your employees.
Establish clear KPIs measuring outputs and performance. These KPIs should be the same as those you have in-house.
Finally, take the time to integrate their team with yours. Often technology projects fail due to lack of communication, leadership and other soft skills. These capabilities will be the backbone of a strong, successful working relationship.
While the pandemic has had a major impact on the way companies think about where and with whom they do business, it’s important to consider the different options of in-house development, reshoring, nearshoring and offshoring carefully.
Nearshoring is the approach that can give companies the best of both worlds – the resources of a contract services provider, along with the close proximity, collaboration and work culture that you are used to getting in-house. By choosing the right partner in the right geography, you can not only meet the needs of your company today, but also position it to effectively address whatever comes next.