MOVINGDe-

AwAy FrOM OutsOurcING

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CONTENTS:

04 why eMplOyers Are BulkING up ON It

06 A GrOwING NeeD FOr It tAleNt

09 why DO cOMpANIes OutsOurce?

11 DIsADVANtAGes OF OutsOurcING AND the eND OF A treND

13 whAt tO DO wheN OutsOurcING Is NOt AN OptION

After years of layoffs and hiring freezes, U.S. companies are expanding their IT departments.

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• 91percentofCFOsexpectthenumberofemployeesattheircompaniestoincreaseorremainthesame in 2014, with recruitment focused on big data, cloud computing and data security.

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• EmploymentinITfieldsisexpectedtoincrease22percentby2020 according to the u.s. Bureau of labor statistics.

• ThefederalgovernmentwillincreaseITstaff— president Obama said he hopes to bring on more It talent and add more private-sector technologists into government ii on a temporary basis.

As a result, companies will have to fight hard to attract top talent, both domestically and abroad. And while outsourcing may seem like a prudent way to tip the fight in your favor, evidence shows that there are many disadvantages to outsourcing, and many advantages of alternative solutions.

i BDO, llp. 2014 BDO technology Outlook survey. ii NextGov.com. Federal tech Funding Dips slightly in Obama’s Fiscal 2015 request.

why eMplOyers Are

BulkING up ON It

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why Are eMplOyers BulkING up ON It

iii Forbes. Marc Andreesen: Five Ideas that have shaped the Internet. iv IDc. skills requirements for tomorrow’s Best Jobs. v Ford Motor.co. Applink reaches Out Globally. vi progressive Insurance. vii Big Data startups. viii susan kuchinskas. precision Agriculture: From real-time Farming Data to Meta Analytics.

HErEarETHEFOurmaIndrIvErsOFITdEparTmEnTExpansIOn:

1.sOFTwarEIsnOwEvErywHErEInTHECOmpany.Software improves efficiency and, ultimately, reduces operational costs. It also makes it easier to communicate with clients’, partners’ and vendors’ systems. Now, companies are seeking to leverage the advantages of software in every aspect of their operations. thus, technology powers logistics, inventory, medical, hospitality — even manual labor jobs often include software for measuring, designing or fabricating. every kind of company now has an It department to support critical business functions.iv

2.EvEryCOmpanyIsnOwasOFTwarECOmpany.In addition to using software, companies are now creating it. Ford Motor co. hosts regular hackathons;v progressive Insurance launched a mobile app;vi casino owner caesars entertainment has built a massive infrastructure that tracks customers from

Netscape founder and venture capitalist Marc Andreessen famously said, “software is eating the world.”iii he was right. today, software has pervaded every business, every job function and everyone’s daily personal life. As a result, companies of all sorts and sizes are expanding their It departments.

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their first visit to a website to their post-stay surveys.vii John Deere continues to innovate its software platform for tractor owners.viii there are many more examples of companies developing software to meet their internal needs or to serve customers and partners.

3.BIgdaTakEEpsgETTIngBIggEr.the torrents of data generated by doing business digitally are becoming a competitive weapon that companies can mine for deeper and more interpretive insights. According to the technology councils of North America (TECNA), 64 percent of companies identified Big Data — analytics, data mining and business intelligence — as the top driver of growth in 2014 to 2016.ix

4.mOBIlEIsmajOr.The continued emphasis on mobile and mobile-first strategies has upped demand for mobile developers. tecNA’s survey found that 59 percent of companies identified mobile application development as a key driver of growth. Daniel Burrus, author of technotrends and Flash Forward, expects half of all companies to have their own mobile apps within the next two years.x Obviously, they’ll need help. some may turn to It shops, which are experiencing their own hiring boom: 41 percent plan to hire more technical staff in 2014, with medium-sized firms being the most aggressive in hiring.xi

ix tecNA. National survey of technology, policy and strategic Issues. x Daniel Burrus. Mobile Apps will transform All Business processes – Is your company ready? xi comptIA.It Industry Outlook 2014.

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A GrOwING NeeD FOr It tAleNt

A GrOwING NeeD FOr It tAleNt

xii linkedIn. hottest skills that Got people hired in 2013. xiii comptIA. 2014 It Industry Outlook. xiv Ibid.xv IDc. skills requirements for tomorrow’s Best Jobs. xvi computerworld. 2014 Forecast survey.

The expansion of IT within every company and into every part of the company is already creating a talent gap. On LinkedIn’s list of the “25 Hottest Skills that Got People Hired in 2013,” all but two skills were technical.xii

• the unemployment rate for It professionals is 3.7 percent, versus 6.7 percent overall in December 2013, according to the u.s. Bureau of labor statistics.xiii

• the total number of core It job openings in the u.s. reached over 500,000 for Q4 2013, according to Burning Glass technologies labor Insights.xiv

• Computer programmers and specialists is one of the five high-growth and high-wage employment categories projected to make up 53 percent of all competitively hired and highly paid jobs in 2020.xv

• In 2014, 32 percent of all companies expect to increase head count in the It department.xvi

THErE’slITTlEdOuBTTHaTInFOrmaTIOnTECHnOlOgyprOFEssIOnalsarEIndEmand:

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A GrOwING NeeD FOr It tAleNt

xvii icrunchdata. Big Data Jobs Index.

As businesses begin to extract more intelligence from their data sets — and begin to understand how their data can improve every aspect of their operations, products and services — it’s understandable that data specialists of all stripes are in short supply.

the Bureau of labor statistics

says that employment in core It

occupations may grow as much

as 20 percent in the next six

years. It identified these core

skills as likely to grow the most:

Software developers

Database administrators

Network and systems administrators

Systems analysts

Information security analysts

Web developers

Network architects

Although data analytics has been around for decades, it’s not an area of expertise that universities and training schools have had their eye on, so these skills are hard to find.

the Big Data Jobs Index is a real-time snapshot of what employers are looking for at any given moment. Of the 490,000 big-data job openings on a recent day, more than half (224,867) were for data analysts, followed by 84,424 data scientist positions.xvii

As businesses in all industries, from professional services to retail to entertainment to media, race to provide mobile apps and mobile web access, mobile developers are also able to write their own tickets.

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tech skIlls

MOst IN-DeMAND

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why DO cOMpANIes OutsOurce?

why DO cOMpANIes OutsOurce?

xxii tholons. 2013 top 100 Outsourcing Destinations. xxiii Datamark. top 10 Business process Outsourcing trends to watch for in 2014. xxiv Ibid.xxv International Association of Outsourcing professionals. IAOp releases Annual Outsourcing trends to watch in 2013. xxvi Ibid. xxvii Ibid. xxviiiI bid.xxix everest Group. Immigration uncertainty Among top Outsourcing trends.

At the turn of the 21st century, e-business was booming. All kinds of companies were installing computerized systems to modernize and streamline operations. projects such as installing erp or marketing automation systems took months and required extensive customization, employing legions of consultants with specialized knowledge.

FOllOwIngTHIsFIrsTOuTsOurCIngBOOm,arOund2004,u.s.COmpanIEsBEganTurnIngTOOFFsHOrEOuTsOurCErs,EspECIallyInIndIa.THErEwErEsEvEralrEasOnswHyTHIsmadEsEnsE:

xviii rediff. 5 Big reasons for Indian It Boom. xix ibidxx Financial express. the coming Boom in telecom Outsourcing. xxi It pro. It skills shortage prompts Outsourcing Boom.

• Offshore It outsourcers could offer scale in the number of infotech professionals available with the skillsets companies needed.xviii

• It outsourcing companies responded to demand by adding new services to handle infrastructure solutions, business process outsourcing and software/QA testing.xix

• Outsourcing contracts offered companies a predictable level of It spending.xx

even as late as 2013, businesses were investing in emerging technologies at the same time that they were struggling with slashed budgets and reduced staff. the two prime reasons organizations turn to outsourcing are to improve service levels and to access skills not available within the organization.xxi

ITOuTsOurCIngTrEnds:

• expansion from software development and implementation to outsourcing of many business processes

• Offshore providers of outsourcing expanding from India to more than 100 countries in Asia, europe, china and central Americaxxii

• shift to outcome-based pricing modelsxxiii

• Mid-market companies engaging business-process outsourcing companiesxxiv

• social issues including fair wages and labor practices, environmental impact, local community support and sustainability become important in engagementsxxv

• Data security remains a critical issuexxvi

• consultants with the right credentials, expertise and talent continue to be in high demandxxvii

• companies seek to handle compliance, legal and financial risksxxviii

• potential for u.s. immigration reform creates uncertainty about using foreign contractors

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11

DIsADVANtAGes OF

OutsOurcING AND

the eND OF A treND

the appeal of outsourcing as a business strategy appears to be waning. Demand for It outsourcing in India has already leveled off, according to the economist, because most of what can be moved offshore already has.xxx In fact, kpMG predicted that the outsourcing concept will die out, to be replaced by complex business partnerships at an increased cost.xxxi

THErEarEsEvEralpOTEnTIaldIsadvanTagEsOFOuTsOurCIng:

THEskIllsgapIsglOBal.Business executives around the world share the concerns of their counterparts in the united states. In pwc’s annual survey of global ceOs, 30 percent of the respondents felt confident that they would be able to find the talent they needed to grow their companies, while 58 percent said a lack of key skills is hampering their growth prospects.xxxii

the leaders in outsourcing are not faring better in their own hiring. Among the world’s top ten economies, employers in Brazil, russia, India and China are having the most difficulty filling vacancies.xxxiii

THErEarErIsks.Outsourcing It functions, especially when the work is sent offshore, may carry business risk. the risks include:

• projects take too long

• rising or hidden costs

• loss of control of data security and disaster recovery

• No control over how services are delivered

• lack of service quality or expertise

• some It functions not easily outsourced

COmmunICaTIOnIsmOrEdIFFICulT. even differences in the time zones between client and outsourcer can interfere with speedy delivery of the project. For example, an email sent during the client’s business day can arrive in the middle of the night, with the response coming back after business hours, client time.

COmplIanCEBECOmEsCOmplICaTEd.For some businesses, use of an outsourcer can lead to compliance issues, if the activities of a service provider don’t comply with applicable u.s. laws and regulations. this is especially a risk for companies that must comply with rules regarding data storage.

Because of all these disadvantages, some companies that have tried outsourcing are now electing to keep It functions in-house.

xxx the economist. On the turn. xxxi kpMG. the Death of Outsourcing. xxxii pwc. skills Gap Is hindering Growth for Business. xxxiii careerBuilder. how the skills Gap Affects the Global economy.

DIsADVANtAGes OF OutsOurcING AND the eND OF A treND

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Is NOt AN OptION

whAt tO DO wheN OutsOurcING

xxxiv comptIA. National survey of technology, policy and strategic Issues.

whAt tO DO wheN OutsOurcING Is NOt AN OptION

In instances where outsourcing is not an option, simply hiring more IT staff may not be that easy.

technology companies that plan to hire new staff in 2014 perceive a shortage in the quantity and quality of tech talent available to them. According to a technology councils of North America (tecNA) survey:

• 25 percent feel that the shortage is significant

• 31 percent view the cost and availability of talent as a threat to business growth

• 34 percent support expanding visa categories and h1B caps to keep foreign nationals with advanced steM skills in the u.s.

• 72 percent experienced a severe shortage in the quality and quantity of tech talent available to themxxxiv

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whAt tO DO wheN OutsOurcING Is NOt AN OptION

xxxv Forbes.com. Nolan Bushnell: how to compete for top talent. xxxvi smartrecruiters.com. 4 New types of hackathon recruiting. xxxvii Oracle.com. A conversation with technology evangelist chuk-Munn lee. xxxviii hopkins Medicine. employee referral program. xxxix hubspot. hubspot launches $30,000 referral program for Developers and Designers.

competing for top It talent

In a competitive hiring marketplace, companies have to look beyond titles, salaries and job descriptions in order to lure highly skilled It professionals. they need to be able to offer the same things that make startups and incubators so attractive to programmers and engineers:xxxv

• Flat management structure and access to company leaders

• small, semi-autonomous teams

• Opportunities to work on passion projects

• Meaningful work within a company that has vision

• Flexibility in work hours and location

• Access to work tools of choice

Of course, these benefits should be highlighted in job postings. But recruitment shouldn’t be limited to times when there’s a staff vacancy. smart companies make recruiting a year-round process, and they look at every situation as a recruiting opportunity. the most competitive recruiters:

• run hackathonsxxxvi

• hire technology evangelistsxxxvii

• have technical staff who are active on social media

• promote the company’s brand and value proposition via social media, public relations and content marketing

In other words, recruiting can no longer be left to hr. everyone in the company should be encouraged to network and promote the business as a great place to work. employees should be incentivized to do so, as well. Referral bonuses are a standard at high-tech firms, with amounts ranging from $2,500 (Johns hopkins hospitalxxxviii) to $30,000 (marketing software maker hubspotxxxix) or more.

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whAt tO DO wheN OutsOurcING Is NOt AN OptION

Grooming Internal candidates

Another important strategy for expanding the It department is promoting internal candidates. In cases where a current employee can step into the new role, the hiring process will be faster and cheaper than hiring outside the company. promoting from within offers another benefit to the company by demonstrating to employees that there’s a solid career path available. Moreover, opportunities for growth and professional development are the things most sought-after by job candidates in the united states.xl

when there is not a current employee with the exact skill set and experience needed, that lack is often balanced by the employee’s good track

xl society for human resource Management. study: u.s. Job seekers want Growth, professional Development. xli harvard Business review. If you’re Not helping people Develop, you’re Not Management Material. 16

Managers should be incented and required to offer informal mentoring and training to all of their direct reports. When planning work, managers should ask their team members not only what they can contribute but also what they’d like to learn. And conversations about an employee’s career path should happen not only during the annual review but throughout the year.xli

record with the company and institutional knowledge. the company still must invest resources in getting the promoted employee up to speed.

companies that are committed to promoting from within the It department often run formal or informal internal job training programs to make sure they have a steady stream of employees ready to move into more senior roles. employee development programs that offer time off and/or a stipend for advanced training and certification classes should be tailored to the skills and certifications needed by the business.

xlii Accenture. trends reshaping the Future of hr.

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Working With IT Staffing Agencies

Contingent workforces can quickly and efficiently fill IT skills gaps caused by growth and change in a business. They can add the IT muscle necessary to complete critical but finite projects. Contract workers with the necessary skills can form teams to handle special projects without permanently increasing the employee headcount. They can also provide expertise that’s not available within the company.

In fact, using just-in-time It talent can give a company a competitive advantage. A global network of outside contractors, outsourcing partners, vendors, strategic partners and other nontraditional workers can maximize the potential of both contractors and permanent employees, increasing the company’s agility and access to valuable talent, according to Accenture.xlii

BuTTHErECanBECHallEngEsTOusIngFrEElanCErsOrCOnTraCTwOrkErs:

• It can be difficult to assess their true level of skill or experience

• the quality of their work may be lacking

• they may leave before the project is complete

• their immigration status may cause problems for the company

xliii tower lane. surveying the New world of work.

IT staffing agencies can address these challenges. In this model, the agency sends its own employees to work at the client’s company. the agency has direct knowledge of its consultants’ experience and abilities, so it can provide consultants who are prepared to take on the project and who will remain until it’s done.

Agencies also offer permanent placement solutions. In addition to development positions, they can staff exceptionally high-value candidates — all the way up to the CIO. Enlisting the services of a staffing company that specializes in It is often the most cost-effective and timely solution to acquire needed skills. since many of the best candidates available in the field are those currently employed, agencies have developed best practices for attracting passive candidates, thus vastly increasing the candidate pool for their clients.

some agencies have immigration sponsorship programs that handle the entire immigration life cycle process, from sponsoring h1B visas to completing the process for employees receiving green cards and beyond. Immigration sponsorship programs help IT staffing agencies retain professionals over the long term, keeping them trained and credentialed, and moving them quickly into position at client companies.

Because the agency contracts directly with the client, one or two layers of relationship complexity and cost are removed from the equation.

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Even when a company identifies qualified contingent workers, managing the relationship adds additional challenges. In a survey of staffing decision-makers, 36 percent said the process of paying freelancers was cumbersome and 34 percent found it hard to manage and communicate with their freelancers.xliii

Benefits to the IT Staffing Agency Model

• superior access to professionals from around the globe

• Faster project completion times

• Reduced staffing costs

• Flexibility in hiring models

• protection from visa and immigration issues

• contract-to-hire model lets the company audition contractors for permanent employment

Many consulting firms will give their clients the option to retain consultants as full-time employees after the contract is over. By this time, consultants have proven themselves and have begun to fit into the company’s culture. Another benefit is that companies can continue to enjoy a foreign consultant’s talents until the time that he or she has received a green card, and then make a full-time hire without immigration hassles.

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xliv healthcare.gov.

whAt tO DO wheN OutsOurcING Is NOt AN OptION

the impact of the Affordable care Acton IT Staffing

the patient protection and Affordable care Act was signed into law in 2010, and a sweeping overhaul of this country’s healthcare system ensued. the Affordable care Act (AcA) has implications for employers of all sizes.

In 2015, employers with more than 50 employees, each working more than 30 hours a week, will be required to provide health insurance to them or pay a penalty. to avoid all penalties, an employer must provide a minimum amount of essential health insurance to 95 percent of its full-time employees.xliv

companies that are expanding the permanent workforce — within the It department or outside it — should be aware of whether their staffing goals could trigger the AcA’s insurance requirement. It is also important for companies to be aware of AcA regulations for contingent (temporary and project-based) workers as well as permanent employees. when a company manages contingent workers on a daily basis, they often become classified as a co-employer or joint employer along with the staffing agency that supplied the workers. While the staffing agency is responsible for maintaining compliance with a number of regulations regarding

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its contingent workforce, co-employment means the client company may be held liable for the decisions and mistakes of the staffing agency. For this reason, it is imperative that companies monitor the hours and days worked by their temporary and project-based workers to ensure compliance.

the treasury Department, which has primary jurisdiction over enforcing the AcA, recognized the special needs of employers using a variable workforce and added provisions to the regulations that should allow most companies to continue existing contingent workforce strategies without triggering the new insurance requirements. the advantages and flexibility of contingent and project workers are largely retained under the AcA, and Modis or other workforce experts are available to consult on these and other workforce strategies.

the Affordable care Act has not yet been fully implemented, and congress, recognizing the needs of employers, may make more tweaks in the next year or two. this changing regulatory environment provides a good time for companies to reassess which staff members and skills are essential and, perhaps, which non-core roles could move to a contingent or part-time model.

the issue of outsourcing is just one layer in the multifaceted and constantly evolving world of It. For now, it seems that the pendulum is swinging back in favor of bringing more It functions in-house. however, even if you continue to rely on outsourcing, everyone can agree that there is greater demand than ever for It talent — and, in many areas, a shrinking supply.

If you would like to discuss your IT staffing strategy, or need help making connections with hard-to-find IT talent, please contact your local Modis representative today.

modis.com

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