With the emergence and growth of freelancing websites (like upwork, freelancer, guru) the IT services business has changed drastically. Smaller IT companies have mushroomed across the developing world. They cater to projects from the developed world (US, Europe, Australia) that were earlier inaccessible.
These changes have brought new challenges for everyone.
- Finding the right outsourcing partners
- Developing skills to effectively manage distant teams
- Gaining productivity despite time-zone differences
- Assimilating members from different cultures without meeting each other
For IT companies:
- Increased competition
- Working on market adjusted rates
- Team members turn into competition because of very low entry barriers in the business
- Continuous upskilling of team members and associated costs
Along with the above challenges, there are disruptive forces at play:
- Technological updations
- Automation of tasks that were fetching handsome revenues till now
- Cyber Security
So how should a typical IT services company survive amid all the chaos ?
With our experience of building a successful and scalable IT Services Company at Gyrix, we have gained few insights to handle these challenges. The insights are divided in three categories:
- Client Front
- Team Front
- Market Front
- Retention is preferable than Acquisition: We made genuine attempts to retain our clients for the maximum time possible. Some of our clients are continuing with us for more than 3 years now. It gives the company stability, the team members develop functional expertise, payments are never a worry and the rapport can be utilized for expanding the engagement.
- Up-skill team members for client needs: We faced challenges in meeting all the technological needs of our long term clients. It is better to develop the new skills in-house, rather than losing the opportunity to an outside entity. It gives bandwidth to learn under protected environment (with lesser risks). Sometimes the clients are willing to bear the cost for the team member to learn new technology.
- Deliver value while sometimes bearing the cost: Services is a test-match that never ends. An inning is always followed by another. The performances are bound to vary, some clients would be very happy, some may not. But if the goal of delivering “Value” is clear, life becomes easy. An IT services company Sometimes should be ready to bear Cost while delivering Value Always.
- Smart is better than average: For longevity of the company, it is better to hire smart people people at higher costs rather than below-average people at lower costs.
- Up-skilling is for the company not for the individual: Setting aside a budget to incentivize team members to do global certifications, should be considered a business cost.
- Shuffle team at regular intervals to reduce dependency: It may be an enticing option to allow a stable team to continue working for a long term client, but making changes below the threshold of disruption is always better.
- Test the bench capabilities: Team members not allocated to projects should be tested regularly by shadowing to live projects. It keeps the morale high and trains them free of cost.
Based on our discussions with peers in the IT world, we found many companies are following most of the above learnings.
However, the one aspect where many IT companies (especially the smaller ones) lack is the Market Front.
- Tend to make convenient assumptions
- Work on their own strengths rather than the demand in the market
- Allocate disproportionate resources for unnecessary technologies
- Bet on “emerging” technologies prematurely
- Assume that all the technologies are relevant to all the geographies. E.g. The list of technologies more in demand in Australia may not exactly match with US.
We had realized the importance of understanding the Market Front earlier in our journey. Hence we developed skills to analyze the Freelancing market with the objective to:
- Carefully observe technological trends
- Understand market demands
- Unearth geographical patterns
We performed a detailed activity over several week, fetched information from some of the freelancing websites, applied analytical tools to sift through the huge amount of data and drew conclusions based on the results. When we had solid conclusions in front of us, we tweaked our sales and delivery strategy to enhance our potential of growth.