Why More and More Companies Outsource Their IT?

Outsourcing seems to be all people talk about nowadays when it comes to growing their business. I am sure that everyone hears that word at least once a day. Either in a boardroom, google search or during strategic planning meetings. This model has proven to be one of the most successful ways to conduct business […]

by Valeriya Kozareva

March 10, 2020

7 min read

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Outsourcing seems to be all people talk about nowadays when it comes to growing their business. I am sure that everyone hears that word at least once a day. Either in a boardroom, google search or during strategic planning meetings.

This model has proven to be one of the most successful ways to conduct business and to increase market share. However, why has this economic phenomenon proven to be prosperous and bring undoubtedly unparalleled value to companies? In this blog post, I will try and narrow down some of the key factors that drive outsourcing.

Ideas and Technological Advancement Without Borders

Recently, I came across a very interesting paper by David Dorwin from the University of Washington. The paper focuses on the history of outsourcing and how its impact changes over the years, from the era of industrialization until today. While I was reading it, it all made sense to me – the invention of railways and the telegraph enabled people to exchange not only resources, goods but also ideas, capabilities and competitive advantages to entire economic sectors. The American and Japanese economies were some of the first ones to put in place the practice of utilizing external capabilities in order to advance their economy and society.

As years passed by, technology was rapidly advancing and so was outsourcing. It was in the 1980s when IT companies started looking at ways to focus on their strategic business needs and divert from day to day operations. I would say that the shift in the economic situation and globalization for the last 40 years has opened new horizons for managing your operations. An era where knowledge and skills are easily accessible can provide the highest value to your company.

Outsourcing is a Tool for Innovation

We live in a time of unicorns, highly scalable companies, innovations and technological progress. The time to market a new product has decreased significantly, as competition is growing. Companies like Revolut, LinkedIn and Spotify have made history by quickly acquiring a major slice of their market. Customers demand to see innovation and intuitive solutions, more than ever, which puts a lot of pressure on big, medium and small companies, as they all want to be successful. It has been proven that to accomplish your strategic goals and stay current to the market needs and be ready for the future, companies need good and sustainable partnerships. Outsourcing is an excellent example of such a partnership.

The outsourcing industry has been steadily growing over the years. More and more companies choose to delegate some, or all, of their software development to trusted partners around the world like companies in East and Central Europe.

If in the past, cost reduction was the leading argument for outsourcing, however, since 2016 we witness a new trend. According to Deloitte improving the focus on core functionalities is a more valid argument for choosing to outsource then cost reduction. Cost is not to be underestimated, especially when comparing countries like Bulgaria and the UK or USA, but I would like to quickly outline a couple of other elements that make outsourcing so attractive.

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How can a company benefit from outsourcing?

Faster release time

It doesn’t matter if you are a startup or a scaling company, there are always way too many day to day tasks to be responsible for and not enough time to develop the product quickly. Especially with the extremely demanding market, every day could be crucial. The focus of the software team will be to deliver the best product as per your needs without the distraction of any other tasks.

We have witnessed in Dreamix how after a short period of time the dedicated team gains momentum and is very quick in developing POCs and new features. They know the business needs of the client inside-out and can automatically translate them into technical functionalities, which saves a lot of time and gives a competitive advantage to other companies which don’t have such a dedicated partner. All of that ultimately will result in a faster time frame to market your product.

Proven delivery process

Having worked with big corporations, especially banking institutions, I have noticed that it is very hard to change the delivery process and the mindset of people within the company. What is crucial in today’s market is to quickly take feedback from your client and translate that into a new version or an upgrade of your product. This iterative way of delivery is not easy for big corporations.

Changing the existing legacy processes can be very time consuming and by the time it is all implemented, it might be too late for the product or service. When you work with a dedicated software partner, they are experts in delivering a product using the right process in the most optimal manner, involving the right people from the client.

Focus on strategic goals

When you are running your startup or having a high ranking position at a scaling company, your time is the most valuable resource. Your schedule is filled with internal meetings, calls with potential clients and strategic planning. Outsourcing gives you the ability to focus on your priorities and increase your business efficiency, without sacrificing the progress of the project.

Working with a bespoke software partner, the dedicated team will be 100% responsible for designing the product architecture, implementation and further support and monitoring. All the internal resources you have in the office could then fully invest their time on strategic plans and ensuring that the company is progressing with the desired speed.

Production flexibility

Business needs can change very quickly and it is not always easy to adapt on time. There are situations where you have to quickly double your software development team in order to meet all the projects sitting in your pipeline. Having a software partner will definitely take this stress away from you. One of the beauties of the outsourcing companies is that they respond to your needs very quickly, ramping up or ramping down the team when necessary.

Access to top talent

Finding top software talent is maybe the hardest and most competitive aspect of development. It could take several months to recruit talent and then at the same time to integrate them into the culture of the company. Large and familiar companies like Google, Amazon and VMware usually offer the most attractive work conditions, leaving everyone else in a very difficult situation.
When you partner with an outsourcing company, you don’t need to worry about any of that.

One of the key advantages of outsourcing companies is that they have a big pool of talent that they have built over the years. Top developers usually teach at universities and attend international conferences so they stay aligned with the newest technological trends but also stay very closely connected with the IT ecosystem.

When a team is formed everyone knows each other and there is no need for an induction process or synchronization. Everybody works as a fully functional team from day one, already aligned with the culture, processes and team dynamics. The only focus they have is to deliver a good result and build trust with the client.

Source of new ideas

Working with software partners gives you access to a whole new geographical ecosystem and new markets. When you have a well-developed partnership it is very easy to exchange ideas, meet new potential customers within the network, and benefit from the innovative mindset.

Software companies have a very good overview of what the newest technologies and trends are and therefore add value to your plans for the future and how to execute them.

A quick glance at the Bulgarian outsourcing market over the years

Over the last 20 years, Bulgaria’s IT ecosystem has flourished, attracting more and more international clients, recruiting the best talent and delivering innovative solutions. Thanks to the unique ecosystem Bulgaria is considered to be the Silicon Valley of Eastern Europe. Here are some of the key reasons why our country has positioned itself as an IT Hub:

  • Bulgaria is renowned for being a leading country in Java and Python technology
  • The educational system is designed specifically to nurture technological talent. There are 220 high schools and 15 universities that offer ICT programs.
  • We have a well-developed technology infrastructure (with 96% overall broadband coverage).
  • No language barrier. English and German are being taught at a very early age and by the time students graduate from high school, they have proficient language skills.
  • A strong expat community of successful Bulgarians all over the world who are coming back and applying their technical expertise and experience.
  • Many international companies have opened their R&D centres in Sofia, including media giants ProSieben.Sat1, Financial Times, Bosch, Skyscanner, VMware.

We now know why outsourcing is the business phenomenon it has proven to be. But before choosing your IT partner, it is very important to evaluate them carefully. Make sure the provider will not only contribute to their IT experience but add value to your company’s culture, processes and strategic vision. Having someone you enjoy working with on a daily basis makes a huge difference and builds trust. This has been the basis of our long term partnerships here at Dreamix.

Thank you for taking the time to read this article. If you want to learn more about the Outsourcing process you can check out our other articles. And, of course, do not hesitate to comment your thoughts below. And if you have more questions do not hesitate to contact our team at Dreamix.

Business Development and Strategic Partnerships Manager