The Sourcing Market Has Evolved. What Does it Mean to Tech Companies?

In the past 15 years we’ve seen the offshore market evolve to export $70BB+ worth of IT services.

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The original value proposition was focused on a lower cost solution, and has since evolved to also include a vehicle for skilled resources. What was once an investment opportunity for IT services companies has now become an extension of Fortune 500 engineering operations.

Most fortune 500 have managed to build their own captive centers, yet are still leverage external contractors to support efforts. The challenges technology companies face is dealing with contractors that are used to an engagement model that was not set up for product companies, but rather the likes of Citibank, and other non-IT companies.

These IT services companies manage a bench, and their entire business is focused on driving billable hours, while your business (as a tech company) is focused on turning innovation into commercial products that works out of the box, and drives revenues to the balance sheet.

What challenges do you face?

As you build new MVPs and gain market adoption, you face new challenges in supporting the implementation with your clients. Often the teams that help you build the product are long gone and onto other billable hour projects leaving you with a gap in knowledge necessary to move from market adoption into market leadership.

Often what happens right before a tech company can reach such market leadership position are competitive threats from new comers that are more agile, and flexible, making it necessary for you to pivot in order to maintain market relevance.

As markets evolve into more automation around IoT, including knowledge workers automation with the adoption of NLP and AI – you’ll face more challenges in continuing to transform innovation, into commercial product.

Let’s review what happens today:

  • Your R&D team goes through ideation by validating market needs, and identifying solutions.
  • Engineering is then tasked with developing prototypes and POCs in order to first prove the hypothesis correct, and to gain market adoption
  • The products that do make it past POC and gain adoption, now need to be build for scalability and ease of use from early market lessons
  • You begin to look deeper into UX/UI and the scalable technology stack to support such market adoption and expansion
  • A competing product comes along and changes the name of the game, causing you to pivot
  • Pivots are time consuming, disruptive, and costly
  • Now you just added another 9-18 months into the timeline of moving from market adoption into market acceptance
  • While all this is happening you have to manage your current product road map, develop the next idea, and integrate possible products resulting from M&A
  • You’ve done a few layoffs by now, and the HR, procurement, and service providers hate you – that’s the life of a head of engineering right?

Wait there is more!

While all this is going on, your corporate team is setting seed money aside to invest in new start ups in the hopes of finding the next gem for the market.  They may get a seat on the board, depending on how much they invest, but certainly don’t get a say into the company’s direction.

Out of 10 investments, only 2-3 (MAX) will make it, and your competitors will bid on them just like you, causing you to end up spending a lot more than you wanted to in order to gain or maintain market relevance.

Does a more sensible alternative exist?

Not really.

The ideal solution is a hybrid model whereas an engineering company could be the internal dedicated products incubator for you. You own the direction of the teams, you don’t have to compete with risking IP ending up in your competitors lap, and if the engineering firm is large enough you can pivot faster, and scale with a lot more flexibility.

When a pivot is needed, or scaling of a product, and ideation of new products – such a company could draw from many innovators to help you do it faster, with less pain, and keep you on track and on budget.

You should focus with such a partner on the outcomes you desire, regardless of location – meaning the resources are dedicated where it will drive the best results.  Find an incubation partner that takes ownership of the entire cycle and participate in the scoping of new ideas process – challenge them to actually bring new ideas to you as a client operating from the same side of the table as deeply involved partners.

In short, don’t look for someone who can provide you resources – look for someone who can help you turn innovation into revenues faster than you could yourself.  Don’t just focus on the short-term need to complete your project, focus on the market outcomes you wish to experience, including maintaining the knowledge and support with implementations of new solutions with your clients.

Ultimately every company has to balance between building in house, partnering, or buying. Nothing new there. However, a hybrid solution could possibly afford tech companies a more flexible way to maintain agility and market relevance. One such company offering this hybrid solution that has also managed to gain a 100% client retention rate among some of the best tech companies in the world, is Innominds.

Innominds is a product engineering company purely focused on tech companies with an engagement model which includes engineers, designers, functional experts, and business savvy executives who understand the convergence of software and hardware platforms, helping tech companies stay relevant in today's emerging markets.

Tullio Siragusa

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