A specialist software company, providing enterprise level digital products and services to international clients, had enjoyed a period of steady and reliable growth in a highly specialised niche market. However, in a period of global financial decline new sales had stagnated and revenue from existing clients was static. With a planned new sales initiative on the horizon there was a need to increase capacity for both software development and datacentre hosting, but funds for organic growth were limited and a decision was made to explore outsourcing options.
The company was on the receiving end of a great deal of enthusiastic advice, mostly strongly in favour of outsourcing (software development overseas and datacentre operations into the cloud) and mostly from agencies that would deliver the outsourced services. The arguments in favour of outsourcing were based on potential cost savings and on the face of it looked compelling. The board was keen to move forward quickly and was on the verge of committing funds to start the outsourcing process, but we carried out a quick audit of the proposed plans and uncovered some areas of risk and unintended consequences that prompted a more considered approach.
There was an urgent need to identify options and potential costs for outsourcing, whilst understanding and controlling operational and reputational risk.
The complexity of the bespoke software platform was such that the task of specifying tasks for an external team of developers and validating the code before incorporating it into the live system would have consumed nearly as much effort as keeping the development in house. This would have added hidden costs to the sums quoted in the outsourcing proposals and introduced both technical and reputational risk that could not be transferred. Similarly, any move of datacentre operations into a cloud environment for business critical and high security platforms would have introduced both hidden costs and uncontrollable areas of risk.
After a comprehensive assessment of wider options, it was decided to partner with a software development company with directly relevant experience who could supply extra members of staff to implant in the core development team to provide the necessary surge capacity. In parallel, organic datacentre capacity growth was funded out of the money proposed for managing an outsourcing exercise and by agreeing a long term partnering deal with a hardware supplier.
The end result was that the required surge in capacity on both areas was delivered at lower cost than the outsourcing options and without introducing risk and hidden costs. This also provided a sustainable and flexible platform for further growth and the investigation delivered a better understanding of the core functions and the risk/cost dynamics that would inform future decisions.