Understanding the risks of offshoring in today’s digital marketplace
Offshoring, the approach many U.S-based companies take to secure IT talent, has lost much of its original appeal. In the past, U.S. companies sent IT jobs overseas for one key reason: to capitalize on inexpensive labor. In many cases, offshore vendors claimed hourly rates that were 80% less expensive. IT leaders, originally seduced by offshoring’s attractive bottom-line savings, quickly found out that offshoring’s challenges and risks often increased project costs, eroding the much anticipated savings. A few of these risks include: Time zone differences Language compatibility Cultural barriers Domain expertise Employee turnover Geopolitical risk IT leaders, now familiar with the risks associated with offshoring and its eroding potential savings, are replacing offshoring with a proven alternative to talent acquisition: domestic sourcing or onshoring. Domestic sourcing taps into talent inside the United States to deliver the speed to market and responsiveness IT organizations require in today’s digital marketplace. In addition, it leverages a deep familiarity of complex business problems, a depth and breadth of capabilities, access to a scalable brain trust, efficient collaboration, and attention to quality. However, determining the value of domestic sourcing has been difficult to illustrate. Today, companies can utilize the Rural Sourcing TCO Calculator, a robust tool that enables the customization of six distinct and commonly accepted productivity factors to a company’s current situation. This allows for a more accurate assessment of their total cost of ownership of outsourcing needs. A key advantage to domestic sourcing however, is its ability to deliver the agility needed to pivot IT priorities in response to changing customer expectations. It allows companies operating in this hyper-responsive digital environment to add and recast IT talent as needed. For example, this agility was recently demonstrated when one of our FinTech software clients asked Rural Sourcing to refocus our existing team and add a second scrum team to meet the regulatory demands of one of their largest clients. Taking a flexible approach allows IT teams to adjust project priorities and delivery timelines on the fly – based on the actionable recommendations that come from real-time analysis of customer expectations.
The Four Components of Digital Adaptation
As digital forces business to shift how they view themselves in a new world, it drives the need for new and adaptive approaches. It’s now about rethinking the concept of digital transformation as more of a continual adaptation to a constantly changing environment. In order to embrace this adaptation idea it is helpful to bucket the areas into the following four areas: managing the constantly evolving needs of customers, partners and employees; the willingness to consider original combinations of workforce models; meeting higher expectations of customers, prospects and employees; and the ability to leverage incumbent (legacy) assets into new revenue streams and competitive advantage. 1. Evolving Needs Today, success and survival results from being able to thrive among volatility and uncertainty, meaning that it's difficult to predict what your future needs will be other than that they will evolve... quickly. One challenge in digital adaptation is how to balance the cost of technical expertise with the standard of its output. Another is to possess and manage the variety of workforce models that enable you to match the best-suited development team, with the needs of the business providing speed, contextual understanding, innovation, and communication. 2. Workforce Change As technologies evolve, companies are uncertain what exact skills they'll need and frankly, it changes daily requiring them to have an open mind to original workforce ideas beyond offshoring or staff augmentation. It’s a confusing time. Many companies are now declaring that they want to bring people back in-house, or at least closer to the business. Companies must appreciate that they have been sending mixed signals when it comes to talent management. In this era of technology skills shortages, they will have to be flexible and innovative. The people, and the models used to manage those people, are as important as the technology itself. To maximize the value of the technology being provisioned for the business, companies must simultaneously adapt their workforce thinking. 3. The Experience The consumerization of IT means that customers compare their digital experience with you against all their other digital experiences, not just those of your competitors. These expectations cross the borders that used to separate our work and private lives. These boundaries have melted away raising the expectations of customers. While it is essential, high-quality experiences should not be reserved exclusively for customers. Companies must enable their staff to deliver these great digital experiences. To succeed you should be putting your workforce in the best position to achieve this by providing progressive technologies, as well as, agile and DevOps methodologies which ultimately will enable them to deliver great experiences for your customers. 4. Competitive Threat Traditional barriers to market entry are extinct. Companies can no longer rely on the advantages they used to enjoy from being the industry dominant elephant because competitors are springing up overnight threatening the core of established organizations. And while these incumbent companies have assets at their disposal such as a proven business revenue streams, customer relationships and brand presence, they are not enough. The competition is coming from unlikely sources as vertical markets boundaries become blurred. For example, online retailers morph into insurance carriers and health care providers, as retailers and insurance companies merge to fight unforeseen rivals. All enabled by cheap, fast technology, vast processing powers, petabytes of data and AI’s relentless pursuit of pattern recognition. Digital has and continues to change the rules of business, and life. There’s no going back. Companies are seeing their foundations shaken by digital, artificial intelligence, virtual reality, etc. A series of company “re-orgs” won’t solve the problem, it’s a constant re-org. Consistent adaptation. Learn more in our next blog or download our digital adaptation white paper.