Picture this. One minute all is fine and dandy, you have access to all the resources you could possibly need, then bam an unexpected challenge arises. Suddenly you find yourself lacking the capacity to meet the new need. What are your options?
Typically when companies find themselves facing this conundrum, three possible options are laid out in front of them:
Certainly a viable solution where demand has increased and is not expected to diminish again for the foreseeable future. Yet, not so great a solution for handling short-term issues or seemingly random spikes in demand.
A bit of a reverse to the permanent staff choice. A valuable option for a short-term solution to manage demand or bring in relevant expertise to solve a technical issue. Not as suitable for serious long-term demand, especially with the approaching presence of reforms to IR35 legislation.
This option seems to fit somewhere in the middle of the previous choices. A more than adequate solution to resolving short bursts of issues or demand, yet also capable of running long-term. Especially where the length of increased demand is uncertain or the idea of taking on more permanent staff is unappealing.
As things stand, there is an overwhelming consensus that localised outsourcing is still considered to be the least appealing for many organisations. While we can certainly understand where this opinion may have come from, as a trusted outsource partner for several large UK companies, we have some views on this topic and would like to try and counter some of the arguments we hear regularly against outsourcing.
Before we get down into it lets get the most anticipated and repeated argument out of the way. If you go by the headline day rate alone, outsourcing will definitely not come in first, but one should also stop to consider the potential ‘hidden’ costs associated with other options.
- The initial recruitment costs required to add members of staff to your team
- The ongoing cost of permanent employee payroll and miscellaneous benefits i.e. sick pay and pension contributions
- The management overheads
- The possibility of reworking low-quality code produced by offshore teams
When you take each of these points into account the cost differential begins to become less of a factor, but the frequently ignored additional benefits also remain.
In regards to contracting, a somewhat unexpected downside is that it is only a temporary measure. What seems like a big upside may actually turn out to be more of a negative than initially thought. When a contractor leaves they will be taking their knowledge with them. If not documented correctly it is all too easy for key knowledge to go missing. You are also faced with the fact that a contractor will not wait around until you require their services again. They have to keep earning a living after all so there is no guarantee that they will be available as and when you need them. Outsourcing to another company can essentially eliminate these risks. With ready access to a team of people, the capacity to share knowledge and train up other team members, should one engineer become unavailable there will already be another capable of filling this space.
In instances where there are concerns regarding intellectual property rights or other sensitive information, it is not uncommon for the preference to be on scaling internal resources. By keeping product development and maintenance within the company boundary, you will create a sense of security over the likes of IPR. However, a trustworthy outsourcing partner will understand and recognise that IPR will remain with the client. They will willingly hand over items such as source code, documentation etc. to the client upon completion.
As an overlooked additional benefit, outsourcing project work opens you up to the experiences and knowledge of every engineer employed by that company. You don’t limit yourself to just one person. Just because a particular individual hasn’t been offered as a resource for your project doesn’t mean that they will not offer their advice or insights to those who are.
Of course, before we bring this article to its conclusion, we cannot talk about outsourcing without at least mentioning IR35. Should you decide to head down the path of recruiting contractors you should be cautious of IR35, and the potential repercussions should you be found in breach of its terms. Should HMRC deem a contract to be in breach of this legislation, the employer is required to provide the employer contributions that would have arisen during a ‘contractors’ term of employment. They will subsequently be expected to continue making these contributions should the contractor turned employee remain with the company. In the lead up to the original 2020 reform deadline, many companies made the decision to place blanket bans on the recruitment of PSC’s. Though in some cases this decision has been revoked in the wake of the 2021 delay, the potential impact to contracting has yet to be fully realised. This now begs the question as to the impact IR35 could have regarding opinions on outsourcing? Maybe the once unpopular choice may gain some favour post IR35? Or maybe the recruitment of permanent staff will become the new norm? We shall just have to wait and see what the future brings.