Max Nirenberg, Chief Revenue Officer and Managing Director for North America, Commit USA
It’s no secret: The tech industry is facing a massive talent drought, with more skilled specialists than ever needed in today’s dev teams and a shortage of qualified candidates to fill these crucial roles. This is especially challenging for startups, who face great opportunities for growth but fierce competition for top employees.
And it’s not just the demand for talent that’s evolving. From the growing high-tech gig economy to the mass adoption of remote work, we are witnessing fundamental changes to how organizations build teams and individuals collaborate.
To better understand the dynamics transforming today’s workforce and the solutions best positioning companies for future success, my company surveyed 200 senior leaders at US-based, recently funded high-tech startups to develop our 2022 State of Tech Staffing Report. The results may surprise you.
Outsourcing is skyrocketing — and could soon become a must.
In one eye-popping finding from our study, we project that software development outsourcing will increase 70% between 2022 and 2023. And believe it or not, this trend is expected to grow even faster in emerging industries such as fintech, where we expect outsourcing to more than double by next year. With no signs of slowing down, global IT outsourcing revenue is projected to reach $587.6 billion by 2027 (paywall), increasing by about 8.2% each year.
So what’s driving this shift? It would seem that talent shortages have simply placed enormous pressure on organizations. Tech job openings have grown 81% over the past two years, yet the median applicant pool has shrunk by 39%. Outsourcing offers several benefits to alleviate this issue.
The benefits of outsourcing extend far beyond the costs.
The time required to hire developers has become incredibly burdensome, particularly for startups with limited resources and tight timelines. If a new recruit doesn’t work out, an investment can quickly become a loss, further exacerbating shortage concerns and delays. Our research found that 68% of companies require one month or more to recruit a single developer, and on average, 20% of new recruits need to be replaced.
By outsourcing these roles, organizations can greatly increase speed to market while reducing the risk of additional costs and delays.
Organizations today are also increasingly receptive to remote work due to the shift toward working from home in recent years. A staggering 99% of senior leaders surveyed in our study reported recognizing the benefits of remote work over traditional workflows. In fact, 75% of organizations reported increased productivity since implementing remote teams. With enthusiastic support from employees as well, remote work now seems stronger than ever.
This fundamental shift presents new opportunities and greater benefits from outsourcing, as the best talent can now be sought out anywhere in the world. And teams are growing accustomed to this new way of working.
Incorporating outsourcing into a team-building strategy can yield many benefits, but what’s the biggest advantage? The answer may depend on what hat you’re wearing, because it turns out the benefits are perceived very differently by different members of an organization.
Cost savings are, of course, a key driver for outsourcing. Nearly half of HR execs surveyed agree that reducing expenses is the biggest benefit. But CTOs see things differently. They report looking mostly for scale, with 42% reporting a heightened ability to quickly resize teams and ramp up operations as the biggest benefit.
Similar sentiments were echoed more broadly. Of our entire survey pool, 30% cited cost savings as a top advantage of outsourcing, while 38% value the ability to scale easily. These benefits were followed closely by time savings and increased productivity.
Overcoming Concerns About Outsourcing
Reimagining how to build and manage a team can require a significant shift in perspective. So, it’s no surprise that 98% of organizations reported having some degree of reservation when outsourcing their development team.
Fifty-six percent of the organizations we surveyed reported that the biggest concern when considering outsourcing was the quality of resources available. While this concern is understandable, the belief that outsourcing can lead to lower quality performance is outdated.
With the number of software developers worldwide expected to reach 28.7 million by 2024, the abundance of qualified candidates is too big to ignore. That’s why more than 25% of organizations we surveyed indicated that access to higher-quality talent is one of the top benefits of outsourcing.
Another top concern is that outsourcing can be expensive. This was counter to HR departments surveyed in our study indicating that outsourcing, in fact, supported cost savings. It also contradicts other research such as Deloitte’s findings that 70% of businesses use outsourcing to reduce costs.
Why do some think outsourcing is too costly? It’s simple. Many companies limit themselves to only looking at onshore alternatives, but this isn’t always the best route.
When most US developers can expect to make well into six figures, sourcing locally often comes at a higher cost and proves less necessary with today’s remote collaboration tools. Instead, organizations should think globally to find quality, multidisciplinary talent. By looking beyond their backyard, organizations can both support the CTO with scale while keeping costs to a minimum.
Capturing The Opportunity With Outsourcing
It’s undeniable. Today’s high-tech startups need faster and more flexible access to multidisciplinary talent. And traditional methods of staffing are often too time-consuming, expensive and restrictive.
New, more creative approaches, such as those I wrote about in a previous article, can be game-changers, replacing the rigid and outdated team-building models to help organizations mitigate risk while increasing flexibility and agility. For instance, instead of asking whether to outsource offshore for cheap or spend more for people locally, teams can research and identify which areas worldwide offer the highest quality and most cost-efficient talent.
Building a successful team for tomorrow doesn’t have to be a challenge. It’s time to step out of the box and consider outsourcing in a new light.
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