Understanding outsourcing as a strategy is crucial to make it effective. From startups to large enterprises, many companies owe their successes and sizable revenues from outsourcing their application and software development and design. Outsourcing enables businesses to adopt new ideas driven by market demand or implement smarter processes that reduce costs. Pivoting towards outsourced engagements allow businesses to make essential adjustments that hold them back from being exceptional. As an efficiency strategy, nearshore outsourcing can cost less because of the ease of doing business in operating closer to your home.
Many might find it surprising that some of the most successful startups and biggest businesses in the world used outsourcing to fuel their growth. Here are examples of top companies and startups that have used outsourcing as key to unlock their potential and take their success further:
The origin story of the world’s biggest online marketplace can be traced back in the late 90s, when its founder, Jack Ma, outsourced Alibaba’s web design to make it more appealing and accessible for English and Chinese-speaking consumers. Steered by this vision, Alibaba’s branding was localized and its offerings customized based on the needs of different demographics.
This focused strategy enabled the company to save on resources. Alibaba was able to build itself as a tower of strength in e-commerce – and it all began with an outsourced web design. With a solid foundation of doing business, the enterprise was able to cope, survive, and thrive against volatile times for more than two decades. In 2019, the multinational reportedly earned US$54.5 billion in profit.
Initially a web design firm, Basecamp, then known as 37signals, streamlined their clients’ processes as outsiders looking in. Basecamp was first developed to address the internal gaps in the company’s workflows and project management. Clients soon started asking about this platform that enabled them to integrate communications, to-do lists, and file sharing.
To move Basecamp forward, the company engaged with outsourced and remote developers to enrich their application’s core features. This also eased the load off of the team and enabled them organize their operations. Basecamp had solved the limitations and setbacks in relying solely on email communications. Today, the tool is a major driving force behind successful project management across organizations, and its story encapsulates the breakthroughs that outsourcing can do for a business.
The messaging app that’s widely used today for group messages, encrypted communications, and file sharing was able to establish its core technology through outsourced developers from Russia. Igor Solomennikov, an iPhone developer that served as contractor for WhatsApp, was later absorbed as CIO. WhatsApp turned to outsourcing its software application to keep operational costs at a minimum and find the right talent that can support its goals. WhatsApp began with a starting capital of about $250,000. In 2013, Facebook acquired WhatsApp for $22 billion.
GitHub, a renowned tool and community for coders and developers, is founded on outsourced consultancy. At the time of its inception in 2008, founders Chris Wanstrath, PJ Hyett, and Tom Preston-Werner hired Scott Chacon as an outsourced contractor. Ideally, they would have wanted Chacon as a full-time resource and the most knowledgeable talent for the company, but they didn’t have the financial resources to offer the position. Chacon helped build the Gist back end, an important pillar for becoming one of the world’s largest software development platforms. GitHub was acquired by Microsoft in 2018 for $7.5 billion.
A startup in 2013, Slack founders Stewart Butterfield, Eric Costello, Cal Henderson, and Serguei Mourachov had developed the online collaboration app for teams with the help of an outsourced design firm. The company handled the app and website’s design and execution, including the creation of Slack’s logo. On its launch, about 8,000 teams and other users signed up to test the app and provide feedback. Today, over 5 million use Slack daily. Outsourcing the app and web design set the Slack apart as the brand acquired a unique image and style.
Around 1 billion people in the world go to Viber to communicate, and Viber depends on ScienceSoft for software development, application improvement, and addition of new features. As a cross-platform, voice-over-internet-protocol (VoIP) application, Viber relies on a talent pool of outsourced software engineers to be able to deliver on its promise to consumers. They also ease the challenges of recruiting, hiring, training, and housing employees for its large-scale projects.
JM Family Enterprises
The automobile industry can also make strides through outsourcing. Diversified automotive company JM Family Enterprises had subsidiaries that include Southeast Toyota Distributors and World Omni Financial Corporation. The company decided to outsource all its software and mainframe hardware to reduce mainframe costs, which, at that time, had already accounted for about $8.2 billion. What it reaped from its partnerships with vendors are minimized costs gleaned from optimized operations and timely submission of financial reports.
Rolling out expansion plans comes with risks and Unilever was able to successfully emerge with the support of outsourced experts. Consolidating and aligning multiple enterprise resource planning (ERP) systems across 24 countries had been a big step in developing a single ERP system across Europe. The effort paid off as Unilever benefitted from a more comprehensive system and saved €700 million annually since the project’s implementation in 2005.
Commonwealth Bank of Australia
The Commonwealth Bank of Australia (CBA) has long credited its multi-sourcing strategy in software and application provision and management for cutting its IT infrastructure costs by up to US$100 million yearly. One of its biggest outsourcing partners is located in New Zealand and India. The partnership demonstrates the strategic advantage of nearshore outsourcing for Australia and New Zealand. One of its prominent projects included a payment solution that rationalized the bank’s entities and acquisitions into one infrastructure. For CBA, the huge difference in IT spending means more of its annual budget can be allotted for strategic ventures and less on operational costs.
This Australia-based company and the world’s second largest iron ore miner has more than 30 years of partnerships with outsourcing vendors, mainly with CGI Group Inc. The partnership encompassed digital services delivery for Rio Tinto’s Aluminum Operational Center. Rio Tinto has also outsourced its subsidiaries’ application portfolio that supports the companies’ back-end operations.
Westpac Banking Corporation, one of Australia’s biggest banks, turns to offshore and outsourced support to streamline and standardize its business processes. Apart from back-office administration, Westpac has also outsourced its application development and maintenance activities.
Why outsource your software development?
These companies validate the advantages in outsourcing application and software development, whether you’re a startup founder or multinational company. Nearshore outsourcing is an even more viable option for both small and big enterprises. The cost and time efficiency and access to a diversity of expertise is augmented as both organizations may share a similar language and culture.
Constantly improving your business and how people work and live can be enriched by new perspectives, which innovative vendors can bring to the table. When set up properly, outsourcing can also help companies gain competitive advantage. They can use the vendor’s resources to realize their vision while focusing on marketing and running the business. Speeding up the time to market gives immediate business value to stakeholders or investors, and provides you a solution that they can iterate.
Like any venture, however, it’s important that companies and founders properly understand the pros and cons of outsourcing your development to third-party vendors. To mitigate these risks, clearly set expectations with prospect vendors and be mindful of crucial but often overlooked aspects of your software development projects. Some of these include business and pricing models, use cases and business objectives, and code ownership and work quality.
It is important for companies, too, to openly discuss these strategic decisions with employees to ensure that the company culture is not jeopardized. Outsourcing can indeed solve difficult projects and address your company’s skills gap or budget issues, but it’s how and who you work with that can make a difference.
Oursky is a developer-oriented and engineer-led digital agency that works with startups, global brands, and listed companies. If you have an app development project or would like to develop a digital solution, get in touch with us!
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