Regularly evaluate your technology spending to determine whether it is worth maintaining a services contract rather than purchasing “one-off” services.
As the seasons change and the calendar prepares to enter a new year, most technology leaders are thinking about their strategies, project portfolios and people as they prepare for the next 12 months. Today, staffing is a significant concern, with quality technology talent difficult to find in the market on a full-time basis or from multiple partners and suppliers, many of whom are struggling to meet demand.
In this situation, it can be easy to make decisions based on what is available versus the right long-term strategic fit. This challenge certainly comes into play when building relationships with technology service providers.
Consider ability, not just skill
When filling a skills gap, avoid the need to focus on the few roles you may need. Focusing on individual skills makes your concerns more about people than about the capability your organization might require and the duration for which the capability is relevant.
This focus on individuals can also hurt your organization in the long run. For example, suppose you need to develop some customer-facing applications and immediately hire a UI designer. In this case, you might end up with beautiful compositions of your screens, but a disjointed user experience and no one who can turn the design into working front-end code.
If you had considered this need from a capability perspective and realized that you needed front-end application skills, you would have eventually realized that multiple skills are required to provide this interconnected capability.
Focusing on capabilities rather than individuals also allows you to make smarter sourcing decisions.
Smart “rent” capabilities
In many cases, it will be more cost-effective to acquire a capability externally. This is especially true when a capability requires multiple disciplines to deploy effectively. Common technology programs, from ERP upgrades to VR applications, can require half a dozen different skill sets. This is an extremely expensive proposition to source in-house unless your workload or a strategic priority justifies an in-house team.
Assuming this is not the case, in general terms you have 2 options available to acquire capabilities in the external market:
- Acquire talent based on time and materials as needed, essentially “paying for the drink” as the need arises
- Acquire a scalable resource that can be scaled up or down as needed
Many organizations assume that the first option is the only path available, as it is one of the most common ways to access temporary talent. It can also be an effective means of acquiring “medium-duration” talent, where it is appropriate to have the same set of individuals working with your company over a period of months.
“Pay for the drink” can work well for large system implementations or upgrades, mergers and acquisitions, or international launches. This strategy allows you to build a consistent team with a narrow set of skills and keep them long enough to understand your company and its requirements. You will do this by avoiding the cost of providing benefits and training and alleviating the risk that your skills will become “obsolete” when the work is completed.
Paying for the drink is much less effective for more variable or complex needs. Consider developing a typical consumer-facing application. Typical applications require a range of different skills and people, from researchers and product designers to diverse teams of developers and cybersecurity experts. Simply staffing these multiple roles, understanding when they are needed, and doing all the hiring and onboarding would drive even a competent procurement employee crazy.
Purchasing capabilities
Purchasing a capability reduces your role in determining which specific skill sets are needed and in managing the balance and coordination between different functions. Instead of trying to plan how many front-end developers you will need based on your product development strategy, you essentially “outsource” team planning and management to your vendor. Your supplier also takes on the role of coordinating interactions and handoffs between different skill sets, a significant task for complex technology-based products.
Managing individuals and the tools that provide a capability is a benefit that cannot be overstated. An in-house ability to manage complex, multidisciplinary technology and design teams might make sense if you're a software company, but it probably doesn't make sense for a manufacturer or consumer products company.
Purchasing capabilities also present an opportunity for more creative and predictable pricing. A simple approach might be to purchase a “bucket of hours” that can be allocated across a wide range of skill sets, including management overhead. More complex agreements can range from monthly “build and maintain” fees to revenue sharing agreements or licensing and maintenance fees.
The biggest challenge for many companies transitioning from renting talent to buying capabilities is moving away from the mindset of selecting and managing individuals and focusing on the quality of the capability, its ability to scale, and ancillary concerns such as ownership. intellectual property and ongoing maintenance.
Instead of viewing the purchase of a capability as a new way of pricing individual human talent, think of it as a physical machine. Just as you probably wouldn't obsess over the individual components of a new CNC machine and would instead focus on the yield, quality of parts produced, and support provided by the manufacturer, you should also focus on production, yield, and support from the vendor providing your resources.
As with many strategic partnerships, take the time to evaluate the companies you are considering when purchasing a capacity. This is a longer-term relationship than talent per hour, and you want a company that can meet your needs today, grow for tomorrow, and provide management oversight and tactical guidance that creates a true asset for your company.
With the right partner, your organization can acquire advanced capabilities that allow you to differentiate yourself in the market without the cost of developing and maintaining these capabilities internally.
