There are plenty of good reasons to put some IT functions in a service provider's hands. But is your small or midsize business up to the challenges required to make outsourcing work?
It took three years for Girls with Goals founder Erin Hurry to finally realize her vision of extending her business and life coaching practice onto the Web, with a community and e-commerce site aimed at helping women realize their business goals through online coaching, mentoring, and storefront services. It's a classic example of IT outsourcing gone very, very wrong.
Girls with Goals.com launched this year, and is off to a good start, with 250 members and 40 live storefronts. But getting there has been a struggle, emotionally and financially, as a series of outsourcers to whom Hurry entrusted development of the Web site failed to live up to their promises.
The first Web site design and development company she used, a Las Vegas outfit that has since gone out of business, promised delivery in three months. Eighteen months later it turned over a non-working product. Goodbye $10,000. "I was nave because I'm very trusting," says Hurry. "It took a couple of months to regroup and cut my losses."
Hurry, who lives in Spotsylvania, Va., thought she'd have better luck with a local Web design contractor, about whom she had heard good things. Hurry paid $9,000 of the $18,000 estimate up front and six months later got a home page and news that the stalled project now was going to cost $30,000 to complete. Turns out the contractor was outsourcing the coding, and when Hurry tried to help the contractor find other developers that could help her bring the project in on budget, she got stonewalled. "People don't understand that most of these Web design companies outsource the work -- they're just brokers," says Hurry.
The last of the three Web development companies she tried, based in New York, ultimately delivered on most of the site design, albeit six and a half months past deadline and using a team in India that wasn't the company Hurry had consented to use. The design had some flaws in the code that could have opened the door to hackers. By the time the product was delivered, Hurry had already signed two IT persons onto her staff to handle application development, including fixing the flawed code.
Bad Start Not a Deterrent
Despite her bad experiences, Hurry isn't entirely soured on outsourcing. She believes it to be a good choice for desktop support and business processes such as payroll and bookkeeping. But given that the Web site is the backbone of her business, she's concluded that application development is too critical a function to outsource. "It's a big step to hire your own team," Hurry says, "but you can build loyalty within your company and see those folks grow, too. Instead of a service provider, you have a team. They start believing and investing themselves in your product, and they understand your brand."
That's probably the most important lesson small and midsize businesses can learn about outsourcing: Don't outsource a core competency of your business.
In most companies, that leaves the field pretty wide open for what to outsource. "The way the textbook goes is to identify your core competency and seriously consider outsourcing anything outside of that," says Frank Casale, CEO of The Outsourcing Institute, a professional association dedicated to outsourcing. "If IT is a core competency, then don't outsource it."
There's good reason to pursue IT outsourcing, whether it's application development and maintenance, help desk support, infrastructure, or business processes. "I like the word growth-sourcing because outsourcing really is a growth enabler" for smaller companies, says Casale. "There's less of what you see in large companies, where you talk about large bloated bureaucracies they are trying to skinny down and optimize. With many small and medium-sized companies, it's more about [dealing with] limited resources and gaining scalability and just growing within a vertical or horizontal, or growing globally."
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