| TABLE OF CONTENTS | | | | improves costs, efficiency and productivity in a total |
| · What drives SMBs to IT outsourcing? | | | | quality control approach. |
| · What holds them back? | | | | Cost Savings |
| · Specific benefits for SMBs | | | | Lower cost is one of the primary reasons for |
| · Outsourcing myths among SMBs | | | | outsourcing. The cost savings are commonly based on |
| · Challenges SMBs face in Outsourcing | | | | the wage difference between the Western world and |
| · Conclusion | | | | offshore destinations. Other factors such as |
| SUMMARY | | | | economies of scale and specialization could also have |
| Small businesses have always confronted with | | | | a considerable impact. |
| addressing their IT necessities. The lack of resources - | | | | Knowledge & Expertise |
| be it staff, budgets or managing resources - have | | | | Outsourcing gives you access to knowledge pools |
| determined SMBs to start exploring the offshore | | | | that you might not have inside your own company. |
| outsourcing option. But start ups and small enterprises | | | | Outsourcing also enables you to focus on your |
| have specific needs that few outsourcers can | | | | company's core business and competences. |
| address correctly. Affordable IT solutions that are | | | | Risk & Quality Control |
| easily to install and configure, service/support | | | | Outsourcing agreements can be structured in a way |
| requirements and, most of all, integrated ready-to-use | | | | that the responsibility to produce a certain quantity |
| methodologies and tools are the most critical demands | | | | quality of output is placed at the outsourcing provider, |
| of an SMB willing to outsource its IT department. | | | | thereby giving you a better way of managing risk. The |
| What drives SMBs to IT outsourcing? | | | | responsibility of the provider can be defined in so-called |
| The SMB market is to eager to find affordable IT | | | | Service Level Agreements |
| solutions that are easy to use. Just as important, | | | | (SLAs). |
| however, is are the requirement that address SMB | | | | Capacity Management |
| deployment issues, operational challenges and service | | | | Outsourcing gives you a tool to manage your output or |
| support requirements. SMBs want IT solutions that are | | | | production capacity in a flexible way. |
| easy to install and configure, and require minimal | | | | Staffing |
| customization and integration. More importantly, they | | | | By using external resources, you can overcome |
| demand responsive and reliable after-sales service | | | | possible shortages on the job market. This is especially |
| and support. SMBs don't take customer service and | | | | the case for highly specialized roles in, such as the |
| technical support for granted. For many small | | | | information technology industry. |
| companies, a solution provider's technical support isn't | | | | Despite the proven benefits of outsourcing - shown |
| merely a convenience; it's a business-critical IT service, | | | | below - SMB managers still seem to be reluctant |
| because of their resourceconstrained IT staffs. | | | | when it comes to IT outsourcing. Many of them share |
| SMB business specific challenges and "pain points" | | | | so-called "myth" beliefs which we would like to |
| determine specific needs for small enterprises. Most | | | | address as follows. |
| outsourcing providers are specialized on the early | | | | Outsourcing Myths among SMBs |
| adopters of outsourced software services - large | | | | Some of the deterrents mentioned before are only |
| companies multinationals. Therefore there are few | | | | misconceptions. Some of the most common things an |
| specialized providers for SMBs and able to adapt to | | | | SMB manager will say when approached for offering |
| their business model and needs. Yet small-sized, SMBs | | | | offshore software services are: |
| are still technology-intensive businesses that require | | | | "WE ARE TOO SMALL TO OUTSOURCE" |
| great attention from outsourcing providers. Small | | | | The real thing: It is very difficult to define the size of an |
| businesses should choose outsourcing their IT to those | | | | organization that is ready to outsource. There are |
| providers withexperience in managing SMB projects. | | | | "virtual companies" that outsource all their development |
| What holds them back? | | | | requirements and handle only marketing and branding. |
| At first glance, this key issue can seem redundant with | | | | In short, if you can see a need for software |
| the ones in the previous paragraph. However, we | | | | development, you can outsource. |
| often see a contradiction between SMB IT | | | | "WE CANNOT OUTSOURCE OUR CORE |
| requirements and how SMBs buy technology. For | | | | PRODUCT DEVELOPMENT" |
| example, SMBs cite tight IT budgets as an inhibitor for | | | | The real thing: Core product development can be |
| adopting technology, but yet they choose not to use | | | | outsourced and there are several success stories. |
| vehicles such as "leasing" to work around limited IT | | | | However, it is absolutely essential to do a thorough |
| budgets. Creating the right IT solution for SMBs | | | | background check on the vendor and ensure that the |
| requires a clear understanding of their technology and | | | | vendor has a good track record in protecting IP before |
| business needs. | | | | outsourcing core product development. |
| REASONS SMBs CITE FOR | | | | "WE DON'T AFFORD OUTSOURCING" |
| OUTSOURCING | | | | The real thing: The underlying meaning of this |
| · Cost Reduction | | | | statement again reflects the perceived difference in |
| · Access to better skill sets, depth of | | | | outsourcing core and non-core areas. You don't have |
| experience | | | | to outsource for the sake of outsourcing! Engaging an |
| · Access to the best / most current | | | | offshore partner is usually cheaper by 30 to 40%, as |
| technologies | | | | manpower, infrastructure costs are far lower at the |
| · Minimizing downtown | | | | vendor's location. |
| · Increasing user productivity | | | | "THE ROI OF OUTSOURCING HASN'T BEEN |
| · Reallocating personnel to more strategic | | | | PROVED" |
| activities | | | | The real thing: On the contrary, the ROI component of |
| · Convenience | | | | outsourcing has been shown time and time again. In |
| SMBs prefer IT solutions that have simple and | | | | fact, the greatest arbiter, the marketplace, seems to |
| straightforward pricing (the requirement), but they need | | | | give outsourcing a resounding thumbs up. Beyond |
| the flexibility to consume technology in modular | | | | reducing head count and employee overhead, |
| components that can be extended when required (the | | | | additional benefits such as faster time to market and |
| behavior). | | | | improved quality of the finished product can achieve |
| It is also important to understand SMB preferences | | | | an ROI of over 400% in some cases. Today, the |
| including, but not limited to, brand loyalty, bundling and | | | | question is not if you will outsource, but when and how. |
| packaging, and service delivery options, such as | | | | "OUTSOURCING MEANS MORE TIME SPENT |
| outsourcing and software as a service, as SMBs | | | | MANAGING OUTSIDE VENDORS WHO ARE |
| upgrade and expand their IT environments. Yet, there | | | | UNLIKELY TO |
| are still issues that have prevented SMBs to start | | | | BE FAMILIAR WITH MY BUSINESS" |
| outsourcing their IT department until recently. And | | | | Like most services related to IT, choosing the right |
| these are: | | | | provider can make all the difference. In addition to |
| Affordability: Recent market figures point out that still | | | | SLAs, SMBs considering outsourcing IT tasks should |
| 40% of SMBs state cost as still the strongest reason | | | | look for providers with specific and proven experience |
| preventing them from outsourcing. But offshoring | | | | inappropriate industries. Outside providers can also |
| proved that in most cases the outsourcing option will | | | | offer solutions that are vertically aligned. |
| be significantly cheaper than hiring in-house staff - | | | | Challenges SMBs face in outsourcing |
| since manpower or infrastructure costs are lower at | | | | SMBs that have identified vendors for outsourcing |
| the vendor's location. | | | | development / maintenance or looking for a vendor, |
| Trust: Lack of clearly defined methodologies and | | | | should consider certain aspects that can easily ground |
| contracts, quality certifications, security assurance and | | | | the outsourcing initiative. Some of the factors that |
| even cultural issues can contribute to low trust levels | | | | SMBs should consider before signing on the dotted line |
| among SMBs when engaging in an outsourcing | | | | are as follows. |
| relationship. The vendor must be able to place | | | | Alignment of focus: Vendors too come in different |
| confidence, expect with assurance, agree to the | | | | sizes with different priorities! Some of them are |
| contract, and act predictably and fairly in order to | | | | largeoperators and some of them are small. SMBs |
| obtain trust from their clients. | | | | should choose a vendor most aligned to the |
| Intellectual Property and Data Security: One of the | | | | company's needs. |
| major drawbacks for outsourcing adoption among | | | | Some of the vendors have of late spread too thin by |
| SMBs is related to protection of intellectual property | | | | getting into non-development outsourcing services |
| and information in general. Especially for | | | | resulting in lack of focus. In determining the ideal fit, |
| technology-intensive start ups that rely on innovation, | | | | alignment of focus is a key parameter apart from |
| these are business-critical issues, and not all providers | | | | several other factors like culture, competence etc. |
| have yet in place the procedures for ensuring all these. | | | | Lack of well-defined processes: In most of the small |
| COMMON REASONS FOR SMB OUTSOURCING | | | | companies, a bunch of motivated tech team manages |
| · Network Connectivity: | | | | software development. Small companies and start-ups |
| Monitoring and Management of WAN, Routers, | | | | do not always have defined processes for managing |
| Internet Connections, VPN | | | | outsourced software development. Many of the |
| · Security: | | | | vendors find it difficult to deal with such a setup. |
| Monitoring and Management of Firewall, Virus | | | | Vendors are more comfortable dealing with |
| Protection, Spam Prevention, IDS / IPS | | | | companies with clearly defined processes. Companies |
| · Data Backup / Archiving: | | | | looking to outsource should spend time in defining the |
| Offsite Storage, Shared SAN, Data Centers, | | | | roles and responsibilities of their internal team and the |
| Archiving Services | | | | vendors' team. Most of the vendors have mature |
| · Messaging and Collaboration: | | | | development processes in place and companies can |
| Email, Web Conferencing | | | | adopt them. |
| · Software Applications: | | | | Commitment to a relationship: All major vendors work |
| Licensing Management, ASP | | | | with multinational companies and a small client may not |
| · Desktop Management: | | | | be considered as important as a fortune 500 client. In |
| Helpdesk, Break/Fix | | | | other words, a large vendor would most likely focus on |
| · Server Management: | | | | serving large clients with large business volumes rather |
| Monitoring Health and Performance Thresholds, | | | | than serving small clients. Small companies should |
| Break/Fix, Administration | | | | choose a vendor who values the relationship and |
| · Web Development / E-Commerce | | | | hence has a stake in the success of the engagement. |
| · Database Administration | | | | Track record and experience: Companies should look |
| Understanding: A clear understanding about the | | | | at the vendor's track record and experience in working |
| outsourcing process and benefits is minimal among | | | | with small companies. Vendors are comfortable |
| small companies. Offshore software services vendors | | | | working with large companies may not understand the |
| are more interested in adding Fortune 500 names to | | | | nuances of working with smaller companies. Small |
| their client lists and hence have failed to educate small | | | | companies may not have proper documentation or |
| businesses about the benefits of outsourcing. | | | | hardware/software infrastructure for testing, version |
| Volume of work: Large service providers would rather | | | | control etc. A vendor with a track record of dealing |
| work with large corporations that can outsource large | | | | with small companies should be in a position to expect |
| volumes of work. The volume of work outsourced by | | | | such situations. |
| SMBs may not be feasible for large vendors. This | | | | Risk Management: SMBs should seriously evaluate risk |
| trend seems to be reversing, but slowly. | | | | management processes adopted by the vendor. The |
| Management experience: Small and medium | | | | recent trend among offshore software services |
| businesses do not have the "management experience" | | | | vendors is the adoption of a business continuity plan |
| required to work with an outsourcing project. Large | | | | (BCP). Vendors with a clear BCP stand a better |
| corporations, for instance, have dedicated specialized | | | | chance of providing uninterrupted services in the face |
| resources to manage vendors. | | | | of contingencies. |
| Benefits of IT Outsourcing for SMBs | | | | Conclusion |
| Process Maturity | | | | Offshore outsourcing has been discovered for quite |
| Perhaps the main reason companies want to | | | | some time by large corporations but has barely |
| outsource is to engage a mature team for its | | | | attracted the attention of SMBs. Still, there are many |
| development tasks. | | | | proven benefits that should encourage SMBs to |
| Types of processes, the investments being made in | | | | outsource their IT function. And, more important, there |
| services, the infrastructure and the level of | | | | are providers of outsourcing services that |
| communication, trust and understanding that exists | | | | accommodate on a small business' model and already |
| between the vendor and client's company all influence | | | | have experience in dealing with this kind of projects. |
| the quality, results and outcomes of the process. The | | | | As we mentioned before, it's not a question of |
| maturity process should be adapted and flexible not | | | | whether to outsource but more likely when to do it and |
| static, developing in scale, scope and framework as | | | | especially who is the right outsourcing vendor for your |
| the relationship evolves and business results need to | | | | buying profile. |
| be maximized. Process maturity is effective when it | | | | |