Outsourcing has long been equated with farming out back-office or non-core business functions – a routine tactical role. But the ever-more relentless pace of technology change has promoted outsourcing to the strategic level.

Companies are now putting outsourcing to work as a way to drive disruptive initiatives such as digital transformation. Nowhere is this more true than in the software development space, where out-innovating rivals is an imperative. 

“Disruptive software solutions are delivering game-changing products, faster speed-to-market, enhanced customer experience and increased competitive performance,” says Andy Hilliard, CEO of Accelerance, which has built a global network of certified software outsourcing partners selected for cutting-edge capabilities. “We’ve had increasing demand from clients for help with quickly ramping up their innovation competency. It’s time to get ahead or get left behind.”

Yesterday’s software development outsourcing meant application support and enhancement, the addition of new features and the implementation of systems integrations such as APIs to various systems. Today’s more ambitious scope includes RPA (robotic process automation), cloud computing and artificial intelligence (AI) and other higher forms of cognitive intelligence. 

The ability to successfully implement these new technologies is critical. Across every industry and commercial sector, disruptive new players are eroding market share from established companies that once looked secure. These disruptive outsourcers are leapfrogging the traditional competition by leveraging the capabilities and experience of outsourcing players who are business partners first, innovators second and software developers third. That’s the new paradigm of disruptive outsourcing.

More than half of organizations are adopting or considering disruptive solutions, according to Deloitte’s Global Outsourcing Survey 2018. A Global Insights Pulse Survey by KPMG backs this up, with 47% of respondents wanting to see greater use of advanced technologies. 

However, not everyone is keeping pace with this step-change in approach. While executives want innovation, the Deloitte report found that a lack of innovation is a top pain point with outsourcing clients – something we’ve seen firsthand here at Accelerance. 

Typically, outsourcing software development has been used to buy in resources, as a way to cut costs or boost headcount. Disruptive outsourcing takes that old model to another level. A strategic approach designed to drive growth and agility, it’s about quickly securing and leveraging emerging capabilities in emerging technologies to make that next generational leap. 

For example, it was a quick pivot to contactless payment – a service you couldn’t convince most retailers to offer 12 months ago – that kept many restaurants viable as COVID-19 swept the US, sending tens of thousands of others to the wall.

Playing catch-up is bad for business, so to stay in today’s game you need to shake things up with some revolutionary ideas of your own. That means not relying on what’s worked in the past, but looking to the future – then finding a software partner who can realize your vision and take that step into the future alongside you. 

Software development outsourcing provides a jump start to companies looking to ramp up innovation. It facilitates access to the most leading-edge capabilities available and, as a bonus, it is more scalable and more cost-effective than an internal build.

Step up – or Step Aside

Early-movers who seize the opportunities offered by disruptive outsourcing will quickly leave their more cautious rivals behind. However, when it comes to digital transformation, few companies have the necessary skills in-house. 

Software as a Service (SaaS) is a standard business model now, enabling data to be accessed from any device with an internet connection and a web browser. Yet I come across companies all the time who can make software work on their server, but have no idea how to put it into the cloud. 

Ettienne Reinecke, chief technology officer of global technology services company NTT, believes the pace of change means the future is closer than we might think.

“Today’s trend is tomorrow’s mainstream adoption,” he writes in Future Disrupted, an analysis of the critical factors likely to shape the business landscape in 2020 and beyond. “Co-innovation will become increasingly important as organizations look to partner with technology providers that can offer R&D resources to help them address and solve these business challenges.”

The KPMG survey found the growth of digital technologies, automation and AI has led organizations to increasingly focus on technological innovation. However, outsourcing providers still tended to be seen simply as a source of low-cost labor rather than strategic insight. In this new environment, that needs to change.

“Particularly for complex processes that are not central to business strategy, outsourcing can provide access to technologies that an organization does not have the skills or resources to develop on its own,” a report on the results concludes. “Successful future outsourcing models will make greater use of advanced technologies... and differentiate themselves more on how services are delivered rather than what is delivered.” 

We’ve seen the enormous potential of disruptive outsourcing with our own clients – and helped pick up the pieces when companies have tried to manage the process in-house. In some cases, they’ve invested in software that’s been limited by short-term thinking or with a narrow focus, leading to missed opportunities elsewhere. One large construction company in the Bay Area which has thousands of sub-contractors created a system enabling all their safety manuals and induction information to be accessed online. Smart thinking. What they’d neglected to consider was building out the e-commerce side of the model, so it could be monetized.

Many others have made huge gains in capacity and innovation through software outsourcing. A US financial services client is currently collaborating with two of our offshore development partners to develop a suite of productivity tools that uses an artificial intelligence program to  build up a knowledge base over time, creating a virtual library of customer “case studies.” By synching multiple complex systems via RPA, it’s possible to approve credit and generate loan documentation online. In a separate project, the client’s loan origination software is undergoing extensive modernization and moved to the cloud.

The Deloitte survey found that disruptive outsourcing was fundamentally transforming the landscape, re-engineering the way organizations operate and making them increasingly agile, effective and efficient. However, the report noted, it’s an undertaking that is anything but simple. “Effort and expertise are needed to address security and cyber risks, changing regulations, organizational resistance, skill gaps, and to help flatten fragmented processes.”

Former ISG partner John Keppel sounded a similar warning, while president of the global technology research and advisory firm. “The unprecedented change brought about by ARC (automation, robotics and cloud) and technology innovation is creating substantial opportunity but also substantial risk,” he told Nearshore Americas, a business and technology news journal. “Clarity of leadership and strategy will be required to navigate these turbulent waters.”

Disruptive Outsourcing: How To Get It Right

So many promising initiatives never gain traction in the market due to flawed execution. If poor functionality means a product doesn’t meet customer expectations, it has failed, however brilliant the original idea.

For those new to the idea of disruptive outsourcing, here are some common pitfalls:

• Lack of focus. Step back and ask, “Why are we doing this?” Be clear on the specific outcomes you want to achieve and how the new technology will be integrated into your business model.
• Lack of vision. Some software development companies will ask how many coders you need; others will give you ideas you never thought possible. Ironically, there’s usually not much difference in cost between the two options.
• Lack of ambition. Today, it’s possible to create something that would have been inconceivable 20 years ago. True innovators know what’s round the next corner.
• A disconnect between the technology and the user experience. Flawed design work or poor implementation can be fatal – a great product won’t gain traction with customers if it’s difficult to use. Technology is the means, but an innovative experience is the end goal. 
• Value versus cost. New technology solutions can give a long-term return on investment that may not immediately impact your bottom line. When executives in the Deloitte survey listed their criteria for disruptive outsourcing, cost optimization wasn’t in the top five.
• Lack of governance. This is one of the most critical factors in mitigating risk. Governing innovation projects can be challenging when management may not have a clear understanding of what it takes to effect the change. This is where it’s important to have an expert trusted advisor to advise management on the project risks and issues so that nothing gets missed in governance.
  

“Finding companies that truly have a culture and commitment to developing innovation is like searching for a needle in a haystack. What we look for in potential partners goes far beyond their ability to code effectively. And when you get that combination of collaborative alignment and innovation alignment, you’ve got a winner.”

- Accelerance CEO Andy Hilliard

Preparing for Change

With disruptive outsourcing, you’re putting a significant piece of work in the hands of another company and trusting them with it – but that doesn’t mean surrendering control. Too many ambitious projects have fallen short due to lack of communication and guidance or security issues. 

When contracting for a great complexity of capabilities, companies need a more structured approach, both to onboarding a new software partner and implementing sophisticated project management. If you’ve never outsourced before, your entire operating model will need to change.

Clients who have succeeded with this new approach cite higher levels of governance and project management, and organizational change as critical success factors. A governance framework will establish management layers and best practices, specify remediation (and, where required, reparations) if something goes wrong. It should also outline a road map for the future, so one project can roll into another.

In the end, an experienced outsourcing partner can mean the difference between success and failure in the quest for bold, transformative development and delivery. Accelerance knows this need firsthand. We operate on the cutting edge of future-focused software development by connecting companies to the most advanced technical skills and innovative concepts through our global outsourcing network. 

A trusted advisor in strategic outsourcing partnerships, Accelerance can help you find the right collaborator for your goals, at a fraction of the time and cost of in-house development. We’ve assessed custom software development providers in 40-plus countries to certify the top 1% as premium partners who understand Western business models and are world-class innovators in their fields. 

For your next outsourcing engagement, our team of experienced management consultants can provide support at whatever level you need, including help to negotiate the contract, put a strong governance program in place, manage cybersecurity, and address regulatory issues. To find out more about our suite of software solutions and advisory services, get in touch.