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What do you think of when you hear the word “outsourcing” for software development roles? Whatever your gut instinct is– think again.
In the recent 2022 State of Tech Survey, Commit spoke to 200 senior tech leaders in the U.S. and uncovered the truth behind three pervasive outsourcing myths. Adding valuable data insights to the conversation for the first time, software development teams can fully embrace the growth in outsourcing and meet the tech shortage with confidence and with strategy firmly in place.
Outsourcing is often thought of as a cost-saving strategy. When local talent is too pricey – why not look abroad? Especially if your HQ is in Silicon Valley, or any other location at the top of the pay scale, outsourcing can be seen as a tactic to help increase ROI by looking to new pastures.
However, the data suggests that cost savings are not even in the top three benefits of outsourcing, according to today’s startups. Leaders stated that even more important than financial benefits, they need the ability to scale and resize teams with greater ease while highlighting time-saving advantages and increasing productivity. Just 30% of respondents see cost savings as their greatest benefit. Moreover, when looking at startups during their Series B funding, the top benefits were timesaving and the ability to scale, while those at the Seed funding stage, prioritize lowering risk as the main reason to turn to outsourcing. Cost is far less of a factor.
It’s also interesting to see the answers to this question when broken down by role. For Human Resources stakeholders, cost flies to the top of the list, while for more technically savvy executives like the CTO, the benefits are centred around scale and productivity. This suggests that HR teams are still looking at outsourcing as a way to save money, while other stakeholders recognize that the benefits have moved on.
Key takeaways? For hiring remote workers, it’s not a race to the bottom. Organizations are increasingly recognizing that they might pay a premium for the right talent abroad, and that’s fine, as long as it helps the business meet its other goals of productivity and scale. Of course, with HR focused on the purse strings, companies need to find a balance where they can ensure efficiency and scale without losing sight of financial constraints.
Since outsourcing is cheaper, many leaders are concerned that the quality of outsourced work will not be up to scratch. The data suggests that the biggest concern about outsourcing for software engineering roles is that the quality of resources will suffer. This came above both compliance and security risks, as well as collaboration or communication issues when working with remote workers in a new location.
This implies that the opportunity for outsourcing talent is not being looked at broadly enough by today’s businesses. While organizations continue to think about outsourcing as chasing low-cost talent in lower-income areas, quality will always be a concern. If businesses can make a shift to consider other global alternatives to onshore talent, they will find that they can access high-quality talent where the cost of living is naturally much lower, allowing for more cost-effective recruitment of niche software engineering expertise.
Think of three roles that you could outsource in your team. Chances are, you considered job descriptions such as junior engineers, low-level web developers, or QA testers. The data walks a slightly different path. When respondents of the survey were asked about their top challenges in staffing and managing engineering teams, 66% mentioned the length of time it takes to hire quality talent, and 51% the lack of team leads.
It’s true–hiring developers takes far too long for the business requirements of today’s fast-paced startups. In 68% of cases, it takes companies more than a month to recruit a new developer. And to make things worse – 68% also have to replace between 10%-75% of these developers once they’ve finally made the hire!
Today’s businesses are looking to speed up the process of hiring quality talent, without breaking the bank. And they are looking for team leads as well as junior or entry-level roles. Outsourcing is the route to meet all of these goals.
A smart outsourcing strategy can allow startups to quickly onboard necessary junior talent, alongside the team leads who will manage their day-to-day work. By using an agency approach, you get vetted and tested employees who come at a transparent and fixed cost (You’re welcome, VP HR), and can scale as quickly as you need to meet business goals (No problem, CTO). If there’s an issue with the quality of work or a culture clash, staff can be easily switched out with other remote workers, ensuring zero impact on business continuity.
Written by Max Nirenberg CRO & MD North America at Commit
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