06 IT Outsourcing Case Studies Every Startup Can Learn From
IT outsourcing has long been a popular option among technology companies. Almost 57% of global companies hire offshore developers in order to concentrate on their core business activities.
Despite numerous successful cases of outsourcing by large corporations, many startups remain wary of outsourcing web development overseas due to trust and delivery concerns. However, the practice of major players demonstrates that the reality of outsourcing is quite different.
In this article, I’d like to use some successful cases of outsourcing among large corporations to dispel some myths and deduce some lessons that cofounders can apply. So let us get started!
1. Slack: Outsourcing Is a Popular Option for Early-Stage Startups
Slack is a real-time office collaboration tool that includes topic-specific chat rooms (channels), private groups, and direct messaging. Needless to say, this is now one of the most popular tools for business communication, with nearly 12 million daily users (as of 2020) and a projected 79 million by 2025.
Simultaneously, Slack stands out as an example of a successful outsourcing case. In fact, in order to save money, the company outsourced design and app development services from the start. Using an outsourced workforce, Slack was able to gain 15,000 users in the first two weeks of its launch and become a startup unicorn in 2014.
2. WhatsApp: Find the Expertise You Lack
Whatsapp is an app that doesn’t require much explanation. With over 2 billion users worldwide, this is without a doubt the most popular messaging app. However, the wind has not always been at WhatsApp’s back.
WhatsApp was founded in 2012 as a small organization with only 30 full-time employees and five part-timers. The company began with a seed round of $250,000 in capital.
To be honest, this is a pittance for launching a product. However, WhatsApp needed to keep its costs low and find web development talent with a good price/quality ratio. As a result, the company turned to East Europe, the world’s largest outsourcing hub, to find tech talent for future developments.
3. CitiGroup: Outsourcing Can Help You Save Money
Citigroup, a US-based multinational investment corporation, is probably the most well-known example of an outsourcing company. Citi has been hiring offshore since 1992, with employees based in India, the Philippines, and Poland. The firm’s efforts in this area went even further. Citi cut 11,000 jobs at its headquarters in 2014, at least a quarter of which were IT specialists. This change saved the company $1.1 billion per year.
Outsourcing technology development is a common practice among banking titans. Banks like Bank of America, Barclays, Goldman Sachs, and J.P. Morgan, for example, hire developers from other countries.
4. Basecamp: Outsource Web Development So You Can Focus On Your Business
Another successful outsourcing case is Basecamp, a company that provides project management solutions. The “cobbler’s children” problem arose at some point during the company’s growth. While others were using their tool to manage projects and work, they were dealing with internal issues such as workflow management and client support. As a result, Basecamp made the decision to outsource some critical development functions in order to resolve the situation and allow their internal teams to focus on business.
5. Google: Outsource to Reduce Labor Costs
Even Google’s 89,000-strong in-house army cannot handle the massive workloads. This is why Google hires global talent and works with contractors on its AdWords project, which accounts for the majority of the company’s revenue (2017). According to Bloomberg, 2018 marked the first year in which Google’s contractors outnumbered direct employees.
According to Google, the first reason to outsource is to gain access to a global pool of talents and expertise that Google does not have.
Second, by outsourcing, the company avoids hiring and operating costs.
6. Alibaba: Outsource The Talents You Need
Another successful example of outsourcing is Alibaba, the Asian e-commerce behemoth. The company currently has 779 million active customers and 149,2 billion in revenue. In fact, the company has outsourced the design and development of its website.
In the 1990s, Alibaba’s founder, Jack Ma, faced a scarcity of resources. There were Chinese specialists with e-commerce development experience. Another complication was that China had strict internet restrictions, which made website development difficult.
So the company began to seek partners and outsource overseas across a variety of projects, and they found the human resources they required in the United States. By hiring specialists from other countries, the website began to grow at an exponential rate. For example, in 2014, Alibaba broke the record for the largest IPO in history, raising $25 billion.
Why Do Businesses Outsource?
Hiring developers remotely helps solve many business problems, as evidenced by the IT outsourcing examples. Let us summarize a few of them. The following are the primary goals that companies pursue when hiring developers from other countries:
- Cost savings: working with remote contractors allows you to save money on operating expenses. Economic interests are more important, especially during the COVID-19 outbreak, when the economic environment is unstable.
- Focusing on business: by outsourcing web/app development functions, companies can double down on product development, scale up, and improve time to market.
- Saving money at the start: Young startups frequently outsource web/app development in order to save money and invest it in the product.
- Learn new skills: If you want to test a new AI-based technology for your product or an AR feature for an app, hiring a person might be too much. Outsourcing a subject specialist with the necessary skills may be a less time-consuming option.
- Avoid additional labor costs: Once again, you do not need to go through all of the hiring hoops and provide all of the social benefits when you can outsource product development to a contractor and save money.
The examples above demonstrate that outsourcing can save your business, regardless of its size, business model, or age. If you want to learn more, I’d like to offer a consultation so you can determine what the best solution for your company is.