The term outsourcing scares people for various reasons, but there is no reason that it should. Outsourcing is very effective for certain situations, especially when developing software solutions. For a company to grow its internal IT department, it must search for a qualified candidate and go through the long process of interviewing, hiring, and training the new employee. This can take a long time and cost the company a lot of money. The alternative to this is outsourcing. But, what exactly is the difference between tactical outsourcing and strategic outsourcing?
There are two main types of outsourcing that you can find for your IT needs: tactical and strategic.
Tactical outsourcing refers to hiring a firm to perform specific development functions as part of your existing software development process. You retain oversight of the project, giving you more control over the process. This is very helpful if you need a project done on short notice because you can avoid the long process of searching for the right candidate.
Tactical outsourcing is also helpful when you have a short-term need for a highly skilled developer in a specific technology that you do not normally use. A developer with the right skill set may be very difficult to locate, so going through a skilled tactical partner can mean fast turnaround and lower overhead than hiring internal resources.
With tactical outsourcing, you maintain the planning process, including gathering requirements from stakeholders and designing the system that the developers will create. This increases management overhead, but it also allows you to have more control over the process and more knowledge about what is happening. They are familiar with your processes and answer to you throughout the process.
Strategic outsourcing involves partnering with an IT company that provides top-down services. They handle the entire planning and development processes, leaving you free to focus more on other aspects of the business. This is nice for some companies because they are able to pay prices per project instead of per hour of work.
With either type of outsourcing, you should address a few key points with your prospective outsourcing partner. The first is documentation because you never know what could happen in the future. If a support issue comes up or you need new functionality added to an existing product, you will need proper documentation to know how the product is supposed to work. Ensuring that your partner provides proper documentation, both in the code and out, can be vital to handling these situations.
You should always provide full technical information about your requirements to your outsourcing partner. Leaving out any details could cause severe problems as you go through the process. Always remember to include all of your key decision makers and stakeholders in discussions to ensure that everybody’s goals align properly. Repeated changes over time can greatly increase the cost of any project, so planning everything up front is vital to a successful partnership.
You should always examine your prospective partner’s portfolio, looking for consistent, high-quality performance over time. Not all outsourcing companies are equal, and even great companies may not be the right choice if their goals do not align with yours. It is also important to note for what industries the company has worked. If the company has worked for other companies in your industry, it could mean that they are already familiar with many of your processes and terminology, making communications much easier.
Both outsourcing solutions could work for you, depending on your situation. Many companies prefer tactical outsourcing because it allows them to maintain more control over the process and usually means less of a commitment. However, the trade off is significantly more involvement from the client.
At Optimus, we find there is a lot to gain from ongoing strategic outsourcing partnerships, and clients typically reap more benefits: less hands-on management, higher quality work, faster delivery and greater flexibility.
For an in-depth look at strategic outsourcing, check out our guide.
(Note: This post has been updated with new information.)