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Managing the Tech Talent Crunch

Managing the Tech Talent Crunch

Published on: 23 Jun 2023 5 min read

The Tech Talent Crunch – What’s Next?

In the post-Covid pandemic period, the world saw a global surge in demand for tech services and tech talent, which kicked off a new era of even faster-paced digitalization. Fueled by low-interest rates, companies were rushing to get the best talent, no matter the cost. Investments in startups reached an all-time high, the stock market was breaking records, and business was booming. So far, so good.

Read the comprehensive explanation of the pros and cons of software outsourcing vendors, staffing agencies and individual software contractors.

However, everything changed with the events of February 2022, which essentially led to galloping inflation, and suddenly everyone started talking about an impending recession. Businesses, pressured by investors and shareholders to be leaner and better prepared for the unknown, began doing the unimaginable – shedding tech workers. This had not happened on such a grand scale since the times of the dot-com bubble.

According to the layoffs.fyi platform, over 450,000 tech workers were laid off in less than 18 months. The recent developments around AI further accelerated this process. Even though investors and shareholders were pleased, this gave executives around the globe a new headache: how to cope with the constantly increasing digital demand while being in a hiring freeze but remaining flexible enough to adapt to the ever-changing market conditions without compromising competitiveness.

The solution is, in fact, pretty simple, and most businesses have been using these three strategies for years to balance internal headcount growth without overexposing themselves.

Below, I will provide a comprehensive explanation of the pros and cons of each approach and when it is best used.

 

Software Outsourcing Vendors

Software outsourcing vendors are software services companies used to working on a project basis. They can provide nearshore and/or offshore technical capabilities and often specialize in certain areas and domains, bringing further value beyond talent, capacity, and reduced costs. Remote Development Centers (RDC) handle all aspects of recruitment, selection, training, onboarding, and performance of each project employee or team, which is the most versatile option of all three.

The pros of software outsourcing vendors include low management overhead, flexibility, long-term commitment and visibility, accumulated knowledge retention, etc

Pros

Software outsourcing vendors are basically one-stop shops for different project needs. Among their significant advantages is the low management overhead, making partnerships extremely cost-efficient and predictable. This engagement model guarantees accumulated knowledge retention, as well as long-term commitment and visibility, which allows for taking risks head-on. Flexible and scalable, such vendors can cover all cases of individual contractors and staffing agencies.

Cons

Remote Development Centers are more cost-efficient, but the volume of the projects they handle might result in a higher cost than individual contractors can offer. Being a sole vendor also means their customers are more dependent and might suffer if key staff members are suddenly missing at some point.

It is also true the sheer geographical distance when collaborating with offshore providers might cause cultural gaps. However, it is generally accepted that outsourcing to Eastern Europe brings the best of both worlds. Countries like Bulgaria or Romania offer world-class experts with US and UK experience at affordable rates.

Best used for

  • Strategic projects and mission-critical initiatives
  • Mitigating risk in tech projects
  • Projects needing fast ramp-up and agility
  • Specific project skillset needed for a limited period

 

Staffing Agencies

Staffing agencies are service companies that act as an intermediary between talent and employers. They provide and/or recruit prequalified candidates who work on a temporary basis to fill in job openings until a permanent solution is set in place. Staffing agencies are usually specialized in certain domains but generally operate similarly.

The pros of staffing agencies include short lead time, wide talent pool and lower payroll overhead.

Pros

Working with staffing agencies grants access to a vast talent pool, which is often considered a very convenient form of partnership. Lead time is shorter, and payroll overhead is lower than with internal employees. Staffing agencies also provide employer-of-record services, another advantage that is hard to ignore.

Cons

With staffing agencies, control over the hiring process is often lost as they oversee talent selection. The cost is also higher compared to internal employees, while the level of management overhead is the same. It is also possible to experience cultural adaptability and mindset issues.

Best used for

  • Recruitment difficulties
  • Aggressive recruitment programs
  • Managing seasonal surges

 

Individual Software Contractors

Individual software contractors or “Gig workers” are freelancers who work as independent entities on one or more projects and provide services on demand. They usually secure engagements through specialized freelance platforms or referrals.

The pros of staffing agencies include short lead time, lower or similar cost to an internal employee and easy access to high-caliber specialists.

Pros

Lead time is relatively short again, and the cost is lower or similar to an internal employee. With individual software contracts, access to first-rate experts is straightforward.

Cons

The main issue with individual contracts is their propensity for abandoning ship without notification, or what we call the “Get up and leave” mercenary mentality. Hiring this way is risky, can lead to legal issues, and leaves little to no leverage when things get rough. Furthermore, management overhead is higher than with internal employees and staffing agencies.

Best used for

  • Short-term projects requiring a rapid ramp-up
  • Specific project skillset needed for a limited period

 

Conclusion

Access to a broader talent pool and cutting-edge technologies, combined with accelerated time-to-market, scalability, and cost efficiency, make numerous businesses choose software outsourcing vendors.

And it comes as no surprise, as offshore and nearshore development partners like Scalefocus provide flexibility through different engagement models – Remote Development Center, Full Lifecycle Software Delivery, Consultancy and Technology Advisory, and Managed Services.

For the last 12 years, we at Scalefocus have helped companies around the globe to bridge the talent gap and tackle digital challenges successfully. If you would like to know first-hand how working with a software outsourcing partner can help your particular business case, do not hesitate to contact us!

About the Author:

Pavlin Dyankov

A technology executive with a decade of experience in advising companies worldwide on how to address their digital needs. I specialize in helping businesses in ICT, BFSI, Manufacturing and Healthcare looking to accelerate their business transformation with the right technologies and best talent.

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