What Merchants Should And Shouldn’t Outsource

Online merchants should focus their internal resources on their core business applications, Chief Technology Officer Clark Huang told PYMNTS in a recent podcast conversation. There are parts of a company’s eCommerce experience where it makes sense to keep them in-house, but other parts where it doesn’t.


As Huang noted, brands and merchants always want to remain in full control of their consumer-facing experiences, so developing these web workflows in-house is not a bad investment. “But trying to develop backend solutions for supporting eCommerce workflows such as payment systems integrations, third-party fulfillment or re-marketing tools is not the best use of internal resources,” he said.

Brands shouldn’t stop having internal technical teams, but “it’s about using your technical teams to program at a higher level – doing things like connecting third-party vendor plugins, quickly A/B testing new pages or workflows, or connecting front-end systems to a more robust, scalable platform,” Huang noted.

However, he admitted that when it comes to outsourcing the processing system that books the dollars and cents for businesses, chief technology officers are unsurprisingly apprehensive about handing over full control.

“I, too, would be nervous about trusting some new startup with a core revenue-producing workflow for my business,” Huang said, but added that outsourcing can be trusted with the right vendor.

However, companies looking to stand up or grow their digital channels quickly amid COVID-19 – as so many consumers have shifted to online commerce – must improve their operational efficiencies. To build services that are securely scalable, many brands are beginning to see the advantages of outsourcing the parts of the digital-commerce experience where third parties excel.

How To Successfully Outsource

Huang said the first thing CTOs must do to become comfortable with a hand-off is to defeat fears of a single point of failure by finding a reliable partner.

Once they find a company with sufficient reliability, brands can begin to focus on what they stand to gain from outsourcing. Huang pointed out that outsourcing is generally more efficient and less costly than in-house development – but neither one is the system’s primary benefit.

“I would say [the] main benefit is reducing the opportunity costs,” he said. “Time not spent internally developing an order management and payment system frees up resources to work on the more important aspects of the business.”

That can include external-facing items like customer acquisition and retention programs or internal systems, such as “performing super-data-driven analysis of funnel activity and responding to findings in real time,” Huang said.

Moreover, outsourcing to a good third party can relieve companies of technologically complicated, moving-target tasks like keeping up with quarterly service bulletins and monitoring card networks like Visa and Mastercard. After all, rules and regulations often change in the world of payments, and competent third parties are able to keep pace with that change.

Preparing For The Shifting Post-Pandemic Landscape, which prides itself on providing such third-party services, is finding an audience that is increasingly receptive in a post-pandemic world. As Huang noted, eCommerce players can see the sea change coming in commerce and are interested in readying themselves.

“Some of these firms do have in-house payment systems that they've developed over the years, [but] they are coming to the realization that with the COVID-19 crisis, they need to double-down on eCommerce in this ‘new normal,’ ” he said. “They're looking for more resources to build out and improve on their core business systems that are actually unique to them.”



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.