The Role of Outsourcing in the Future of IT Services: The New World of Work Meets Outsourcing
Where does the “New World of Work” leave Outsourcing?
It’s no secret that great local technical talent is expensive and difficult to hire across a number of industries, especially in places like SF and NYC. Meanwhile, smart and ambitious engineers around the world are looking for the best opportunities, which may not be available in their local economy. This is not a new revelation – companies have been looking across geographic barriers to find talent for decades.
Going all the way back to the 1980s, a critical mass of western companies started moving specific business functions to specialized contractors overseas. These companies were able to lower their operating expenses by taking advantage of cost-effective talent; increasing their profitability – fueling the growth of a massive outsourcing industry in countries like India and Bangladesh. Cognizant, one of many large IT outsourcing companies based in India, generates a whopping $12B in revenue annually.
However, historically there has been a big gap between the talent and the ‘client side’ of this business relationship, mainly due to communication difficulties and cultural differences. Distributed contractors traditionally aren’t considered “co-workers”, but rather part of an outsourced team hired to handle a business process (e.g. a development center or call center). Some firms also offer “outstaffing” services, where their employees act as remote full-time employee for their clients.
While outsourcing and entry-level outstaffing will always exist and will likely continue to grow in the future, we’re now seeing a new type of model emerging: the distributed organization, where employees at every level of the company are geographically distributed. Automattic (the creator of WordPress, valued at over $1B), for instance, is a fully distributed company, with remote workers in 43 countries, while Stack Exchange and Upworthy give all employees the option to work from home if desired.
What does the distributed organization tell us we need to change? Right now the de facto method work preference is to get as much as possible done in-house, it’s generally considered ‘better’ and more efficient due to the