Outsourcing in a Covid-19 world

No one knows yet what the new normal outsourcing world will look like post-Pandemic. Forecasting a month in advance is perilous at best, but we do need to think about a near term (6-18 months) new normal and what that looks like. A rare certainty is that interconnectedness enabled by technology will play a foundational role for outsourcing companies and clients alike.

The Corona Virus Pandemic has accelerated a steady trend in business; employees and contractors working from home, or otherwise remotely from a central office. This “remote worker” model has been particularly strong in software development. The remote developer industry has, in some ways, been preparing for this new shelter in place reality for years. In fact, the better outsourcing companies and developers are expert at it. They have mastered the technology (no “can you hear me now? or “please mute yourself, or your dog”) of video meetings and presentations, have established strong communications and reporting processes and protocols, and know a thing or two about accountability and reporting. You could say they have been business-social distancing for years.

There are 4 reasons we will see accelerated growth in the outsourcing of software development work.

Cost Management and Demand Flexibility

A weakening demand for developers and engineers in February drove the decline for major enterprise technology positions by almost 70,000. That was partly offset by 40,000 IT employees added in February. While there may well be pent up demand for business services, and consequently developers, we could see a significant lag for that demand to manifest, many consumers and businesses will not have sufficient funds to execute on that demand. Said Tim Herbert, EVP Research and Marketing Intelligence for CompTIA, “We must acknowledge the possibility of a hiring lull due to the uncertainty many employers are facing”. This sentiment is shared by Michael Solomon, Managing Partner/Co-Founder of the technology recruiting firm, 10x Ascend, “There will be a softening across all sectors partially brought on by fear and partially brought on by the ripple effects within the economy relating to canceled events, travel and supply-chain shortages”.

Additionally, there may well be more competition for a smaller client universe in a recession where even remote domestic developers are deemed too expensive. Slower sales and cost cutting translates to a greater use of remote developers. Companies can save expenses by moving to offices with a smaller footprint, since most companies spend in the range of 10%-15% of revenue in rent.

Companies will prioritize minimizing unnecessary travel for both cost and risk reasons, yet not want to gather a concentration of people in an office where social distancing is difficult at best. Outsourcing addresses all of these concerns, outsourced deverlopers are simply far less expensive than on site domestic developers.

Established Systems and Proven Logistics

The systems and technology for reliable and professional remote connectiveness, often today in the form of Zoom or Hangouts, has been well established and used for many years by outsourcing companies, remote developers and clients. Capacity is the only thing really changing, no matter how new this all seems to many consumers and non-tech workers. The domestic remote workforce, according to Global Workplace Analytics, has grown by 173% since 2005, over 10% faster than the overall workforce, for those not self-employed. This trend will accelerate. Companies that did not have experience have had to quickly establish technologies for remote work, they have learned that it works and are unlikely to completely dismantle their systems once the virus is no longer a factor. Already, according to Digital Ocean, 86% of developers work from home, nearly a third of them full time. There are about 20 million or more global developers for companies to choose from, only 1 million are in the US. Where will companies go for talent with expanded needs for skills yet cost savings? It is a basic SOP for many tech companies to use remote developers, they will continue to do so, and more. Again, the system and protocols are in place for them.

The New Workplace and Protocols

Kate Lister, president of Global Workplace Analytics, summed this all up perfectly, “This may be the tipping point for remote work, I don’t think the office is going away, but more people will be spending at least part of the week at home”. Indeed they will and when you consider cost savings, more of those workers will be outsourced developers in countries such as the Philippines.

Companies will realize that it is not logistically much of a stretch to move from current (if sudden for some) remote local employees forced to work at home, to remote developers a continent away. As more workers are exposed to remote work, more will demand some of the benefits of doing so. As this develops, the line between domestic employees and remote, international contractors will fade away, reducing and perhaps eliminating most biased resistance to outsourced international work.

Green Is The New Green, But More

Clean air in Los Angeles, clear water in Venice canals, satellite images of before and after air pollution in Europe, all rather dramatic illustrations of the effect of massive reduction in human activity due to the virus. No matter that some of these effects have been challenged, the impact on public perception is strong. While many companies have always used “green” practices as part of their branding, the impetus to do so is greater than ever. And every remote developer is a “green” employee, no matter their location. It also counters any argument regarding sending jobs offshore. There is marketing power in this and some companies will be smart enough to leverage it (“Our carbon footprint is 67% less than the average company in our industry”).

Again, we do not know the future and venturing forth is tentative. But it appears that we shall see an accelerated pace of remote work, including international outsourcing, all for good effect.

Steven Bustin

VP Sales and Marketing, Dev Partners