OUTSOURCING MODEL

Outsourcing can be defined as the contracting or sub-contracting of non-core activities to free up cash, labor, time, and facilities, for activities in which a company holds competitive advantage. Companies having strengths in other areas may contract out data processing, legal, manufacturing, marketing, payroll accounting, or other aspects of their businesses to concentrate on what they do best and thus reduce average unit cost. Outsourcing is often an integral part of downsizing or reengineering.

Outsourcing is an effective cost-saving strategy when used properly. It is sometimes more affordable to purchase a good from another company, than it is to produce the good internally.

An example of a manufacturing company outsourcing is Dell buying some of its computer components from another manufacturer to save on manufacturing costs. Alternatively, businesses may decide to outsource bookkeeping duties to independent accounting firms, as it may be cheaper than retaining an in-house accountant.

In addition to cost savings, companies can employ an outsourcing strategy to focus on core aspects of a business. Outsourcing non-core activities can improve efficiency, streamlining, and productivity because another entity performs these smaller tasks better than the firm itself. This strategy may also lead to faster turnaround times, increased competitiveness within an industry and the cutting of overall operational costs. Businesses can reduce labor costs significantly by outsourcing certain tasks, while companies may simultaneously have access to technology without investing large amounts of money to own the technology.

Outsourcing also has several disadvantages. Signing contracts with other companies may take time and extra effort from a firm’s legal team. Security threats occur if another party has access to a company’s confidential information and which may cause the company to face data breach. A lack of communication between the company and the outsourced provider may occur, which could delay the completion of projects.

EXTENDED TEAM MODEL

Extended Team Model or ETM can be defined as a customized offshore outsourcing model aimed at building an extended arm of a client by having continuous access to various resources of a vendor, by forming a long-term partnership.

Firms view the Extended Team as members of a unified startup team and therefore ‘extensions’ of the home office. With ETM, colleagues in the home office and in the foreign office are in constant and direct contact. Also, with ETM, overall project management and responsibility for the final product remains with the core start-up team.

Hence, the Extended Team Model comprises of extending your existing team with professionals. These are not just IT people with some work experience but specialists who are qualified, highly experienced and people who have proved themselves.

Any firm hiring the Extended Team Model has the following possible benefits:

1. More Successful Teams

When people know each other they are more likely to emotionally feel close to each other and can be more comfortable to share relevant information. Hence, it is important for managers to identify and understand the mechanisms that are suitable for building and leveraging social capitals when forming Extended Team Models.

2. More Efficient Communication

Articulating project requirements can be tedious and time-intensive. And requirements frequently change. Constant communication among the firm and its extended team members can help to alleviate the burden, reducing the amount of necessary documentation and thereby saving a lot of time and money. Direct communication is also more personal and to-the-point than official documentation and thereby saving a lot of time and money. Direct communication is also more personal and to-the-point than official documentation, helping workers outside of the home office feel like connected and valued team members.

3. Shared Responsibility

The feeling of seeing each other as equal and shared responsibility enables team members to happily compromise certain things in their personal lifestyle, for example, working late at night, or on Sundays towards a deadline. As Extended Team Model encourages equality among team members and the equitable sharing of responsibilities across development locations, it has been noticed that the team members, both in-house and outside, do compromise their cultural norms and expectations for the good of the team.

4. Greater Transparency and Control

Transparency can be achieved through various means but the whole point of it isn’t to just keep an eye on a foreign-team; in fact, transparency shapes a culture of trust and accountability among the firm and the Extended Team members. And trust and accountability promote efficient and vibrant teams. Also, for startup founders, this is specially significant when justifying the choice of an Extended Team Model to investors.

5. Scalable Development Capacity

As Extended Team Model offers great scalability, this allows startups to increase development capacity rapidly and efficiently. Also, as the startup grows, or as the project ramps up, it’s easier to add additional developers as needed on a team extension basis than it is to hire full time developers at the home office.

So as you can see, Extended Team Model or Outsourcing, any of the two can be just the right solution which helps you address the issues on hand and helps you re-focus on avenues of growth. There are certain pitfalls in these models, as will be the case in any other model. But with the correct partner, those pitfalls would be as easy to dodge as in case of dodge ball game! So get going and find the right model for your firm!