Selective Outsourcing In The API Era

by Rebecca Bausinger, Product Manager, APIIDA AG

Over the last decades, outsourcing has become a standard way for companies to lower their costs of IT operations and focus on their core business. Before we start getting into the new opportunities in this field, let’s have a quick look at the definition of outsourcing.
Definition: Outsourcing is defined as the process of turning over all or part of an organizational activity to an outside vendor (Barthelemy, 2003).
In other words, a company pays another company for performing one or more services or tasks for them. Thereby the vendor takes over responsibility. These responsibilities are detailed and documented in a contract.

Selective Outsourcing

We see a growing number of companies stepping back from an “outsource as much as possible” approach to a more value aware outsourcing. You may outsource the hosting of a kubernetes or database cluster to a cloud provider or an on-premise outsourcing IT service company, but you may want to keep some app development in your own hands. One very good reason to do this is, for example, when the app is one way or the only way you interact with your customers. This might be the one app which is the reason you are superior to your competitors. In conclusion, you better keep the reason your company is making money your own priority and leverage it as much as possible. Why should any IT service provider know more about your industry or your customer than you do?
The concept of selective outsourcing is neither revolutionary nor new to the IT industry. It is defined by Gartner as “an internal IT organization decouples or carves up the scope of business or IT processes for purposes of individually or selectively sourcing each component separately and distinctly.”

Let me give you one example:
A company specialized in building state of the art aircraft may want to focus on the aerodynamics of an airplane design or the material used for construction. The value delivered to their customers is focused mainly on the object they are selling and not, for example, the sales management tool documenting their opportunities and driving the sales cycle. The management of a sales cycle or the documentation of opportunities might not a core competency of the aircraft construction company. But other companies are specialized in providing exactly this functionality. It’s their core competency and it’s the main value they bring to their customers. At the moment there are several companies out there providing this functionality as a SaaS (software as a service) solution. In conclusion, the construction company will profit from using the SaaS instead of spending a lot of money for the development of a home-grown sales application. This example is not what we understand as classical outsourcing but in the context of the definition, it is a valid outsourcing approach.

Selective Outsourcing in the time of API Economy

Considering the new possibilities and SaaS options in the market the opportunity of effective selective outsourcing has never been better. With external services connected to your IT, you have the possibility of more granular outsourcing of apps or even specific features in an application.
In 2016 Gartner described Uber as a good example for using the possibilities which come with API Economy.
“Uber, for instance, is an example of a business built on a platform because it leverages Google Maps through an API to enable its entire business model of matching drivers who have a vehicle with passengers who need a ride.”
In this example, it becomes obvious that a core value of Uber comes through smart integration of an existing service into their product. Aristotle once recognized the whole is greater than the sum of its parts and this applies here as well. By integrating external services, you can add additional value to your product, the sum of the features used by your employees or your customers. One needs to understand that a way for a company to make money could also be interpreting and adopting an existing service for your industry and integrating it into your products.
If you struggle or don’t see the point of integrating external services, please tell me your story. I’m eager to learn more about the problems companies are facing with handling integration and how we as APIIDA can support you stay competitive in the age of API Era.