All companies are now tech companies. In digitally transformed industries, technology is the underlying force that drives businesses forward. However, to consistently maintain business continuity and relevance, enterprises need a wealth of top tech talent.
This makes sense because the need for top tech talent also exploded with digital transformation. In fact, this is where the problem starts. The demand for tech talent continues to outstrip supply, and experts predict that the talent gap will continue to widen (at least for the foreseeable future).
If we take a recent study conducted by Gartner, for example, 63% of senior executives surveyed considered the talent shortage a key concern for their organization.
But how bad is it? How are HR departments dealing with the situation? Let’s take a closer look.
The Tech Talent Gap Is Much Bigger Than Anyone Imagined
The talent shortage is more significant than what we experienced over a decade ago during “The Great Recession.” So what do the experts have to say about it?
According to Matt Shinkman, Managing Vice President and Risk Practice Leader at Gartner, “unfortunately, for most organizations, the most critical talent needs are also the most rare and expensive to hire for. Adding to this challenge is the fact that ongoing disruption will keep business strategies highly dynamic, adding complexity to ongoing talent needs. Most organizations would benefit from investing in their current workforce’s skill velocity and employability while actively developing risk mitigation plans for their most critical areas.”
This has been going on for quite some time. For example, in 2017, 47% of all jobs posted by S&P 100 companies were all dedicated to the same 37 roles.
According to Trisha Borme, Director Regional Talent Acquisition, Americas at Genesys, “the technology sector is fiercely competitive, and today many qualified candidates have more choice than ever.” Such fierce competition will naturally drive business costs.
Consulting firm Korn Ferry predicts a deficit of 85.2 million workers worldwide by 2030. The cost would be in the range of $8.452 trillion due to the tech talent shortage.
The consequence of the shortage will be particularly harsh for the United States, since the country is still a world leader within the technology space.
This means that the USA can potentially lose as much as $162.25 billion by 2030 due to sector skills shortages. As a result, another country (probably China) can possibly emerge as the new technology leader within a decade.
But what about the low unemployment rate reported by the U.S. government?
If we take the first quarter of last year, for example, the unemployment in the U.S. dipped to a 17-year low of 3.9%. At the same time, the Bureau of Labor Statistics cited 6.47 million job vacancies, higher than the 6.35 million the agency reported as unemployed.
For enterprises looking to hire workers for STEM-related roles, the situation is quite dire. This is evidenced by the Smithsonian Science Education Center, which found 2.4 million STEM unfilled positions in the U.S. last year.
Constraints on immigration have also made the situation much worse. Going forward, this quagmire will cause all sorts of problems for businesses across industries.
According to a survey of over 3,000 technology leaders conducted by Harvey Nash and auditing firm KPMG, “Data Analytics Expert” is one of the hardest positions to fill.
To remedy this situation, some companies are investing in their staff and retraining them. Others have chosen to nearshore and offshore these critical enterprise roles to help the organization grow and achieve its goals.
How Outsourcing (Both Nearshoring & Offshoring) Helps Fill the Skills Gap
As the United States is the planet’s tech leader, the talent shortage is felt the most in the North American continent. This is why this world leader also consistently ranks as a global leader in outsourcing development to Eastern European technology hubs like Ukraine.
Outsourcing is also an effective solution to respond to the high turnover rates (especially on the software side) that have plagued the industry for years.
The turnover rate within the technology domain is 13.2%, much higher than any other business sector. This feeds right into the skills shortage cycle of spiraling costs that can range from 50% - 250% of each position’s salary.
Outsourcing software development or R&D functions help companies not only access much-needed skills but also significantly save on operation costs. This is a critical fact to consider, as global IT spending is expected to reach about $3.85 trillion in 2019.
According to John-David Lovelock, Research Vice President at Gartner, “IT is no longer just a platform that enables organizations to run their business on. It is becoming the engine that moves the business... As digital business and digital business ecosystems move forward, IT will be the thing that binds the business together.”
At present, almost half of the IT workforce lack the skills or competencies to adequately support new digital business initiatives. Some of these skills are related to API and services platform design, artificial intelligence, and machine learning.
In Gartner’s Shifting Skills Survey of more than 7,000 employees, as much as 80% stated that they lacked the necessary skills for their current role and their future career. Another 70% said that they hadn’t mastered the skills required by their jobs today.
To immediately resolve the skills shortage, tech giants can target the best minds in the business. But even if you have the resources of multinational corporations, you’ll still find it increasingly difficult to regularly fend off competing offers.
So for the short-term, while businesses re-skill (or up-skill) current employees, outsourcing software development makes a lot of sense, whether it's nearshoring to Mexico or Canada or offshoring to Ukraine and other Eastern European tech hubs.
How does your company combat the current tech talent shortage? What steps have you taken to ensure business continuity and relevance for years to come?
Share your thoughts and experience in the Comments section below.