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.
Four Trends Redefining the Workforce Model
As digital adaptation takes hold, four over-arching shifts are converging to change the way organizations build and evolve their workforces. 1. Access to Evolving Skills In this era of digital adaptation, organizations’ staffing needs change on a dime as they respond to evolving customer requirements. To react quickly, today’s workforce models need to combine in-house candidate identification, recruitment, and more thoughtful retention with precision-driven third-party staffing utilization. External staffing resources will need to meet the needs for specific technology domain expertise, industry experience, creative workforce models, innovative engagement structures, technical innovation and creativity, and much more. Hiring organizations will prefer third-party partners that can deliver on these increasingly complex staffing requirements while adding value in new and unexpected ways. 2. Need for Skill over Scale In the past, IT demands preferred scale above all else. That’s because the type of project being staffed required rote repetition of key tasks – an assignment perfectly suited to offshoring. Today’s technology projects demand a wider range of skills in smaller quantities, as well as a heightened need for collaboration and communication. The once-dominant waterfall approach to software development has been replaced with a more relevant Agile Methodology popularized by digital adaptation’s ebbing and flowing needs. Today, the skilled project team – one that has been created and staffed for a particular assignment able to cover everything from User Experience to backend database demands – dominates the workforce landscape. Agile teams are smaller, command a wider variety of technology skills, and require broader “soft” skills such as communication, real-time creative problem solving and collaboration. 3. Demand for Innovation, Collaboration Collaboration leads to better outcomes, and that’s true across all industries and markets. In acknowledgement of this widely held belief, market-leaders such as IBM and Yahoo are moving remote workers back into corporate offices. Why? It’s certainly not the opportunity to pay sky-high rent on urban offices. It’s an effort to reclaim the creativity and innovation that comes from sharing close quarters. While not every company can make such a significant investment in expensive office space, many companies are taking time to reevaluate and rebalance their approach to workforce building. Partners with innovative staffing delivery capabilities and those that adopt the latest communications tools and platforms to encourage collaboration are winning favor as hiring organizations seek expert help in balancing cost against the need for quality output, a chief motivator behind the “rehoming” trend. 4. Push to Expand Talent Pools Although the US technology-based talent pool dwindled as offshoring started to grow after 2001, efforts to promote STEM-based education have picked up in recent years. Despite that push, the slight uptick in STEM-based hiring that happened in 2016 came about because of foreign-born STEM-educated candidates. While STEM-based hiring is on the upswing, demand for technology skills continues to far outstrip supply. Today, public and private sector hiring organizations are competing with contracting firms, staff augmentation firms, and offshore companies for a limited number of STEM specialists. To rectify that imbalance, hiring organizations are partnering with high schools and universities to foster interest in and pursuit of STEM-based careers for US students. To learn more about how organizations in the midst of digital reinvention utilize workforce partners to build out their staffs, download our white paper, "An Introduction to Digital Adaptation.”
Balancing Cost with Speed and Quality is Key to Digital Adaptation and Transformation
In our last blog post, we broke digital adaptation down into four key areas: Evolving Needs, Workforce Change, The Consumerization of IT and Competitive Threats. This post, which focuses on Evolving Needs, will explain why balancing cost, speed and quality is vital as companies apply technology to solve business problems in the digital age. By definition, digital adaptation is at once disruptive and unpredictable. This fast-moving phenomenon forces companies to adjust on the fly to meet the demands of ever-changing markets, making digital transformation one of the most important movements to affect business in decades. Experts point out that today we operate in the era of “Digital Darwinism." Characterized by rapidly evolving technology and society needs that outpace business’ ability to keep up, companies that plan to survive, and even thrive, will need flexible leaders who take an “evolve or die” approach and can pivot quickly, according to Brian Solis of Altimeter Group. Clearly, there are economic rewards for companies that leverage digital adaptation to remake themselves and their processes from the inside out. Companies deemed to be digitally remade produce more revenue from their physical assets, generate more profit and command higher market evaluations according to CapGemini. However desirable these financial results are, the road to digital transformation is fraught with twists and turns. As technologies advance and capabilities expand, businesses have more options from which to choose and decide where to invest becomes more difficult. With more choices comes more risk, and the time lost to chasing a “wrong” choice can be devastating from a competitive standpoint. When it comes to acquiring the talent needed to succeed in this fluidity, the “multiple guess” influence is clearly seen. Effectively prospering and competing in this era of digital transformation means companies need to wage the war for talent using three distinct and inter-related strategies: Sourcing a wider range of skills and talent. Being able to navigate the nuances of agile. Using innovation to balance cost against speed and quality. Accurately forecasting the portfolio and corresponding volumes of skills and talent combinations needed to develop and deploy software makes up the first challenge companies need to address. While that is a tall order, the current environment of rapid change adds complexity to this mission. For example, the application development teams you have in place will see demand for their talents wane over time ─with some skills fading more rapidly than others and others enjoying heightened demand over time. What can you do today to predict the coming shakeup with confidence and actually plan for it? Once you’ve aligned that cube of possibilities, you’ll notice that the spectrum of skills you require is expanding exponentially. This expansion will most likely outpace your ability to find the talents you need at a reasonable price. This scenario is particularly relevant to companies that discover their needs have grown to encompass data scientists as well as mobile app developers. There is simply not enough money in corporate staffing budgets to afford the wide range of talent that is needed, especially in a hyper-competitive marketplace. Secondly, we know that it's no longer good enough for an organization to be able to leverage “standard” agile. You must "customize" it to fit your needs ─even as they evolve in real-time. To do that, you need to accumulate enough agile expertise to be able to spot the unintended consequences of clumsily applying this proven mindset. For example, the benefits of using a common language, sharing a time-zone, and commanding a familiarity with U.S. business culture are hugely important, particularly when projects move quickly. Sharing common ground eliminates the need to translate idioms, accommodate varying time zones and explain unfamiliar behavior. A shared perspective can enable a faster, more sustainable transition to a customized, thriving agile environment. Third, in this era when customers’ behaviors and expectations are shifting quickly, you need your development and deployment teams closer to your operation ─not geographically dispersed. The current prevalence of distributed workforces complicates the execution of a pivot, even as environmental factors call for acceleration. Creativity and innovation share two negative influences: distance and isolation. These barriers cause particular angst when speed and creativity are at a premium as they are today. Consider following the examples of noted remote work advocates IBM and Yahoo. Both companies have recently required workers to return to physical offices in an effort to regain the interaction and collaboration that accommodates change and fuels innovation. Despite this remote worker homecoming, budget constraints continue to prevent most companies from recruiting every professional they want to a staff position. Evolving needs demand that you apply a balanced model to hiring that balances three key influences at play in the talent landscape: quality, cost, and speed. However daunting this new environment may seem to be, it’s not as if business has been stagnant in the past. Companies have always adjusted their output and operations to evolving needs. Today’s challenges center on the unpredictable pace and unknown direction of those evolving needs. Those two characteristics add a new layer of complexity that makes it difficult for companies to go it alone and reduces the appeal of previously revered software development models. Offshoring development has proven to complicate the process with its “follow the sun” approach that, in the end, often delivered more complexity than the round-the-clock advantage. While it is likely that in-house teams, offshore resources, and staff augmentation will continue to fulfill specific skill needs, these options are not the answer to every phase of software development, especially those affected by the unpredictable disruption common to digital adaptation. Just as digital transformed the marketplace, it has altered the hiring environment as well. Digital adaptation requires flexibility. In these volatile times, companies that want to assure continued success will need to listen carefully to the whistling winds of change and adjust on the fly. To learn more about how to succeed as a Digirati in charge, watch for the next blog and download our digital adaptation white paper.