In-house Development Over Outsourcing

Some companies want to retain ownership of their application or source code. This is not always possible in outsourcing. In some instances, the cost of outsourcing is not as low as an enterprise wants it to be. There are companies that also have an in-house IT department, which can be tapped for developing projects like mobile apps. For them, there is no need to outsource.

There are valid points and reasons for a company to choose in-house development over outsourcing. Michael Schneider, CEO of mobile app platform Mobile Roadie, cites three specific cases when outsourcing need not be an option. First is if the organization is into applications business. Second is if a company is developing a game. Third is if a company requires a highly customized software development. In these instances, the enterprise may be better off starting at zero and engaging company resources and own the source code instead of outsourcing the work.

To Outsource or Not To Outsource?

So when do companies should outsource? When a company’s software development needs might be uncomplicated and not so demanding, it can outsource the work. It might seem counter-intuitive to outsource smaller jobs, but it is also safer in the long run. When owning the source code won’t be a big deal, outsourcing development might be a good choice. An example of such a case is the creation of content-driven applications for various purposes, including international business marketing. There are many content platforms available, making source code ownership unnecessary. The same is true for simple mobile application initiatives. Companies which have their own IT departments but are not in the IT game can also opt to outsource. If an existing product only needs an upgrade for a new release, the organization can outsource instead. This is to keep the IT team focused on in-house processes and innovations.

Business and software strategies should always be reviewed not just based on short-term gains but long-term advantages too. Outsourcing may not be beneficial all the time. Even with savings on business expenses, frequent outsourcing might cost non-monetary losses to the company. Willy Shih, a professor of management practice at Harvard Business School, notes that consistent outsourcing and off-shoring can lead to a lack of innovation in a company. Shih advises IT enterprises to choose which software projects to outsource and not. This is to simply focus on savings. IT companies should also need to look into dealing with problems posed by projects that can yield new ideas and product concepts.

SoftServe SaaS

The Company

SoftServe Inc. is a solutions provider that has been in the IT business for a long time. Founded in 1993 and with headquarters in Florida, the company has successfully executed international business marketing and now has development centers in Ukraine and the Philippines.

The company is geared towards providing software as a service (SaaS), cloud computing and mobile solutions to various industries and businesses. The company’s business and software strategies are oriented towards a complete package of services for development, maintenance and support of software solutions.

Given its clear business direction as well as updated and holistic set of solutions, SoftServe has received many awards. In 2011, it was included in the Global Services 100 list for the fifth time. Just this year, the International Association of Outsourcing Professionals (IAOP) included SoftServe in the Global Outsourcing 100 under the Rising Star category.

The Products

SoftServe’s services are founded on the Ecosystem, a combination of software development, delivery, maintenance and support, partnered with in-depth consultation with businesses. This so-called consultative approach enables businesses to realize software development and enterprise goals with SoftServe’s expertise and best practices.

The SaaS and Cloud Computing solutions offered by the company are for organizations seeking to make new applications or revamping current ones as they move to the Cloud. Their services are categorized as consulting services, development services and service frameworks. These services address Cloud and SaaS problems and feature: horizontal capacity scaling, application and database tenancy, zero downtime upgrades, high availability, and continuous release management.

Its mobile software solutions enable companies to make the transition to mobile with ease. Services covered are similar with the Cloud/SaaS solutions set, from consulting to implementation. The services are packaged as MobileVIEW (strategy), MobileMAP (assessment) and MobileMOVE (development and deployment).

The company also offers Software Development Life Cycle Solutions (SDLC) for smooth software customization and development.

The Strategy
With SaaS, cloud computing and mobile applications gaining momentum in the industry and securing their places in the future, not just of IT but also of people’s lifestyles, SoftServe places well among its competitors. As outsourcing in general is expected to further expand this year, the company appears ready to ride the waves of IT changes and global markets. Although SoftServe does not offer unique services, its business and software strategies are commendable in the way the company presents its solutions: complete, encompassing and integrative. The company went out of its way to create an impressive packaging of its services, creating catchy solutions names for otherwise ubiquitous offerings.

As a SaaS, Cloud and Mobility solutions provider, SoftServe is also poised to break into the business intelligence, healthcare and education industries. The company’s fierce economic showing in the previous year can be attributed to the rise in mobile devices and cloud computing needs of businesses. Branching out into healthcare and education is an excellent move as these two important industries are slowly venturing IT integration. If SoftServe continues to invest in its global strategy, they can compete well in these two areas.

Gartner.com defines Crowdsourcing as the process by which a company sources a task or project to a wide set of participants via the Web and social collaboration sites. The term combines “crowd” and “outsourcing” and was first used by Jeff Howe in an article on Wired magazine. Other terms used for the process include fansourcing, crowdcasting, open sourcing, crowdfunding, mass collaboration and wikinomics.

In the past, when a company wants to brainstorm or solve something, they need to hire a new employee to do the job. With the boom in outsourcing across industries, companies already have the ability to accomplish small-scale projects or non-essential tasks at lower costs. Crowdsourcing removes the limit of outsourcing to one department or agency, thereby increasing the ideas and solutions to a problem.

Crowdsourcing ranges from small tasks to grand design projects and can be done internally or externally. The use of crowdsourcing has revolutionized market studies and international business marketing. One of the excellent examples of crowdsourcing is Threadless. The company allows independent designers to submit t-shirt designs, which are then subjected to voting on their site. The winning design is then produced en masse. Targeted marketing is another way to use crowdsourcing. Netflix uses this method to enable users to suggest movies to their friends.

Crowdsourcing is also changing business and software strategies for enterprises. Dell’s IdeaStorm is one success story in the IT industry. IdeaStorm is Dell’s site for customers and developers to collaborate and share ideas in. After four years, the site and “the crowd” have come up with both software and marketing approaches that customers themselves support.

Google, Foursquare and Facebook are just some of the companies and social media sites that hold “hackathons.” These events invite independent developers to work with their company engineers to come up with new applications using the site or company API. Such crowdsourcing occasions can deliver a handful of apps in a span of just one working day. On top of that, these events allow fresh ideas to be implemented within the company parameters—without hiring new people. Netflix also popularly crowdsourced the improvement of its algorithm development, giving $1 million to the developer that improved its recommendation engine’s accuracy.

Another crowdsourcing avenue for business and software strategies is Mob4hire. It is a crowd services provider that enables companies to do market research and beta testing of mobile applications or do market research on mobile services. The testing is done by mobile app users around the globe who are members of the website.

Crowdsourcing, when done right for the right problem, can be a valuable tool for businesses. It connects companies to their intended market and opens opportunities for company growth without doubling overhead costs. Best of all, it integrates marketing and product development — a winning combination.

Several industry players have already made moves towards offering Cloud services, and even startups and small companies are exploring the technology. Cloud computing has shown that it is not a trend. Indeed, the Cloud is no longer what its name connotes—a light and fluffy thing. The area has shown a backbone, as can be seen in the boom in the industry. In a report entitled “Forecast: Software as a Service, Worldwide, 2010–2015,” Gartner predicted that software as a service (SaaS) will reach a revenue of $21.3 billion by 2015. The report also cited that 75% of SaaS deliveries could be considered as cloud services. As the two models converge, the percentage could exceed 90 percent by 2015.

Given such a promising growth in the area of cloud computing, it’s no wonder that big data players like EMC have taken notice and are setting out their own claims in the relatively young market. While EMC began as a data storage solutions provider, and remains a major name in this area, it is now making its own move towards becoming a key player in cloud computing.

The EMC strategy, however, is not a typical one. While companies are scrambling to become one of the top cloud service providers, EMC positions itself instead as a partner in the journey towards the Cloud. In a speech during the EMC World 2011, Dennis Hoffman, senior vice president for EMC Service Providers, gave Dell a lesson or two on business and software strategies. According to Hoffman, unlike Dell’s move to invest on becoming a cloud service provider, EMC’s strategy won’t be the same. He provided three reasons for this:

• a service provider can’t be a product provider and be excellent as both at the same time;
• the business and financial models are dissimilar;
• and the company will have to be sure it is a top service provider before making that move.

EMC’s business and software strategies have worked for them significantly, including the decision to become a partner to cloud service providers instead of becoming a service provider itself. The company posted revenue leaps in the last two quarters of 2011, a 14% increase from the past year. CEO Joe Tucci attributes much of the growth to the mounting popularity of cloud computing. For EMC, the cloud is the future.

EMC has stepped up its international business marketing and have signed international groups as partners. This year, the company announced a partnership with Atos, a French IT services company, in creating a European cloud services provider called Canopy. The alliance will be for open cloud computing. The Irish government has also teamed up with EMC to establish a cloud computing endeavor called Cloud4Gov. VMWare, an EMC subsidiary, will also feature prominently in the partnerships. The Cloud grows bigger and brighter—and so does the future of EMC.

Infobright addresses enterprise needs for large-volume, machine-generated data. The company develops a top-performing analytic database for massive information sources such as network logs, web data, stock tick data and telecom records. Its solutions and products are used in various industries: finance, software development or software as a service (SaaS), and telecommunications.

Founded in 2005, the company is based in Canada, with research and development offices in Poland. In 2008, Infobright made an open source release of its analytic database software. Their open source community, infobright.org, has enabled its customer and user base to grow. The company’s move is a bold one in terms of business and software strategies.

Among the accolades for Infobright are “Economic Data Warehouse Choice” by Ventana Research, “Cool Vendor in Data Management and Integration 2009” by Gartner, Inc., and “Company to Watch in 2010” by Intelligent Enterprise.

The Products

The Infobright solution uses a columnar approach to database, along with intelligence called Knowledge Grid, to make query performance faster and easier. This approach, which is driven by intelligence instead of hardware, allows information management to be simpler by removing the need for indexes, data partitioning and manual tuning. The products are designed for big data that can reach up to 50TB.

The approach focuses on a basic principle; that is to create data information automatically upon loading. Utilizing the generated information reduces data accessing whenever there are queries. This speeds up query response in the process.

Infobright offers two products. Infobright Enterprise Edition (IEE) is the commercial version of the software while Infobright Community Edition (ICE) is the free, open source version.

IEE comes with a complete set of features to manage business-driven queries without the need for heavy IT involvement. The IEE already has Release 4.0 and includes capabilities for big-data analytics that approximate real-time analysis. The basic features of Infobright’s enterprise product include: SQL Support, Flexible Schema Support, Industry Standard Interfaces, Supported Application, Programming Interfaces (APIs), Data Manipulation Language (DML) Support, Concurrent Querying, Operating Systems (OS), Process Support, and Supported Load Form.

The Strategy

The company provides columnar databases for big data, an approach that is different in terms of file organization. Infobright made a strategic move by being the first in its industry to release an open source version of its software solution. The highly active open source community it has established for ICE has become an important part of the organization’s business and marketing strategies, increasing the use of its solutions in various fields including multimedia and advertising.

Even with the free version’s release, its enterprise edition remains strong and competitive in the IT industry. At the beginning of 2012, Infobright also entered an OEM agreement with Information Builders, a business intelligence (BI) solutions provider. With the OEM agreement, Infobright’s IEE will be embedded in Information Builders’ products. Given Information Builders’ extensive user base worldwide, Infobright’s move is bound to make positive impact on its international business marketing endeavors.

Derek Broes, a digital media and technology executive, writes in Forbes.com about how the specifics of SOPA and PIPA can affect not just the rogue sites they seek to target but your business too. If SOPA and PIPA are approved, the United States’ Department of Justice (DOJ) can block access to a website once an accusation of copyright infringement is made and a court order is sought. This action is not limited to the main host of an infringing file or a rogue site but can also include any other sites that link to or are connected to those accused. The problem with this setup is the vagueness of infringement and participation in the violation. Blogs with hyperlinks and social media accounts with links can be dragged into the fray. International business marketing and small and medium businesses (SMBs) using social networks and can suffer in several ways, the worst of which is being taken down or blocked.

Angela West of PCWorld observes how SOPA and PIPA will be bad for businesses because of the ambiguous definition of what copyright violation is. Current practice in social media business marketing encourages linking and discussion among users and customers. This creates the buzz business needs. However, under SOPA and PIPA, one accidental link to a rogue site or one link taken out of context can make your business website or social media account a “participant” in the infringement violation. The DOJ can block your website and sanction you immediately after a court order is sought, whether you have been proven guilty or not. What’s more, search results can be modified to remove accused rogue and participatory websites.

Businessinsurance.org provides a comprehensive infographic on how SOPA and PIPA work and how it will affect your current business and software strategies. The infographic suggests four major concerns for enterprises. One is how venture capital could end up shying away from IT businesses if SOPA is enacted into law. Other concerns include the invasiveness of the methods for blocking accused offenders and the possible censorship and firewalling of the Internet. Overseas relocation of operations by cloud computing and web hosting companies is also feared. CNet also discusses pros, cons and implications of SOPA and PIPA, including security of the domain name system (DNS) and IP blocking.

Major businesses like Sony, Dell and McAfee are on the pro-SOPA side as of this writing while Google, Wikimedia, Yahoo and WordPress are on the opposite side. How SOPA and PIPA will affect you will largely depend on your business and software strategies. But given the anti-SOPA stance of social media sites, international business marketing is sure to suffer.

On a more positive note, the year 2012 is also rife with opportunities and avenues for growth and exploration in the IT industry. Software startups can expect investor interest in tech, especially in specific fields and services. With the move to tech globalization, IT startups in digital data and records management can expect expansion in terms of business and services. Social media and cloud computing are also changing the scene for business and software strategies in established companies and startups alike. Below are the top trends and industries that can expect a boom this year.

1.  Multimedia and Social Medi
   After Spotify went on a partnership with Facebook, the music streaming site experienced huge numbers in membership. Social media keeps on changing the way people share content they enjoy, from photos to music. Music and media startups and services have a lot of potential this year. As noted in The Telegraph, even TV viewing is open for improvement in this area through social media integration.
2. Big Name / Celebrity Investment
   The Telegraph also mentioned a growing interest among celebrities to invest in tech. Big names who have invested in startups include Lady Gaga, Kanye West and Ashton Kutcher. Justin Timberlake took on MySpace as well.
3. Healthcare IT
   Stephen Fleming, Georgia Tech vice president, observes that IT services for the healthcare industry will continue to expand this year. Because of the American Recovery and Reinvestment Act, electronic medical records (EMRs) will be in greater demand. Business and software strategies should address both patient and physician needs to compel healthcare providers, he adds.
4. Big Data
   Cloud computing platforms and software as a service (SaaS) will also take center stage in 2012. Companies are going global and employing the Cloud for international business marketing and operations will become crucial. Big data and cloud computing can change business-to-business (B2B) and business-to-consumer (B2C) ventures, says Mike Eckert, Executive Chairman of Atlanta Technology Angels.
5. Mobility
   The onslaught of smartphones and tablets for mass consumers has increased demand for mobile applications. This area has great potential for software startups. Mobile services can also look into marketing automation, going directly to consumers through their mobile devices. Ecommerce will also see the need for integration in payments and security, notes Spence McClelland of Noro-Moseley Partners.

Other notable ventures include mobile payments, automated and social media marketing strategies, targeted social networking sites and opinion mining. John Nesheim, author of High Tech Start Up, cautions software startups that this year will be a rollercoaster ride. The not-so-positive outlook on the world economy may pose challenges and keep investors and partners avoid startups. But IT landscapes are quickly changing as well, providing several roads to success for this type of enterprise.

On the other hand, enterprise resource planning (ERP) has been around even before Y2K. While previously viewed as a promising venture, the implementation of the ERP systems over a decade ago did not result in the successful rollouts businesses expected. Thanks to the Cloud, however, ERP is getting a makeover.

Forrester Research surveys reveal that businesses with existing ERPs are not the only ones planning to upgrade their systems. Within the year, one out of four businesses intends to revamp or implement an ERP solution. Global operations and continuous growth are pushing SMBs and enterprises to relegate business processes to third party vendors using software-as-a-service (SaaS) solutions, many involving cloud computing.

This is hardly surprising not only because cloud computing is speedily catching on as more than just a buzzword but also because of the evolving nature of business and software strategies. Software meant to address specific task-based problems no longer sound efficient in an operation that is globalized and digitized. Recognizing the need for an expansive capacity for file storage while staying on top of computing speed, many enterprises are turning to solutions off the ground and into the Cloud.

The top provider of cloud-based ERP and financial software is NetSuite. The company, which was founded in 1998 and is based in Silicon Valley, provides SaaS specific to business and enterprise management requirements. NetSuite offers one system that integrates ERP/financials, ecommerce, and CRM, among others. The idea is to offer ERP solutions without the cost and complications of an on-site setup and too many software systems in place.

NetSuite Chief Executive Officer (CEO) Zach Nelson explains in a Business Mirror interview that unlike the usual software solution, cloud-based ERP is an all-in-one solution for enterprises. It is a cost-efficient way to match the complex nature of international business marketing these days. For example, NetSuite OneWorld addresses the global nature of business operations. With the promise of a comprehensive solution with faster computing via the Cloud, NetSuite has expanded its work across continents. It was named No. 10 in the list of the fastest growing financial management system (FMS) companies by Gartner.

While analysts are divided on whether cloud computing is the next frontier, NetSuite believes it is the “next great technology architecture.” Cloud-based solutions are no longer just for large enterprises. NetSuite is also campaigning for small to mid-size companies to value the benefits of file and data backup and management through the Cloud. The company has also recently partnered with CyberSource and SecurePay for their SuitePayments service to Australian businesses.

The growing business of cloud-based ERP/financials has compelled even on-site providers like SAP and Oracle to explore and offer cloud services for enterprises. In this race, however, NetSuite seems to be taking the lead.

This post discusses the cost/benefit ratio of ensuring alignment in the management team.

The cost of misalignment

I suppose we have all been in situations where we knew that the management team and thus the entire company was misaligned. I assume that we also have had the “feeling” that this misalignment had severe consequences such as:

• Lost business opportunities (sales)
• Winning poor deals (deals with negative gross margin and/or outside our core markets)
• High staff turnover
• Excessive operational cost
• Internal waste (time and money)
• Decreasing competitiveness
• Bankruptcy

Putting a specific number of the cost of misalignment is obviously very difficult.

Based on my experience the price of misalignment is ALWAYS EXTREMELY HIGH and accumulates dramatically over time. Ongoing misalignment eventually leads to the ultimate disaster: Bankruptcy.

In todays competitive environment only those software companies that understands how to align all resources to pursue a chosen strategy will survive. 

The strategy – and associated plans and activities – may change from time to time based on the feedback signals from the market. The ability of the management team to intercept  and interpret the signals, define corrective actions and realign quickly is crucial for becoming and maintaining a position as the market leader. In the software industry, where the winner takes all, global market leadership must be the objective of any company.

The cost of ensuring alignment

We have through this series of posts “Strategy for software Dummies” demonstrated how to check for misalignment. We still claim that a thorough check can be completed within two weeks and will cost little when using ValuePerform and a certified consultant to facilitate the process. Such check will document the degree of misalignment, identify the areas of misalignment and provide the basis for an action plan to assure alignment around the chosen strategy.

Implementing this action plan can be anything from simple to comprehensive.

We have seen situations where members of the management team needed to be replaced, because the misalignment was deeply rooted in differences in personal beliefs, preferences and values. And we have seen situations where just minor corrections yielded immediate results.

The cost/benefit ratio of ensuring alignment

Is this equations always true?

I will claim it is and I suppose most executives will agree with me. The next question is then how to measure the current degree of alignment.

A number of executives will be satisfied with presuming alignment. They a) genuinely “presume or feel” that they have alignment or b) don’t want any additional issues to deal with just now.

Presuming versus knowing

I once read a book based on the experiences of a CIA agent. One of the statements that had a lasting impression on me was something like this: “Presumptions will eventually kill you”.

Making decisions, which may have an impact on wether you or others live or die, are certainly made substantially different form decisions with a less irreversible outcome. Nevertheless is it important to always be conscious about the difference between “knowing” and “presuming”.

When the price of moving from “presuming” to “knowing” is minimal, there is no excuse for not doing so. When the consequences of being wrong are small you simply execute in small steps correcting the process as you learn more.

There is always a price associated with certainty. When that price is low compared to the consequences of being wrong there is never an excuse for not replacing “presuming” with “knowing”.

We know that checking for misalignment is not difficult, doesn’t take long and doesn’t cost a lot. We know that the consequences of being wrong are high.

What are you waiting for?

This post was originally published on the TBK Consult Blog on 23 January 2012.

This post deals with avoiding invisible or suppressed misalignment.

You can find a list of all posts in the series at the end of this post.

The invisible misalignment

As a CEO and/or the member of a management team I am certain that you have experienced the situation, where you have reached agreement on something, but felt that there was still unspoken or suppressed disagreement. It happens all the time in most companies.

We have covered this issues in some depth in “Why do management team disagree“  and again in “Why does misalignment occur?”

Avoiding misaligment

I believe that you can only prevent ongoing invisible or suppressed misalignment, by testing team members individual positions from time to time. Doing so, you can bring the misalignment in the open and use the different positions to have a constructive analysis of the situation and find common ground.

ValuePerform is an excellent tool to perform an alignment check on you critical issues such as the company strategy and the priority of the management areas. ValuePerform is a tool to be used every 6-12 months depending on the changes, which have taken place. Adding or replacing  members of the management team always call for a new alignment check. Mergers and acquisitions also calls for alignment checks in all important teams.

Alignment and consensus

Consensus is like well greased cogwheels.

Is alignment and consensus the same thing? No, alignment only requires that you understand and support a certain strategy and the associated actions required to pursue this strategy. Consensus requires that everybody agree on the strategy and the associated actions. Consensus is much more powerful than nominal alignment. Consensus requires much less control and coordination in the execution phase simply because everybody agree on the objectives and the strategy.

This explains why so many management cultures (especially the Japanese and the Scandinavian) puts a lot of emphasis on consensus. Decision making may be slower, but execution is much faster.

This post was first published on the TBK Consult blog 18 January 2012.