Resource Allocation Strategies for Digital Transformation

Organizations that embark on digital transformations quickly realize their scarcest resource becomes the software engineers who built the organization’s offerings. An organization needs to realize this scarcity in order to allocate enough time and attention for future success. One effective way to allocate resources is to take a three-pronged approach:

1. Focus your own engineers on developing market differentiating features and capabilities.
2. Use external expertise to develop and integrate non-differentiating services that can’t be bought off the shelf.
3. Use cost-effective SaaS offerings for the rest.

Hybrid approaches like this are faster to develop, more differentiated, and better quality than those built entirely in-house. Businesses benefit from better alignment of budgets with market needs and higher satisfaction and engagement of internal teams this way.

Allocating Resources to Compete and Succeed

Digital Transformation, Cloud Migration, Containerization and DevOps are different aspects of the same overall business objective. They provide increased agility in hyper-competitive markets. To remain competitive, businesses must continually sharpen their differentiators and quickly respond to market threats.

Successful companies have reacted to these market trends by reallocating their resources. Internal teams have been focused on the development of unique differentiators along with the evolution of the overall solution. Necessary customizations like integrations and non-differentiating features have been outsourced to complementary engineering firms who work closely with in-house teams. Finally, SaaS solutions have been used to provide the remaining standard services that are commoditized and will not differentiate the offering.

Optimize Your Resources to Fit Your Project Needs

As part of digital transformation, most companies have started to outsource basic capabilities to SaaS providers. Many companies are reaching the point where they have outsourced as many services as they can. But this is not the end of the transformation journey. The next step is to outsource the development of services that cannot be purchased as SaaS but need not be developed in-house. With the right partner, this is possible, desirable and advantageous.

Not every development effort will be the right fit for outsourcing to a partner. But some common project characteristics make it easier to identify when an outside team can help. Any software system can be divided into three broad tiers representing:

• Commodity Services: Off-the-shelf, commercial software services delivering basic application functionality.
• Customized Services: Necessary custom microservices that tie together commodity services and link them with differentiators.
• Differentiating Services: Distinctive services that deliver the major unique features and functions of a business offering.

Don’t Try to Do Everything Yourself

A few large businesses do all development work in-house, but most businesses opt for a more cost-effective approach. With Limited software engineering resources being dedicated to developing services that are important but not differentiators, businesses risk falling behind more focused competitors and diluting their overall value. Often, developing custom features that integrate off-the-shelf cloud services and internal systems while meeting specific business needs is essential to successful digital transformation. This type of development is a good fit for outsourcing.

Even for companies with effective and mature processes, the alternative to outsourcing is expensive and slow. Hiring, onboarding, and training new employees takes months and includes additional costs. Independent contractors have the same recruiting and training issues, and someone has to worry about retaining and supervising these individuals.

Backfilling the existing staff with an embedded outsourced team will free up your internal experts and set them to work on higher impact projects right away. Plus, developing differentiating features is often some of the most rewarding and challenging technical work that will help your top performers. Don’t underestimate this value. How else can you get a highly skilled team to start work on new, high-value features, today?

Outsourcing Service Development

If you think you have the right project and want to outsource microservice development successfully, keep the following ‘Must-Dos’ and ‘Challenges’ in mind.

Must-Dos:

• Identify service needs that are essential to your business success, cannot be bought off the shelf but do not differentiate your service.
• Ensure the project has a defined timeline, budget, and scope. Insist on a preliminary rough design resulting in solid commitments from all project stakeholders.
• Find a development partner experienced in your business domain and technology stack; reputable firms should be happy to provide references and examples.
• Hire a firm that can provide in-person, high-touch engagement in the early and closing stages of the project. Remotely distributed teams are fine, but meeting the people who will actually work with you is essential to building trust and setting up the engagement for success.

Challenges:

• Having a committed internal team-lead is essential to knowledge sharing and overall project success. Moving most of your in-house team over to focus on differentiators while keeping a project lead with the partner team will provide the optimal blend of outsourcing, knowledge transfer, and collaboration.
• Development firms are typically paid from Capital expenditure budgets, while in-house teams are paid from Operating expenditure budgets. When retaining a development firm, ensure there’s budget flexibility and know who to work with inside Finance.
• Beware of open-ended engagements where consultants ‘keep the meter running’ without accountability for deliverables tied to specific deadlines.

Conclusion

Digital Transformation, Cloud Migration, Containerization, and DevOps are driving major shifts in solution development approaches. Smart companies need to focus their scarcest resources on their most important and differentiating software development efforts.