In a recent survey of 60 founders SaasStock established that 45% of SaaS companies have been struggling with slowed revenue because of the coronavirus pandemic. In the travel and hospitality space this percentage would no doubt be higher. The effect of the various lockdowns around the world delivered a swift and devastating blow to the tourism and travel sectors forcing many well-known technology companies to cut jobs.
Yet, perversely, the COVID-19 crisis has teleported us into a future world, one in which digital has become central to every interaction. Even travel and hospitality companies, ailing from a significant drop in travellers, are being forced further up the adoption curve. Consider how hotels brands are accelerating the adoption of contactless technologies. In Skift’s 2020 Digital Transformation Report, 78% of top executives from travel organisations said that it is much more important or somewhat more important to proceed with their pre-existing digital transformation activities in light of COVID-19. These findings should be music to all technology companies’ ears and in normal times they would be fighting to hire engineers and product managers to satisfy this demand.
However, hamstrung by the lack of necessary skills due to layoffs and the uncertainty of future revenues, many technology companies, not wanting to miss the opportunities being presented, have decided to keep fixed costs low and outsource IT operations and development instead. The consequence is that outsourcing is growing but driven by new motivations.
Greater focus on core areas
A software company’s value lies in its core products and diverting precious time, staff and resources away from their core mission can impact the performance and competitiveness of the applications leading to lost revenue and missed opportunities. By strategically outsourcing parts of the process, companies can tap into the experience of partners that have facilitated hundreds of similar projects for other customers. While it generally makes sense to develop core intellectual property with an in-house team, there are many supporting areas of a modern technology stack, such as system integrations, that can be developed and supported by a partner with deep skills and talent in the specific area of interest.
Access to a large talent pool
Having downsized many companies may only have access to a small talent pool. This often means having to compromise, electing to support and maintain existing applications at the expense of new products or product enhancements, or foregoing on maintenance and operations in favour of enhanced capabilities. Faced with lost revenues and reputational damage, many companies see outsourcing as a path to preserving operational rigour and capitalizing on new opportunities
Specialist skills
During the pandemic some companies have taken on ambitious projects, ranging from artificial intelligence, machine learning through to data warehousing and analysis, that are pushing them to the limits of their existing competencies. In such cases they may depend on the expertise of one or two individuals internally who could quickly become overworked. Service companies often maintain a team of skilled resources across technologies that these companies can utilise to augment their teams without having to pay their salaries. In these times, there is growing consensus that organizations should do what they do best and outsource the rest.
Domain Knowledge
By selecting an outsourcing company that has experience and expertise in the company’s vertical the ramp up time on new initiatives will be minimal, and in many cases these resources bring industry know-how that the company itself does not possess. Turning business visions into reality is given a significant boost when the technology partner has sector knowledge and industry connections.
Scale teams up and down
An obvious benefit of outsourcing is the ability for companies to scale up or down as needed. It is generally understood that outsourcing allows companies to access quality resources at favourable costs providing services from staff augmentation, application development to system integrations. Maybe less well known is the ongoing hosting and operational support services provided by some service companies. Application monitoring and service queries are handled by specialized resources who can resolve issues quickly in a scalable, secure and dependable environment meaning the company does not need to employ staff to run its 24/7 operations.
Remote working
In the past, companies often considered geographically separate teams as a disadvantage to outsourcing. The rapid shift to remote working has largely dispelled the apprehension around the effectiveness of remote teams. In fact, most service teams have extensive experience working with distributed teams and have established project governance practices that can aid the company’s own transformation to hybrid or remote working.
Favorable case for outsourcing
The coronavirus pandemic is revolutionizing the internal operations of travel and hospitality companies and their digital transformation strategies are becoming more urgent than ever before. How technology companies that serve this industry respond to the challenge will no doubt vary widely but as long as demand for travel is curtailed by government policies, regional infection spikes and the absence of a vaccine caution over hiring back to pre-COVID levels will remain, and that presents a favorable case for outsourcing.
