“You have to make sure you reduce your costs in order to stay competitive” - my boss at the time told me. It was early 2009 and the financial crisis had reached Europe.
At the time, I did not really understand what he was referring too, but a decade later I full understand what he meant and have lived it myself. As an entrepreneur you are looking at value for everything you pretty much procure. At the beginning of a downturn, sales becomes more difficult and prices are going down. If you are a supplier of some sorts to another business, becoming more efficient and being able to lower your prices can give you the edge and make you stay in business.
Fast forward 11 years, I have been able to change careers from a Procurement Consultant to being an entrepreneur and this life lesson sticks with me until today.
The outsourcing industry usually thrives in a downturn as many companies are scrambling to get cheaper resources. However, I am in the strong opinion that it might be too late to outsource at that stage. While you were enjoying fairly high margins and did not really care about the procurement side of things, this might not have been the same for your competitors. So, while you need to find an outsourcing partner, they are kicking your ass as they already have setup a team remotely.
What is more, your competitors are already in “Partnership mode” with their outsourcing provider and have had optimizations along the way. So, even if you were to obtain the same hourly rates, your competitors are more efficient and this can still give them the edge.
We are in the strong opinion however that in tech outsourcing not only prices can give you the edge. When selecting an outsourcing provider also consider things as (1) Timezones (2) Cultural Backgrounds and (3) Training in Tech Resources / Availability.
So, given the current bear in the Stock Market, it is time to start thinking strategically and reduce costs where you can. At Parrolabs we already made the decision to reduce costs in terms of Office in order to be able to offer a better price level to our clients. We are thinking longer term as we believe there will always be a need for technical resources and have made some Capex investments.