The landscape of outsourced IT services has undergone a revolutionary transformation, moving far beyond just a strategy for cutting costs. It's now a dominant force in the realm of business operations, with momentum that's only accelerating.
Per the latest insights from Statista, the IT outsourcing (ITO) market is on a meteoric rise, expected to soar to an astounding US$777.8 billion by 2028. This surge is not limited to a specific sector; it encompasses a wide array of organizations, from dynamic startups to established industry leaders. They are all turning to ITO not just to keep pace, but to actively fuel innovation and propel significant growth.
What might come as a surprise is the role of IT outsourcing in the success stories of global giants. Industry disruptors and household names like Slack, Alibaba, WhatsApp, Google, and Unilever all embraced outsourcing in their formative years as a springboard for their growth. Some of these behemoths continue to leverage outsourced IT operations even today.
This strategy has been a crucial ingredient in their recipe for success, showcasing that smart outsourcing is not just for initial lift-off but can be an ongoing driver of innovation and efficiency. In today's fast-evolving marketplace, the question isn't if you should engage in IT outsourcing, but how quickly you can integrate it to catapult your business to new heights.
Here are five top companies that have used IT outsourcing for their software development to grow their business.
Slack: Succeeding from the early stage with IT outsourcing
Slack Technologies decided to outsource certain aspects of its app development before officially launching its workplace communication services. They collaborated with a service provider to conduct beta testing and gather valuable feedback. This feedback was crucial in developing a unique tool that stood out from competitors.
Additionally, the outsourcing firm worked on logo design, site improvements, and software development for web and mobile apps.
Since its debut in 2013, Slack has gained popularity among small organizations and startups due to its stylishness, convenient functionality, and user-friendly interface. With its rapid growth, the company secured an additional $250 million in funding in 2017, reaching a total value of $5 billion. Today, over 10 million individuals use Slack daily for their business communication needs.
This highlights the success of early IT outsourcing for Slack, enabling it to establish itself as a prominent business communication network.
Alibaba: Overcoming skill gaps through outsourcing
Alibaba, one of the largest online marketplaces globally, faced challenges in its early stages regarding finding local IT specialists and complying with internet restrictions in China.
To overcome these obstacles, Jack Ma, the founder of Alibaba, decided to outsource much of the site's initial development to an IT outsourcing firm. This strategic move allowed Alibaba to tap into the tech talent that China lacked at the time and build a website that appealed to both English and Chinese online buyers.
The result was a significant increase in e-commerce transactions for Alibaba, leading to a successful $25 billion initial public offering (IPO) in 2014 and establishing itself as a formidable competitor in the global market.
WhatsApp: successful cost reduction through outsourcing
WhatsApp provides a prime example of highly successful outsourcing. When the company launched in 2012 with limited funds, it sought to cut costs by outsourcing core and software development. They enlisted the help of an external team of developers for iPhone app development and other technical responsibilities. Meanwhile, the U.S. office focused on customer service and administration.
Upon its release, WhatsApp quickly became the most downloaded app on various digital platforms. This success caught the attention of social media giant Facebook, which acquired the company for a staggering $19 billion just two years later.
Over the course of eight years, WhatsApp's user base grew from 50 million to two billion, solidifying its status as a dominant player in the messaging market. Throughout the company's journey, IT outsourcing played a crucial role in its achievements.
Google: Leveraging business operations with multiple ITO services
Google implemented outsourcing for IT infrastructure management and software development in 2016 as a strategy to reduce costs related to non-core activities. The company also leverages external IT services for software development and testing, allowing it to build, monitor, and release popular products like YouTube and search apps for iOS and Android. With billions of users accessing their platforms on various devices, Google attributes a significant portion of its success to outsourcing.
During the pandemic, Google's third-party workforce surpassed its regular employees, highlighting the importance and effectiveness of its outsourcing approach.
Unilever: Enhancing operations with outsourcing services
In 2005, Unilever embarked on a two-year initiative called "One Unilever" to transform its business technology. The goal was to streamline IT, human resources, accounting, and financing tasks across its European operations, which accounted for over 30% of its global business and employed 30,000 workers.
To achieve this, Unilever outsourced the development of its ERP system and other programs to trusted third-party service providers. Multiyear contracts were established with reputable vendors to integrate the complex processes into a unified system.
Upon completion, Unilever experienced improved access to information, enabling better decision-making. The IT outsourcing effort resulted in annual savings of at least €700 million (about $713 million) in operational activities.
Unilever recognized early on that outsourcing technology functions as a cost-effective and less risky approach compared to relying solely on internal resources.
From the nascent stages of startups like Slack to the expansive realms of industry titans like Google, outsourcing has been a pivotal force. It's not just a business strategy; it's a catalyst for innovation, a tool for cost reduction, and a means for companies to hone their focus on core competencies. The success stories of these renowned companies aren't just narratives; they are compelling testimonies to the effectiveness and myriad benefits of outsourcing in sculpting business triumphs.
Outsourcing opens the doors to a world of external expertise and resources, allowing businesses to tap into a diverse and global talent pool. It's a strategic solution to bridge skill gaps and streamline operations, thereby enhancing efficiency. As the IT outsourcing market burgeons, an increasing number of companies are adopting this approach not just to keep pace, but to spearhead their growth in competitive landscapes.
These success tales from industry leaders offer invaluable insights. For businesses contemplating outsourcing, this is more than an opportunity; it's a roadmap to unleash their full potential. The question now is not if outsourcing can transform your business, but rather, are you ready to take this leap and join the ranks of these successful companies? Let's embark on this journey together, transforming potential into palpable success.