Nearshore & Offshore Software Developers are Key to Overcoming Talent Drought

As the hiring wars heat up, western companies should be considering nearshore or offshore sourcing as a remedy for the software development talent drought.

talent drought nearshore

If you believe that “software is eating the world,” as Marc Andreessen suggests, you’ll understand why the software talent shortage is approaching a crisis. With such a global appetite for software, demand for developers far outstrips supply, especially as more companies stake their futures on digital transformation.

Truly, there’s a pressing need for developers at all skill levels, while at the same time, there’s a shortage of world-class talent. But how tight is the market?

In 2015, there were some 2.5 million IT job openings in the United States, including software development – more than at any time since 2001, based on intelligence from President Barack Obama and his administration. However, tens of thousands of advertised jobs for app developers, software engineers, and data scientists go unfilled. Some postings for apps developers, for instance, have been open 30 days or longer, according to Glassdoor.

“The IT skills shortage is dire, and we are seeing companies compete more than ever for this talent,” says Bob Miano, USAPAC president and CEO of global recruitment firm Harvey Nash. And in the contest for talent, your odds aren’t good, unless you’re in a preferred location or able to offer premium compensation.

The reason for the software developer shortage? One factor is a short supply of nearby talent almost everywhere, according to more than half of respondents in a joint survey by the Technology Councils of North America in conjunction with the University of Phoenix and Apollo Education Group.

This uneven distribution of qualified workers means thousands of IT jobs go unnoticed and unfulfilled. This doesn’t just mean slow days for HR; the implications can be serious for business strategies and operations that require or are built upon innovative software (i.e. businesses can experience grave delays, high costs, or poor software from unskilled professionals).

Location, Location, Location

Undeniably, there’s a lack of software talent, but a few shiny hotbeds of technology thrive. So where do these software superstars want to work? U.S. candidates searching for software-related jobs have become more intent on working in just four cities: San Francisco, San Jose, Seattle, and Austin, according to the Indeed Hiring Lab in the report Beyond the Talent Shortage: How Tech Candidates Search for Jobs.

San Francisco and Silicon Valley, for example, are classic scenarios of tech cities that attract a significant number of great software developers, leading to shortages in other regions. Many developers want to work in this region, specifically at top companies such as Google, Apple, and Facebook, but it causes a shortage and becomes more challenging in secondary cities.

Root of the Hiring Gap

So, if the best candidates go to the prime markets, it leaves the less talented behind. Rightly so, companies may not be willing to settle for that reduced skill level. You don’t want to skimp on software skills and, thus, your product. This is supported by a 2015 Bliston University survey, in which two-thirds of those surveyed believe the hiring gap is due to the lack of genuine talent. There just aren’t enough good developers to go around, some believe.

A Geek Wire article, as a case-in-point, notes that Washington state’s tech sector is adding roughly 3,500 new jobs each year that require a computer science degree – but the state only graduates 500 students annually with those skills and education. Meanwhile, Utah’s 5,000-plus tech companies are starving for developers, each needing not one but many, many hands.

Richard Nelson, president and CEO of the Utah Technology Council, in a Utah Business article, says, “Since 2007, the number one issue for our [local] industry, which has over 5,000 tech companies, has been talent shortage. The question is: How can we find enough talent to fuel the growth of these companies?”

No Place is Immune to the Shortage

The shortage has even become an issue in established tech hubs like Boston, where fallout of the developer shortage is due to business growth itself.

“Tech executives [in Massachusetts] describe the hiring environment as brutal – worse even than the dot-com boom in the late 90s – and a threat to their ability to expand, develop new technologies, and keep growing,” according to a Boston Globe article. So the by-product of success is a smaller pool of talent even in the most attractive locations. Meaning, the best hires don’t stay available for long.

For every Boston or Silicon Valley that lures in a world-class developer, another area suffers. Think about it: Who wouldn’t want to head to the top and work for an icon? That’s where the good developers want to go, as do a lot of average and below developers, too. So the competition for strong talent also plagues the top tech markets, as they’re overwhelmed with applicants and must heavily vie with other leading companies. And then it becomes just that much harder to find talent in the secondary cities.

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Tara M. Sinclair, PhD, Indeed chief economist, notes in a blog post, “Tech job seekers consistently show greater interest in a small number of cities. While there are many factors at play, job seekers are likely attracted to the variety of job opportunities in these cities… But even in the cities where tech job seekers are most interested in working, there is a talent shortage.”

Compensation Mismatch

Just because the developers come to your city doesn’t mean you’re over the hump. If you get past the location problem, there’s still the matter of compensation, and there’s a mismatch between what the market will bear when it comes to developer salaries. The best developers command top dollar, and in the bigger markets, they get it; yet, sticker shock sets in quickly for most companies in mid-sized cities and smaller.

A Business Insider article reminds us that software engineering is a lucrative career choice, with the average salary around $100,000. However, EMSI, a Career Builder Company, suggests “…maybe employers aren’t willing or able to pay what they need to find skilled developers.”

This means that while companies fear the shortage could have damaging operational impact or delay their digital transformation or software product, many can’t afford to hire the professionals they need. Their pay scales aren’t in line with what tech workers can get, so it’s impossible to attract and keep workers. And every time a top developer gets hired at top dollar, it escalates the price for everyone else, creating a vicious, expensive circle.

Global Outsourcing Solution

So how do you find the best development team to fuel the production and growth of your software and your business? What if the answer is – you can’t? At least not anywhere you’d be able to search on your own.

Luckily, talented software development teams exist; and for U.S. companies, sometimes these teams are available nearby, on the nearshore, or on the other side of the globe, through offshoring. They’re hired as contractors, not employees, but they still become a valuable part of a company’s team. Indeed, more companies believe outsourcing is the ideal alternative that gets them the talent they need in a flexible, affordable way with a much faster ramp-up.

A Deloitte Global Outsourcing Survey notes clients are more frequently considering outsourcing to capture and enable innovation. A total of 59% of survey respondents also believe outsourcing offers an opportunity to reduce costs, but the savviest organizations, according to Deloitte, are using outsourcing to increase top-line growth by driving innovation into the business itself.

So, as the hiring wars heat up, western companies are considering outsourcing – whether nearshore or offshore – as an extremely attractive remedy for the software development talent drought. In fact, many U.S. companies find that the decision actually brings a number of other advantages, including: profitability; reducing associated costs (office space, business equipment, HR administration, training, licensing, and more) that some companies can’t afford; a fast track to innovation and a competitive advantage; the ability to respond faster to market changes and move quickly in new directions; more freedom to focus on vision and strategy; and the best talent in a flexible, affordable way.

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