5 Signs that IT Talent Outsourcing is on the Rise

By Celerity on Aug. 6, 2013 View Comments

5 Signs that IT Talent Outsourcing is on the Rise

No one can deny that IT departments are growing across the board as organizations seek to leverage the power of technology to achieve competitive advantage. But the question that this leaves us with is: how can you ensure your growing IT department contains the best talent for your new initiatives? Where will these new employees with niche skillsets come from, and will they be hired full-time or as contract workers?

There are many telltale signs in the marketplace that point to the rise of IT outsourcing. Here are just a few:

1. Hyper-specialization

Think back to Adam Smith’s little idea in the Wealth of Nations called the “division of labor.” As Harvard Business Review suggests, we now live in an era of “hyper-specialization,” especially when it comes to producing knowledge-based goods. There’s hardly such thing as just a “software developer” now—but there are Django developers, Python developers, and Java developers, just to name a few.

Given the constantly changing technology landscape, subject matter experts (SME’s) that can speak the latest programming language or operate the newest open source platform are in high demand (translation: they are hard-to-find and expensive to hire). Organizations usually don’t have the time or the money to hire a new SME for every IT initiative. That’s why outsourcing is a great way to control these costs and boost productivity.

2. Growing Shortage of In-Demand IT Skills Sets

While overall job growth this year was only 1.5%, IT jobs are up by 4.57% from a year ago. But those numbers aren’t reflected in graduation rates for the subject: computer science is the only one of the STEM (science, technology, engineering and mathematics) fields that has actually seen a decrease in student participation over the last 20 years, from 25% of high school students to only 19%, according to a study by the National Center for Education Statistics.

According to the College Board, in 2010, only 14,517 students took the AP computer science test, compared to the 194,784 students that took the AP calculus test and 109,609 students that took the AP statistics test. (Looking for a job? Microsoft currently has 3,400 open engineering positions it says it's having difficulty filling).

Companies that are desperate for IT talent need to look for creative ways to find these personnel, and their first option is often outsourcing. While the average time to fill IT positions is 37 days, companies like Celerity have access to large networks of highly-qualified tech professionals who are looking to transition to their next position, and can fill the requirements within 14 days.


3. Onshore Trumps Offshore

Remember when you used to call your phone company and get an operator in India? That isn’t happening as much anymore (In fact, it’s been turned inside out—India is opening its call centers in the U.S. now). “Offshoring made more sense in the era of big waterfall projects such as ERP, where it was going to be in place for a number of years,” says Monty Hamilton, CEO of Rural Sourcing, a software development center in Jonesboro, Ark. “But in the age of mobile development and Agile projects, it doesn’t work out so well.”

General Motors is moving IT operations back in house, Apple will start making some Macs in the U.S., and offshore outsourcers were painted as economic Benedict Arnolds during the election, says Information Week. In IT, the work brought back home has largely come from companies unable to get support offshore for the technology they use like Oracle databases and CRM applications. And outsourcing these operations closer to home creates faster time-to-market, a better end product, and improved customer service.

4. An Intensifying Technology Arms Race

Think we spend a lot on IT now? Worldwide IT spending is expected to exceed $2.1 trillion in 2013, up 5.7% from 2012. And according to CIO Research's recent Tech Priorities survey, 48 percent of top IT executives indicated they expect to increase spending this year.

This is in large part due to market shifts beyond the “exploration” stage of spending on the 3rd platform (mobile devices, cloud services, social technologies, and big data) to a full-blown, high-stakes “competition” stage. Companies will be closely watching how much their competitors are investing in new technology, so as not to fall behind.

Spending more on technology generally means hiring more IT resources, and outsourcing is one of the more resourceful ways to compete for top talent in the technology "arms race."

5. Job Loyalty is Dead

Did you know that 74% of employees now are either actively searching for a new job or open to new opportunities? In 2011, there was a 5.2% voluntary turnover rate within one year of hire. “Now that the U.S. recession is over and the economy is moving in the direction of a recovery, voluntary turnover will reemerge as a critical component of workforce planning,” says SHRM Customized Benchmarking Database. “High performers will see opportunities to switch jobs and take their in-demand skill sets with them.”

Turnover is expensive and painful. It may cost as much as $150,000 to replace an information technology employee who earns a salary of $60,000 a year, according to James Del Monte of JDA Professional Services, Inc. Much of the expense is in indirect costs such as loss of training, loss of institutional knowledge, productivity losses, consulting fees and overtime expense.

Contractor hiring has increased so that the workforce is able to engage with the employer in a number of flexible ways (telecommuting, part-time, compressed hours, etc). Freelancers, contract workers, and consultants now number nearly 17 million—12 percent of the workforce. The number of temps has jumped more than 50 percent since the recession ended four years ago to nearly 2.7 million — the most on government records dating to 1990. In no other sector has hiring come close.

Staffing firms pipeline around the clock by networking, recruiting passive job seekers, and using proprietary applicant tracking tools to source millions of candidates. They also give an organization the chance to “Try Before You Buy,” which decreases retention (both voluntary and involuntary) in the long run.

All of these factors make IT Talent outsourcing the most attractive strategy for any organization looking to sustain strong growth and competitive advantage.

Have you seen these trends in action within your workplace? What has your experience been with outsourced IT Talent?

Posted in: IT Consulting