To Outsource or Build In-house

To Outsource or Build In-house

Shweta Srivastava, CTO, Paul Merchants

In the past few decades, enterprises have changed the way they used to look at IT. Earlier perception of IT as cost centre has changed to profit centre and IT has become one of the major contributors towards achievement of organizational goals.

In olden days, different departments of an organization used to work on automation systems, which used to operate in silos with no exchange of data/information. Then came an era of ERP systems ­ all departments were brought on a single platform which contributed towards process automation and information exchange. Decisions could be taken based on the data derived from a single data source pertaining to all concerned business verticals. How-ever, challenge remained to continuously evolve the automation systems with the same pace, as workflows and processes change. Technology change, regulations change, and changes in the eco-system as a whole impact the way an enterprise operates. The legacy systems, which once used to be the core of all operations, started becoming redundant.

In such a dynamic work environment, IT decision makers are always faced with the question of deciding whether they should opt for a technology platform developed in-house or to go for an out-source model. There is no set rule that either of the models is best fit; rather, both have their own respective pros and cons. In an in-house development model, success or failure, the risk is entirely owned by the organization. For an enterprise whose core business is not software development, developing an in-house application is a huge investment. In-vestment is not only restricted to the monetary aspect, but involves dedicated manpower resource, time from conception till delivery, and patience until the product is ready for use. Even after the re-lease of the product, persistent evolution of the technology platform based on external as well as internal factors calls for investment. A concrete project management plan and efficient tracking
of the same is the key to ensure successful delivery of the product. Timelines should be derived based on detailed understanding of the scope and should be adhered conscientiously.

A great deal of effort & time is also invested in upskilling the technical team to stay abreast with the latest events in the market. A continuous focus towards learning gradually translates into evolution of the application. Having an in-house team gives the leverage to internal teams to keep sending request for change. It is extremely important to follow diligent change management process and apply necessary controls.

Having said that, an in-house development gives the team flexibility to introduce change as and when desired without being concerned about the cost quoted by the vendor or extended timelines of delivery. TAT for any upgrade/release is much faster. The intellectual property stays within the company. There is no insecurity related to the leakage of trade secrets as there is no third party involved. The data is in complete control of in-house team and confidentiality of the same is maintained. In short, full control lies within the company.

At the same time, outsource model works well for the go-to-market strategy. After evaluation and comparison of available options in the market, it is easy to decide on the product that closely matches the requirements. Once finalized, the technology partner has complete responsibility to study the internal processes of the company and align the product based on the shared requirement. This is quite like plug-and-play from end user perspective.

Any upgrade due to industry regulation becomes sole responsibility of the outsourced vendor team and is delivered by default. Technology upgrades and application enhancements are handled by the outsource vendor team and are passed-on to the organization without any additional effort. However at times, the vendors become resistant to. On the flip side, there is no control over the source code. For every small change, dependence is on the external team and each change is delivered with a cost. In case there are frequent changes desired, the cost of customization may even exceed the cost of initial product.

In a nutshell, there is no right or wrong when it comes to taking the decision on outsourcing or in-house development. The decision should purely be taken based on the individual scenarios and avail-able options.