IT services vs. bodyshopping. What’s the right strategy for your company?

Despite the layoffs in IT industry, Gartner set the global IT industry market size at $1.36 trillion for 2023, a 9.1% boost over 2022 and the forecast for 2024 is double-digit growth, with a 10.2% uptick predicted. Software driven transformation initiatives are the main driver, followed by IT services – Garner mentioning infrastructure as a service as main contributor.

Simona Pavelescu, CEO of High-Tech Software & Systems (htss), a company specialized in developing business software products, with over 1,000 clients in 11 countries, speaks about the two options a company has when embarking on digital transformation initiatives: buy a service or individual IT capabilities?

Should I buy a service or individual IT capabilities?

„Automation, digital transformation are top strategic initiatives for all industries but the ability to implement them is the main differentiator for being successful. The first option which looks easy & attractive is to buy individual IT capabilities – you are in full control of scope/cost, you pick the capabilities, you manage them. Going on this path, indirectly you decided that the technical skill is the main driver for your success and it’s worth to focus in acquiring & manage it.

The second option is to buy an IT service. Looks more complex as the service is intangible, how you make sure you get what you want? When you buy a service, you acquire a package of know-how – capabilities, best practice, continuity & commitment versus final outcome (measured via a service level agreement). In this case you’ve decided to focus on the result, transforming the business competence you have in house in a control mechanism over the scope rather than technical capabilities,” stated Simona Pavelescu, stated Simona Pavelescu.

According to the CEO of htss, the fundamental question is what do you want to achieve? From her experience (over 20 years in IT industry) most of the initiatives fail or get delayed because of the poor scope definition/management and some times because of lack of the right capabilities. Although we are talking about IT strategic initiatives the direction of travel (business outcome) is as important as the journey to reach it (technical capabilities).

If your ambition is to develop long term in house technical skills than first option might be good enough otherwise focusing on your core business and partnering with a specialized IT provider is your success recipe.

Financially although short term first option looks cost effective, long term the only way to keep the cost competitive is to ensure volumes and to motivate your technical staff with a set of interesting projects based on latest technologies.

Which is the right decision for me?

„The starting point is your short term strategy and the planned initiatives for the current year. You need a joint decision business & IT regarding the amount of change you need and you can afford to manage. Secondly do you have enough technical competences, the critical mass which allows you to deal with attrition/replacement without delays and lose of knowledge? If not the next question is where is worth to invest in strengthening the business team or in acquiring extra technical competences? Although this is a short term analysis please do not forget your long term development objectives.

As a general conclusion – there is not right or wrong decision it’s all about degree of risk you want to take based on your current context. The main challenge for an IT journey – automation/digital transformation - remains speed and access to the right competence at the right cost – are you mature enough to do it yourself or a specialized partner is a better choice – asks Simona Pavelescu.