From a startup or growing business perspective, it is one thing to understand the basics of outsourcing, but completely another one to use it as a competitive advantage. Being able to accomplish this requires careful planning, strategy and understanding of it’s impact across your business departments.
If you are interested in understanding or using outsourcing as a competitive strategy for your startup or small business, you’ll find below a baseline idea as to how you can use outsourcing as a competitive advantage, how it can affect your company and how to get started devising your own strategy.
Let’s begin with a disclaimer: Outsourcing is not a lasting competitive advantage.
This looks like a contradicting argument! In it’s core, outsourcing cannot be a competitive advantage. While it brings cost cutting, speeds up product development and helps companies focus on their core, it is not a proprietary strategy with a barrier of entry or one which can’t be replicated by the competition in the long term.
Think of it this way — if one day Apple realizes that they can cut costs on their computers 10% by moving their design team to Canada, then it will also be true for it’s competitors, which will in turn come to the realization that they can also employ this strategy.
Now, if we think of it from a startup’s or small business’ perspective, it’s a completely different ball game. It allows for faster product iterations, quicker time-to-market cycles, and extends your lifeline — i.e. runway. So in a smaller scale it works to get ahead of the game in a sea of competition looking to get to their next milestone.
How does an outsourcing competitive strategy look like?
To understand these competitive strategies I will reiterate that we must think of them as tools to get a product-to-market faster, create a better customer experience, enhance or shorten the product roadmap, or obtain more customers via marketing.
Let’s take a look at how it works from a development standpoint.
Development outsourcing strategy
Outsourcing development is one of the most popular strategies companies use today. Especially since it has become quite the challenge to hire and retain affordable tech talent in Nigeria.
This strategy involves branching out a significant chunk of your development department and outsourcing it to countries and locations with tech hubs.
These are some ways this strategy works:
- Completely outsourcing your tech team — which can happen via a development agency or by individually hiring remote developers. This means that all of your product roadmap will be managed, created and deployed by them. You will still own the vision, but they will own the execution.
- Having an in-house CTO, Team Lead or Project Manager and outsourcing Junior duties and responsibilities — which you should hire remotely, greatly simplified through a service like Dunn and Braxton. This strategy allows for more control over how the product is managed, created and executed. It will also help you have an “inside man” who understands the thought process, lingo and can lead the team towards the direction needed.
With a limited budget and the need to get to market you can save a significant amount of cash and development time by employing a strategy like this.
Example – If we were to say that a Junior developer costs around N2,000,000 a year in-house or N1,000,000 remotely. You can even get two and speed up development!
Summarizing, it affects your company departments the following way:
- Finance: Lowers your developer cost
- Product: Reduces your product roadmap timeline
There is not a one-size-fits-all strategy that you can just pick up and employ. It’s completely dependent on what your company does and that stage it’s in. In my eyes, the earlier the startup the more you should outsource to be able to get to MVP or product-market fit. Conversely, the further along you are the more you should consolidate your tech decision-makers in-house — aka your CTO or Team Lead.
How do I get started with an outsourcing strategy?
Here’s a list to get you jump-started with finding out if you can outsource some of your company’s functionalities.
- Find your core competencies as a company — What are some core functions that move the needle revenue-wise or product-wise?
- Define your roadmap and milestones — Where are we going, how are we going to get there, and by when?
- Define what activities can be outsourced to produce faster, better or higher quality results. — What activities can we outsource to achieve our milestones, or get there faster or at a lower cost? You should create a list of responsibilities and job functions.
- Set procedures and expectations — Under what conditions will we be willing to implement an outsourced member or members to our team?
- Find your professionals — Use your job list and get out there to find your desired professional!
Outsourcing as a competitive strategy is very attractive and has some great advantages, but it takes some planning and careful execution to really bring to life. As I mentioned, there is not a one-size fits all strategy, it takes some real company introspection to find out what is the most efficient and effective way to implement it in a your company. Use this as a baseline and adapt according to your size, industry and company age.