Outsourcing for small and medium business

Outsourcing is a concept that’s been around for many decades and is very big business. According to Deloitte (Outsourcing, today and tomorrow: Insights from Deloitte’s 2012 global outsourcing and insourcing survey), organisations around the world were estimated to outsource some U.S. $480 billion worth of business and information technology (IT) services in 2012 alone.

About a dozen years ago I wrote an article for the now defunct Fairfax Media MIS magazine that compared the benefits of outsourcing and insourcing for large corporations. By reflecting on that article I’m astounded at how much the world of outsourcing has changed.

I won’t bore you reminiscing about the article as the focus of this blog is to look at the concept for smaller organisations and, in particular, how the Internet and Cloud Computing have revolutionised the opportunity for all to benefit from outsourcing.

What is outsourcing?

For those that don’t know, outsourcing involves the performance of services by an external person or company, which were formerly undertaken internally by an organisation using its own employees.

Traditionally the benefits included:

  • Access to lower cost resources.
  • Access to a larger pool of skills and capabilities than could be nurtured internally.
  • Lower risk though contractually enforceable service levels.
  • Higher service levels.

But enough of the old world! Formerly purely the province of large enterprises, outsourcing is now an attractive, even compelling, reality for small and medium sized businesses (SMBs).

What are some of these new outsourcing opportunities?

Cloud-based Infrastructure as a Service (IaaS)

Cloud-based IaaS offers individuals and SMB’s access to hardware without an upfront investment, on a month-to-month contract, at a lower cost and with the flexibility to scale up or down within minutes. This is a revolution and is putting traditional (legacy) IT hardware vendors rapidly out of business.

Why buy a server, have some techie run it up, buy a maintenance contract, have to deal with upgrades and backups on a daily basis when you can get on the OrionVM, Amazon Web Services or Rackspace site, tick a few boxes and have your server resource available immediately with no further hassle? Seems to be a no brainer?

Platform as a Service (PaaS)

Similarly, PaaS makes it possible for anyone with an Internet connection and a credit card to set up an application development shop – so now the larger software development and services companies are being disrupted because barriers to entry have been dramatically lowered and competition has increased. Witness the flood of apps, startups and innovation generally.

Virtual CTO

Virtual CTO is one of the more interesting outsourcing developments for SMB’s. In larger organisations there is usually an established IT department which deals with all things IT – from strategy to operations to mobile and web needs. SMB’s usually can’t afford to hire their own staff and generally make lots of poorly informed decisions about their technology needs.

Virtual CTO is outsourcing provided by specialist IT services suppliers where they provide your organisation with the technical skills and resources required for you to make technology work for your business. Kind of like ‘IT Strategy as a Service’! Buy what you need, when you need it, no lock-in and lots of flexibility to get the best IT advice for your business needs.

Crowdsourcing

Perhaps the most disruptive innovation has been the advent of crowdsourcing and online services auctions. The capacity of cloud computing technology allows them to take place on a massive scale.

outsourcing vs. crowdsourcingOutsourcing vs. crowdsourcing
A quick look at the differences between the two.

Australian Innovation defines crowdsourcing as the “outsourcing of tasks and activities, traditionally performed internally by an employee or an external contractor, to a large group of people (a crowd), through an open innovation approach or an open call.”

Some of the advantages of using a crowdsourcing approach can include:

  • Reducing costs, sometimes radically.
  • Finding new business opportunities that you may never have discovered yourself.
  • Building virtual teams rapidly which offer access to the best minds to solve the hardest problems.
  • Speed and flexibility, the ability to respond quickly to the changing circumstances of your own business.

Some of the most well known, successful and innovative crowdsourcing sites include:

The bottom line!

As with all good things there is usually a caution. While crowdsourcing has a number of great advantages for smaller businesses it can result in intellectual property (IP) ambiguity, including ownership issues and the confidentiality of IP. So be careful, but be bold also and venture into this brave new world because it just may give your business an extraordinary and unexpected opportunity. At the very least it will probably save your business a lot of money.

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Written by

Strategy Manager at EmpireOne, Craig has a critical look on businesses and their technologies. After years in the media, artificial intelligence and insurance and risk management sectors, his knowledge, skills and experience have positioned him perfectly to advise and put businesses on the right path.