Does functional outsourcing inhibit business transformation?

IT Outsourcing is big business, but a recent study indicates that there’s a hidden cost to this flexible means of extending capabilities and bandwidth.

The 2018 Accelerate: State of DevOps report shows a clear link between the outsourcing of individual functions and below par performance in productivity and agility. Low-performing organisations were three times more likely to have handed areas such as application development, testing/QA or service operation to third parties.

A key finding from the report is that businesses deploying new features less often are getting left behind. The gap between low and high performers is widening, impacting overall business performance, not just IT performance.

The issue with outsourcing is that while it delivers upfront cost-savings and workload benefits, it can also engender a siloed approach that slows a business down. This presents a problem for established businesses that are transforming operations to respond more quickly and effectively to customer demands. The cost of sluggish development could outweigh any savings realised through outsourcing.

The problem with outsourcing

With the outsourcing model, friction between teams is often a major hindrance. This makes it difficult to facilitate seamless handoffs, creating barriers to throughput. What’s more, urgent updates or critical features that should be prioritised for quick release can get batched with low-value work, resulting in delays that risk competitive disadvantage.

To keep pace in the digital age, businesses need to regularly release new software features that enhance user experiences, while maintaining service stability. Anything that prevents this will gradually erode productivity, profitability and market share, leaving the business vulnerable to disruption.

So, what are the options?

Silos are the real problem here, and they can occur internally as well between outsourcing partners. Whether you’re insourcing, outsourcing or a combination of the two, you need to break down silos to facilitate better cohesion and integration for frictionless delivery and stability. Accelerate: State of DevOps concedes:

Other popular models that are not addressed in this analysis include both geographically distributed teams and so-called “embedded” contractor models. A key difference in these models is that the “other” teams – whether they are in-house distributed teams or the additional staff provided by contracting and consulting firms – operate and behave as part of the primary organization’s cross-functional product or technology teams; if the rhythms of software development and delivery are maintained, outcomes are very likely to be maintained.

In fact, we see support for this in the data: high-performing teams are twice as likely to be developing and delivering software in a single, cross-functional team.

The key point is the need to ‘operate and behave as part of the primary organization’s cross-functional product or technology teams’. Various approaches can be taken to facilitate this, but for products that differentiate business performance, many opt for the insourcing approach, bringing software development and operations closer to home. This does pose challenges however, from devising an effective operational model to attracting/retaining talent and building the right culture (especially in traditional ‘waterfall’ organisations).

On 18 September I’ll be hosting a webinar that explores the options in detail. I’ll be joined by James Harvey who heads up The DevOpsGroup Academy as well as Principal DevOps Consultant Raj Fowler. Raj formerly worked at BAE Systems as Head of Product Delivery and DevOps Coach. He’ll share insights from BAE Systems’ successful transition to a seamless cross-functional model with multi-sourcing. Three critical factors underpinned the success of this project:

  1. Prioritisation – Raj identified priority applications where stability couldn’t be compromised, but a high degree of throughput was required. These areas had a direct bearing on business performance, enabling improvements to quickly deliver tangible commercial value.
  2. Redesign – he revised the existing operational model for better integration with the overarching service integration and management model. This meant identifying where silos were causing problems, and instigating measures to break them down, such as appointing a dedicated product owner to hold accountability for outcomes, build the team and foster the right organisational culture.
  3. Collaboration – setting outcome-based contracts aligned with business objectives ensured every individual, team and organisation understood the importance of collective success. Individual or local performance was meaningless if the shared goals were missed.

What next?

It’s time to grasp the nettle and tackle factors preventing your business from realising its transformation goals. Overcoming outsourcing issues is one important aspect of this, and our webinar will provide valuable insights to help you on your journey.

Join Webinar Here

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