Strategic IT partnerships vs IT outsourcing
In the past, we discussed the subject of hiring a digital marketing agency vs. hiring freelancers and the ways it can affect a business. In this article, we explore the appeal of hiring external IT assistance. Outsourcing technological assistance has come a long way in the past several years and has evolved into long-term strategic partnerships. Although cutting operational costs is one of the focus points of any business, this task has taken a backseat when hiring third party professionals to help improve one’s company. In fact, most examples of successful companies today are established on the principles of smart partnerships with other businesses and agencies that help them develop and maintain their success.
The history of IT outsourcing
It was Eastman Kodak Company that introduced the concept of working with a third party company to help revolutionize their business. Back in 1989, they reached out to IBM to design, build, and run the new Kodak facility. The decision was condemned back then as something quite bold and risky in comparison to simply investing resources into building their own data processing center. However, this event is also what started the very definition of IT outsourcing.
Fifteen years later, practically all industries adopted the trend of IT outsourcing, turning to third-party companies to handle their internal IT functions. With the further development of the Internet and the ability to work remotely, businesses realized that they no longer needed to have a physical presence of employees to get certain tasks done. And with the trend of off-shore enterprises being on the rise in the past decade, IT outsourcing came together as the perfect combination.
The obstacles with IT outsourcing
Kodak was the first company to come up with a solution for an issue that all companies struggle with – cutting costs and simplifying the internal infrastructure. When a business has an action plan that allows it to focus on its primary expertise and goals rather than on specialized IT functions, the overhead and expenses become much lower in the process. By utilizing IT services providers outside a company, it ensures faster responsiveness and more fulfilled business demands – both of which provide an advantage over the competition.
At the same time, this was also one of the issues with IT outsourcing. Businesses were searching for a low-cost alternative to having to hire an in-house team of experts. And so, the overall goal back then was to find the bottom line IT help just to reduce the need for internal staff and additional expenses as much as possible. As a result, the cheapest vendors got the most accounts when it came to IT support services. Much like deciding between SEO agencies and in-house SEO experts, the struggle to prioritize quality over price soon came into play here as well. IT outsourcing evolved into strategic IT partnerships as a result, going past the simple notion of cutting operational costs.
The shift from IT outsourcing to strategic IT partnerships
In the past, most companies leaned towards outsourcing their Customer Support call centers to low-cost companies while maintaining the essential functions and departments in-house. And the search for lowering operational costs has led companies to outsource other activities to third parties. Eventually, two major issues came from this approach:
- Low-cost IT outsourcing leads to low-cost service providers that specialize in one activity or area of expertise. This requires hiring multiple service providers for different types of activities, which defeats the primary purpose of saving resources.
- The overall quality of work from low-cost outsourcing can easily become too low for businesses to profit from it. Inevitably, this leads to a business saving on the costs of hiring staff, but spending more on maintaining the overall quality of its offer.
However, a shift in the past several years has led businesses to seek out strategic partnerships with specialized consultancies for planning and coordinating other internal operations. Some of the most common examples are hosting providers, software development companies, SEO companies, PPC agencies, etc. What made this decision easier for businesses to make is the existence of B2B companies that offer multi-channel services to help support other businesses. As a result, you can now come across strategic IT partnerships where a single company can handle tasks that include:
- Digital Marketing Solutions (SEO, PPC, Social Media Management, Email Marketing, etc.)
- Managing IT Services (Network Monitoring, Help Desk, Device Management, etc.)
- Web Development Solutions (Web Design, CRM Software, Hosting Providers, Business Intelligence, Integrations, etc.)
- Consulting Services (strategic planning and coordination of IT, advertising, optimization, etc.)
Taking the next step with strategic IT partnerships
Moving past IT outsourcing is simply the next logical step for modern businesses across the globe.
- On the one hand, you have the option to invest huge amounts of resources into hiring in-house IT experts to avoid having to buy software for your business.
- The other side of the specter is avoiding the financial burden of hiring in-house teams by simply outsourcing the software development of your business. And this can inevitably lead to huge risks in terms of losing time and quality in the delivery of your services.
Strategic IT partnerships are the balance between these two scenarios. A business gets a professional team at a price lower than having to hire in-house specialists, and it doesn’t risk as much losing out on quality or time by opting for low-cost service providers. Basically, it is the direction in which all industries are headed. As a business plan, strategic partnerships are simply the best strategy for keeping up with the increasingly competitive, fast-paced market in which most companies operate. And the advantages speak for themselves. Here are three ways in which strategic IT partnerships win over traditional IT outsourcing:
- Leveraging businesses and technical expertise
- Offering services that can scale with growth
- Full integration with businesses
Strategic IT partnerships combine business and technical specialties
Outsourcing IT activities for your business has moved past the simple notion of taking the low-cost approach that Kodak took in 1989. Instead of hiring low-cost companies to handle five separate tasks, businesses now have the option to form strategic partnerships with one company that can handle all five tasks for them.
So, the introduction of strategic IT partnerships vs. traditional IT outsourcing has taken a leap since the 1980s. Cost reduction is no longer the priority. It certainly remains a core value, but with the added potential to partner with an agency or company that can contribute to the development of your business with their own combination of business and tech strategies.
Strategic IT partnerships contribute to scaling mutual growth through diversification of services
One of the fundamental ways to grow a business it by expanding the offer in services or products it has. It helps build long-term relationships with clients as well as boost the strength of your own brand. While outsourcing a certain activity can prove risky and potentially harmful to the reputation of your business, having a strategic IT partnership can change that. With it, you can expand your own offer to customers while being able to control and guarantee the quality of the service or product your strategic partner provides. And this is a tw0-way street since you might also be able to extend your own expertise to strategic partners.
Outlining the advantages of forming strategic IT partnerships vs. IT outsourcing:
- You outsource all IT activities to a single company
- Your business nurtures one or two partnerships instead of dozens of service providers
- The level of quality remains intact
- You have a sense of ownership over the IT services you get
- Access to expertise that powers business growth
You can easily integrate strategic IT partnerships into your business
The strongest IT partnerships are the ones that are well-integrated into your business model. Full integration enables high-performance results on both sides. The following four guidelines can help you integrate your strategic partnerships into your business plan more easily:
- Define your business objectives
- Establish an open-communication system
- Follow a structured development process
- Plan long-term partnerships
#1: Define your goals and devote resources to the output
Traditional IT outsourcing focuses on headcount to complete tasks whereas strategic IT partnerships create experienced teams that can deliver quality results. And this team is directly responsible for the development process, as it is their work that can affect the outcome of certain business objectives for a company. You need to make sure that both parties are equally committed to the fulfillment of objectives, each understanding its roles and responsibilities.
#2: Clear and open communication between teams
IT outsourcing can often lead to low-cost providers that will avoid or delay delivering potentially harmful news or bad results. Strategic partnerships are based on honesty and transparency. By establishing such a relationship early on, you increase responsiveness and the chances to mitigate risks as quickly as possible.
That is why having an open communication channel with IT partners plays such a key role in the long-term success of such a collaboration. Your role in ensuring this is to define and establish an organized report system, as well as schedule regular review meetings to discuss ongoing projects and potential risks.
#3: Follow a well-designed development process
All experienced IT specialists have a well-established system when it comes to development processes. Project management is crucial in the development process. Therefore, you need to make sure to define the project development process from the start, to make monitoring simpler to monitor and manage.
#4: Plan your integration process long-term
It’s important for IT service providers to outgrow their initial role as an outsourced team and step into the shoes of a potential strategic business partner. In fact, that is how the majority of partnerships started off, by demonstrating the quality and high performance a company needed to start considering long-term cooperation. As a business owner, you need to look past the success of one project and consider the bigger picture – whether or not an IT service provider has the potential to help your company grow. After all, predictable quality software development projects are something only strategic IT partnerships can provide.
The six elements of a lasting strategic IT partnership
Whereas IT outsourcing has a very flexible and unreliable way of functioning, building a partnership requires stability and balance. It’s important to overcome that client-IT service provider relationship and define a clear cooperative understanding between two companies. By doing so, you create a win-win scenario, where both parties will have the motivation to devote their resources to the best outcome.
A lasting business partnership is built on the common goals of all parties to contribute to their industry, provide exceptional customer service, and perform at the highest quality. So, if this is something that you can agree on with your strategic IT partners, you need to secure the following elements to make it last:
- Written partnership agreement
- Strong and established level of trust
- Structural roles and obligations
- Defined communication process
- Access to company knowledge & resources
- Frequent check-ins with management
The relationship you build with your outsourcing partner plays a crucial role in the success of your project and your company. However, good relationships don’t just happen. Whether you are new to outsourcing or have an existing relationship follow these tips. You will be well on your way to building a profitable and long-term strategic outsourcing partnership.
Strategic IT partnerships are the more balanced and cost-effective option in comparison to IT outsourcing
Being a strategic partner means that in addition to the traditional benefits of outsourcing, that partner can leverage their wide breadth of skills and experience to help support and guide an organization as their internal needs evolve and grow.
By keeping these functions under the roof of a single strategic partner, they become a true asset to the organization. And this allows the business to focus on their core competencies while offering guidance and support for continued growth and expansion, at all levels of the organization. It is a truly symbiotic relationship; allowing both the organization and the partner to focus on what they do best.
- For more useful advice, explore some of the other blogs on Digital Dot, or consult with us directly on how best to improve your business.