Although many companies rely on offshore technology teams to save costs and build capacity, there are still many challenges around outsourcing. Time zone issues, frequent staff turnover, difficulty managing workers, language barriers—the list goes on and on. Offshore workers can allow companies to save money. But what if offshore pricing was available for onshore talent? What if the best of both worlds – an easily managed workforce at a competitive cost – was possible. In fact, it is.
For all the pains and issues related to building global technology teams, outsourcing remains a viable option for many companies that need to build their engineering groups while controlling costs. With the U.S. and Europe making up almost half of the world’s economic output, but only 10% of the world’s population, it’s no secret that some of the world’s best talent can be found in other countries. That’s how countries such as India, China, and Belarus have become global hubs for engineering. And why not? They have great engineering schools, low costs of living, and large numbers of people who are fully qualified to work on most major platforms.
This is basic supply and demand: companies want to hire people at as competitive a price point as possible without sacrificing quality. This is exactly how Bengaluru and Pune became technology juggernauts in the 1990s, and how Minsk became a go-to destination a decade later. The problem, of course, is that what was once a well-kept secret became well known…and wages started creeping up.
With salaries increasing in countries that typically are used for offshore talent, the cost of offshore labor is also on the rise. In India, a traditional favorite of offshore workers, annual salaries have been steadily rising by 10% since 2015, making it less beneficial for companies to hire workers there. In fact, in one of the biggest outsourced areas, call centers, workers in the U.S. earn on average only 14% more than outsourced workers. In the next few years, the gap will be narrow enough that the benefits of setting up a call center in Ireland or India just won’t make sense. What the laws of supply-and-demand can give, they can also take away. That’s why “outsource it to India” is no longer an automatic move for growing technology companies, financial institutions, and other businesses looking to rapidly grow their teams. It’s also why major Indian outsourcing companies such as Wipro and Infosys are diversifying into other parts of the world.
As political and economic instability grow, moving a company’s outsourced work domestically can help to mitigate the risks of an uncertain landscape. A perfect example of this is China. Hundreds of American companies have set up development offices in China to take advantage of a skilled workforce at a low price point. So far so good, right? Well, not really. Due to concerns about cybersecurity and intellectual property theft, companies such as IBM have mandated that NONE of their code can come from China. All of a sudden, setting up shop in Des Moines is a lot more attractive than going to Dalian.
The federal government, as well as many states and municipalities, are also playing an active role in keeping skilled technology jobs at home through grants and tax breaks. New programs and training schools are also emerging, which are helping to build talent in the U.S. at a lower cost and helping companies take advantage of talented workers outside of large cities with low costs of living. hiring 100 engineers in midtown Manhattan might not be cost-effective, but places like Phoenix and Jacksonville allow companies to attract world-class talent without breaking the bank.
This doesn’t mean the end of offshoring, of course, When looking for options to handle mainframe support, and legacy systems services, including Sparc, AIX, HPUX, and lots of back-leveled IBM, Oracle and Microsoft products, the lure of inexpensive offshore labor often wins. Unlike emerging technologies, legacy systems do not require constant updates and front-end improvements to keep up with competitors. The typical issues that affect offshore outsourcing aren’t as big of an issue when legacy systems are involved. So where does it make sense to build teams, or hire contractors, domestically?
Domestic Offshoring (sometimes called near-shoring)
There is a key difference between outsourcing development to overseas labs and building global teams, but the driving force behind both approaches is pretty much the same: cut costs while preserving quality. Working with IT consulting and staffing companies like TxMQ is a prime example of how businesses can take advantage of outsourcing onshore without going into the red. Unlike technology hubs such as Silicon Valley, these companies are typically located in areas such as the Great Lakes region, where outstanding universities (and challenging weather!) yield inexpensive talent due to lower living costs. With aging populations creating need for skilled workers in the Eastern United States, more states are introducing benefits to attract more workers. This is already creating an advantage for companies that provide outsourced staffing because they can charge lower prices than traditional technology hubs. It’s the perfect mix of ease, quality, and cost.
Global 2000 companies face challenges resulting from their large legacy debt, and the costs to support their systems are high. As they struggle to transform and evolve their technology to today’s containerized, API-enabled, microservices-based world, they need lower-cost options to both support their legacy systems and build out new products.
While consulting and staffing companies are well known for transformational capabilities and API enablement, there are other advantages that aren’t as well known. For these transformational services, many companies also support older, often monolithic, applications, including those likely to remain on the mainframe forever. From platform support on IBM Power systems to complete mainframe management and full support for most IBM back-leveled products, companies like TxMQ have found a niche providing economical support for enterprise legacy systems, including most middleware products of today, and yesterday. This allows companies to invest properly in their enterprise transformation while maintaining their critical legacy systems.
The Future of Work
In a 2018 study of IT leaders and executives, more than 28 percent planned to increase their on-shore spending in the next year. With the ability to move work online, companies can support outsourced teams easily, whether onshore or offshore. To mitigate age-old issues such as different time zones and language barriers, and as the pay gap closes between the U.S. and other nations, employing the talents of outsourced workers onshore can help companies benefit from outsourcing without having to fly 15 hours across two oceans to do it.