There was a day, not so long ago, when one or two IT professionals could take care of most needs for many, if not most, small-to-medium-sized businesses (SMBs). Today, businesses outside the technology industry find themselves spending from 1 to 10% or more of their annual revenue on technology (resources, infrastructure and services) depending on their industry and market. Manufacturing and retail tend to be at the low end, although custom manufacturing and retail with significant e-commerce or supply-chain integration can be very different animals. Finance and healthcare tend to be at the high end of the spectrum with security, process automation, record retention and virtualization among their key needs. Service providers range all over depending on their specialization and needs for market access.
Whether you are an existing business or a new, growing organization – the use and strategic value of IT and software in your business is likely to have grown over the past few years and to continue to grow into the foreseeable future. For SMBs, this is a problem: How do you manage your IT spend and risk? What percent of your annual costs are reasonable for IT and software? You can’t afford to sit on your hands while more nimble competitors snap at your margin and new business. You need to leverage your intellectual property to secure existing lines of business and break new ground. But – should you spend your time and cash to do what is needed – in-house or should you outsource?
What do you need? What choices do you have?
Today, almost anything can be outsourced – directly to providers or through services that manage systems and resources across several providers. A few of the many areas of technology that SMBs can outsource easily include:
Infrastructure and Applications
At one time, infrastructure for SMBs simply implied a network and a few productivity servers in a data closet (usually located with telephone systems) connected to PCs and printers in an office. As the times moved along, many SMBs used providers like Rackspace to rent space in their data centers to locate their own servers. As virtualization has become more accessible and competitive, SMBs considering and starting to use Amazon Web Services (AWS), Microsoft Azure, Google Cloud and the growing list of competitors available – including providers that bundle virtual services in packages that make them more accessible to smaller organizations.
In this field, there are a lot of options and capabilities that can be very useful and cost-effective for the SMB market, but most companies in the field don’t have the in-house expertise to navigate the field easily. It has been estimated that 94% of SMB operations do not have the skill sets they need to leverage, implement and maintain the growing capabilities of virtualized infrastructure and systems available on the market today.
What does this include?
- Virtual Servers & Services – Virtualized services are scalable (both in data and processing capacity), always current technology, and can be accessed across a wide range of situations from remote, mobile users to high-availability business-to-business systems. This is a great capability, but the question is – do you have the resources and skill sets in-house to decide between services, implement, configure and maintain a suite of virtual systems on one or more providers? Will your resources have enough experience to stay with this rapidly changing landscape over the long haul? This is a serious question and can be a very serious commitment in the SMB market. In some industries, there is almost no question – you have to be there at some level. In others, since technology is not really their business focus, there is an honest discussion to be had over the amount of in-house expertise you want to maintain outside your strategic focus.
- Design & Development for Business, E-Commerce, SaaS & Mobile Applications – There are many reasons to develop strategic business applications in today’s market. Reaching new clients on new platforms, automating proprietary services and supply chains, providing a strategic market presence where competitors haven’t reached – are among just a few of the many drivers that bring SMBs into custom software. There are many standard business applications and suites available that require nothing more than a network connection and an internet-capable device for users to participate in work activities 24X7. But, at the same time, automating a proprietary business process with virtual spreadsheets and shared document pools is not scalable or maintainable over the long run. When it comes apparent that the ad-hoc approach that has been nurtured and maintained by a few dedicated workers isn’t going to hold together or adapt to new needs easily, do you use an in-house development team or outsource the new application? In this situation, an SMB will have the expertise to leverage their proprietary business advantage, but they probably don’t have the experience or skills to bring the right technology to the project, develop and maintain the target application over the long run. Then the question is again – do we build the expertise in-house or outsource? There are several key decisions in making the right choice we will explore shortly, but for now, just think about all the different situations that could come into play for each organization.
- Security & QA – Data security and reliability has become a standard business risk for all companies, from global enterprise to SMBs. Most businesses have to be connected to the global network at some level, but maintaining secure, private data and systems in network-connected environment is a constant threat. SMBs generally don’t have the financial reserve to deal with outages or data losses over a few hours, much less the risk of intrusions or reliability problems that could span days or weeks. Regular security audits, threat anticipation, intrusion mitigation are all part of the toolset required, whether your infrastructure is in-house or virtualized. Beyond that, the number of devices and services that access your systems is constantly changing – impacting existing applications in new ways and bringing new demands. The role of quality assurance in this situation is not done when the application goes into production on day one. Quality and functionality for purpose needs to be evaluated regularly so that changes can be made strategically – rather than as a reaction to unplanned situations. For an SMB, these needs can be an unpleasant surprise when problems come up that are beyond their skills and maintaining the expertise needed is not cheap.
What Drives Your Decision?
So – when it comes down to a choice of in-house or outsourced IT and software development teams, what are some of the drivers you need to consider? Of course, every business is different and the SMB world is quite sensitive to market and business model specialization – but even so – are their common issues that many organizations need to think about?
Here are some issues we hear our SMB clients working over frequently:
- Is your business basically in the technology industry? Are information technology and software development outside your strategic business focus? Should you spend your time and resources pursuing an IT function or would you be better off partnering with a services vendor that has what you need – allowing you to focus on your business value to your customers? It is a worthwhile discussion to have internally, but you should also consider where you are going to look for the provider you need. There are literally thousands of service providers available worldwide with all sorts of skills and experience. For SMBs, the question should be, “What am I comfortable with?” Do you need a vendor who has 100’s of clients, is really inexpensive on an hourly basis, but honestly has resources available directly only in off-business hours? Just like any market, there are trade-offs in price and quality of service that you need to navigate to decide what would work best for your situation.
- Even in industries that consider their business to strongly linked to technology, like custom manufacturing or supply-chain logistics, the skill sets and experience needed for IT and software development in a world of cloud services may be a difficult and competitive environment to manage for SMBs. Outsourcing, especially in these industries, is not an “all-or-nothing” proposition. Integration of vendors that have the necessary skills and have the ability to work in real-time directly with your in-house team can be a strategic advantage and allow you more flexibility.
- Many SMBs experience peaks and valleys in their business environment that make it difficult to maintain a stable in-house team. In these cases, access to partners that can help them scale both their infrastructure and resources up and down becomes a critical need. Hiring new resources can present a lag time of anywhere from three to six months while teams are brought together and into production. For an SMB, even over a longer project, this can be a serious problem. If a vendor can have an experienced team available in a couple of weeks to fill a requirement and building an in-house team could take months, the question becomes, “will the window of opportunity close before the project begins?” Plus, when launching a new application, a contract with a vendor presents an opportunity to clearly define project terms, scope of work, and responsibilities that may be more difficult to negotiate with new or existing internal teams.
- While in-house teams have deep knowledge of their existing systems, customers and proprietary business advantage, they often don’t have experience with a broad range of current technology, plug and play approaches that can ease and shorten development, and the many device formats now in the field. In these cases, finding vendors that can bridge the gap and work with the internal team rather than supplanting them is very important for SMBs. This implies a need for a smaller, more nimble outsourcing vendor who can quickly overcome cultural barriers and has established processes and procedures to bring a team together.
So, bottom line, the message is that the access to information technology and services has never been better for the SMB market and will continue to improve. But with that promise, there is a serious decision to be made over how much energy and strategic focus you need to expend in pursuit of technology and technical resources. When you step back from it, the choices have a lot in common with every business decision – time-to-market, access to resources and experience, build-or-buy, scalability and risk management. If you decide to outsource some or all of your IT and software development needs, the key issue is finding a vendor that you can work with at a partner-level over the long run. Changing horses in midstream is not an exercise anyone wants to take on.
Scio is a nearshore outsourcing vendor of IT and software development services for our clients in North America. We can solve many of the problems faced by our SMB clients with a range of services and resources that are available in real-time, on demand. We are aware of the business climate, communications, and culture in the US – because that is where the majority of our clients and projects reside. We leverage cloud services and systems for our clients large and small every day, in a variety of industries. That broad range of experience and technology is a critical advantage for our SMB customers. It allows them to be more flexible, more capable, without losing their business focus. Whether you need a new mobile application or to migrate your internal applications to better and more scalable environments over time – we can help. Contact us to find out how a nearshore partner can make the difference for you.