The latest technology developments, not only in the adtech and martech sectors, are fueling the discussion about building services in-house on the corporate side. Should companies build up more and more services internally or continue to outsource them to external service providers? Both approaches promise advantages, but if you look at the issue objectively, the question no longer arises.
The rapid development of software solutions in recent years has made it possible to simplify, link and automate many planning and implementation processes. Handling has become more user-friendly, performance faster and, thanks to cloud connectivity, available almost everywhere.
As a result, companies today have significantly more options for completing tasks in-house with their own employees that were previously outsourced to external service providers. The resources required for this have also decreased significantly. This brings many advantages, but also involves a higher initial investment, as many companies are not prepared for this either in terms of personnel or structure due to their technical infrastructure and existing processes.
However, if you know what to look for when in-housing, it holds enormous potential for growth and innovation and saves a lot of time and money.
In my opinion, focusing solely on the question of whether to build up services in-house in the future or whether to continue working externally with third parties is too short-sighted and only begins to address the challenges of the current era. The issue is much more complex and the decisions more far-reaching. The considerations should therefore go far beyond the decision of whether or not to set up services in-house.
Thanks to the technical developments already mentioned, companies today have to ask themselves much more strategic questions concerning their future business orientation.
Today and in the future, companies will increasingly have to ask themselves how their products can be sold in the future and what expectations their buyers will have of them as a company and of their products. Is my company prepared for this?
Which technologies do I need to implement these (partly new) use-cases and can I alone judge which is the right provider(s)?
Which existing software solutions can be sourced externally and what needs to be developed in-house in order not to lose control over actions, processes and not least the sovereignty over one's own data.
Which services should be developed in-house and which should be outsourced? Are the service providers used even capable of operating the required technologies?
There are many arguments in favor of setting up in-house services:
One of the biggest advantages is to build up know-how within the company in order to keep it within the company and to share it between different departments.
Another advantage is to keep control over services, required resources and processes.
Building up know-how about the technologies used and, above all, sovereignty over the company's own data is also one of the most important advocates.
If services that are sourced externally today are built up internally in the future, this can mean more flexibility and less dependency.
Unfortunately, this is not quite as simple as it sounds.
The first recommended step is to review what exactly is to be built up in-house and what purpose this is to serve. Further output of this evaluation is a potential analysis of what actual possibilities the company can realize with the available resources like data, technology, investment, etc. A comprehensive understanding of the market, as well as a very good technical understanding are indispensable here. Only then can and should a company assess whether the necessary services should be built in-house and whether the company is capable of doing so.
The challenges of in-housing:
The benefits described are often accompanied by very high expenses and responsibilities that should not be underestimated. Building up internal resources requires know-how, time and financial investment, if the required know-how can be obtained at all in the expected quality. This means that there is still a shortage of the necessary specialists in the market.
If one has now built up various services in-house, this requires the use of appropriate technologies and tools for collaboration, management and distribution of the relevant information, so that all departments can work together collaboratively on the same level of information.
But it is not only the use of technologies that is necessary. One of the biggest challenges is managing processes internally and coordinating partners and service providers externally that are not covered internally. Overarching project management and an overall understanding of the individual processes and tasks are critical to success.
By building up specialists in in-house departments, a company distances itself from qualities and talents that exist in the market and that are only available from external service providers such as agencies, technology companies and other service providers.
This brings us to the advantages of working with external service providers.
What are the advantages of working with external service providers:
One of the most important and powerful advantages in working with external service providers is the diversity and quality a company gets when it works with specialists in a particular field. Those who work with the best providers in a given market benefit accordingly, as these service providers have an advantage in experience and information because they are usually closer to market developments through a permanent exchange with each other and with corresponding suppliers.
As a result of the specialization of the service providers, often at industry level, a company benefits from experience gained from comparable projects that have already been implemented.
Provided that a company has adapted its processes and structures for this purpose and has them under control, it can benefit greatly from the transfer of know-how to the company through the use of different techniques.
For the reasons mentioned above, the question of whether services should be built up in-house is no longer relevant. The right question should be, which services should be built up internally, which should be outsourced, and how should this be orchestrated correctly?
To find the right answers, a company should ask itself the following questions, among many others:
Which information / data does a company need to keep in-house for processing and which can be processed by external service providers?
Which services can a company outsource accordingly and which should be kept internally to avoid loss of information and to sustainably ensure the build-up of know-how within the company?
What support does a company need to be able to make these decisions and implement the required changes?
What is business-critical data / information that I as a company should not pass on to third parties for processing?
Answering these questions and more will give you a better idea of a possible course of action. For every company the solution looks different, but in the vast majority of cases there is a mix of in-house departments and outsourced service providers.
What is always added, however, is the establishment of new, additional technologies that combine with the existing technological infrastructure or replace older ones. Here, too, it is often advisable to combine existing software solutions that can be obtained as a licensing model with the development of in-house solutions to protect business-critical areas. This allows companies to operate a flexible technical infrastructure that uses the best possible software solutions, but can still replace individual elements on a modular basis without risking data loss. Company-critical data is thus not tied to external service providers or software solutions.
The question of whether or not to build services in-house is no longer an issue. Rather, it is a matter of finding out how a company is best positioned to adapt to market changes as a result of digitization, and to do so in a way that is as future-proof and flexible as possible.
I would even go one step further and claim that companies that do not shift services in-house will have massive disadvantages in the future that will be to the detriment of competitiveness, innovative strength, sales growth and future security.