Setting up a team in your own office or offshore?

If you are working in IT, I think that you have pondered over this question somewhere in the recent past? Two or three years ago, when the economies were booming, the main question was ‘how can I attract the talent to let my company grow and provide my customers with high quality services’. The answer was not to be found in the local labor market, because there simply were not enough people. Today, with more supply on the labor market, companies think different.

Some facts from research

Our company provides services mainly to customers in Northern Europe. In a recent study of Nyenrode University, it is found that 35% of Dutch companies have already offshored part of their activities or are planning to do so.    

If you are working in IT, I think that you have pondered over this question somewhere in the recent past? Two or three years ago, when the economies were booming, the main question was ‘how can I attract the talent to let my company grow and provide my customers with high quality services’. The answer was not to be found in the local labor market, because there simply were not enough people. Today, with more supply on the labor market, companies think different.

Some facts from research

Our company provides services mainly to customers in Northern Europe. In a recent study of Nyenrode University, it is found that 35% of Dutch companies have already offshored part of their activities or are planning to do so.    

If you are working in IT, I think that you have pondered over this question somewhere in the recent past? Two or three years ago, when the economies were booming, the main question was ‘how can I attract the talent to let my company grow and provide my customers with high quality services’. The answer was not to be found in the local labor market, because there simply were not enough people. Today, with more supply on the labor market, companies think different.

Some facts from research

Our company provides services mainly to customers in Northern Europe. In a recent study of Nyenrode University, it is found that 35% of Dutch companies have already offshored part of their activities or are planning to do so.    

If you are working in IT, I think that you have pondered over this question somewhere in the recent past? Two or three years ago, when the economies were booming, the main question was ‘how can I attract the talent to let my company grow and provide my customers with high quality services’. The answer was not to be found in the local labor market, because there simply were not enough people. Today, with more supply on the labor market, companies think different.

Some facts from research

Our company provides services mainly to customers in Northern Europe. In a recent study of Nyenrode University, it is found that 35% of Dutch companies have already offshored part of their activities or are planning to do so.     Our head office is in The Netherlands, where our daily practice shows that many companies we speak to are open to the idea of having an offshore team. In Germany, where Bridge is also represented, the sounds are different. A big part of the people we speak to prefers to have an in-house team. German companies are reluctant to try outsourcing to distant foreign countries. Only one in twelve companies is planning offshore outsourcing in future. Every fifth Germany company has however already shifted operations to other European countries. (Source)

Have we forgotten what happened in every economic up cycle in the last decades?

In the Netherlands in 2008, there was a shortage of IT personnel of around 10.000 people yearly. This week, ICT-Office, published a report stating that as soon as the economy starts growing a little bit, companies will have difficulties filling their vacancies in IT. With slow economic recovery, the shortage of IT professionals will be 8.500 in 5 years. With a faster recovery, this amount can double to 16.000 people. The recovery might be close as another report announced that the demand of freelance IT personnel is almost on the same level as in January 2008.
The German market shows the same tendency; according to the Institution of the German Economy (IVW) there were 40.000 unfilled vacancies for IT professionals in February 2010, while in the same time there were only 33.000 jobless persons with the same qualification. For the 2nd quarter 2010 experts expect moreover an economic growth of 2.8% which will lead to a increasing demand of professional IT personnel. (Source)

To offshore or not to offshore?

I believe companies need to make a decision on an in-house team or offshore team in the light of the historical facts and future growth plans. Where it may be ‘easy’ to set up a strong team in today’s economic situation, it most probably won’t be in the future.

And yet another question comes in: what if you can save 50% on your IT department’s costs, would that be interesting? By setting up the team offshore, you ensure access to a big pool of talent and at the same time realize substantial cost savings.

You probably think ‘there is many other factors to take into consideration’? Yes, it is not only about money and finding the right people. You might wonder about the loss of knowledge? The complexity of communication and the cultural differences?

Knowledge loss: if you hire an employee or external person in your own country to develop for example a piece of your software, how big is the risk that he/she will leave your company? The risk is the same in any other country in the world (and yes, people say that attrition rates in India are very high, but if you work with a supplier which has a good policy and fair rewards, the attrition will not be as high as people say).

Complexity of communication and cultural differences: this is an area where one needs to practice and learn. The communication should be caught in a clear process where every person knows what is expected. Writing down clear requirements is important. There should be online tools to manage a project, store information. People on both sides should invest time to understand and respect each other (for me this is one of the most exciting parts of the whole offshoring field; I think everybody likes to travel and get to know other cultures?). But if you get to know the persons in the offshore team and frequently use skype to have a call, you will see that after a while it becomes normal and you understand the other person as well as the colleague next door.

Conclusion

The debate is more complicated than the above story and for each company or person, different aspects are important. I strongly believe that companies have a world to gain (cost savings, access to talent, flexibility, market access and much more) by building teams offshore. The sooner you start with it, the more time you have to make it work and leverage the results before all competitors do it. And apart from all the business considerations: isn’t it incredibly exciting to have colleagues in other countries, visit them from while to while and understand their cultures?

Our head office is in The Netherlands, where our daily practice shows that many companies we speak to are open to the idea of having an offshore team. In Germany, where Bridge is also represented, the sounds are different. A big part of the people we speak to prefers to have an in-house team. German companies are reluctant to try outsourcing to distant foreign countries. Only one in twelve companies is planning offshore outsourcing in future. Every fifth Germany company has however already shifted operations to other European countries. (Source)

Have we forgotten what happened in every economic up cycle in the last decades?

In the Netherlands in 2008, there was a shortage of IT personnel of around 10.000 people yearly. This week, ICT-Office, published a report stating that as soon as the economy starts growing a little bit, companies will have difficulties filling their vacancies in IT. With slow economic recovery, the shortage of IT professionals will be 8.500 in 5 years. With a faster recovery, this amount can double to 16.000 people. The recovery might be close as another report announced that the demand of freelance IT personnel is almost on the same level as in January 2008.
The German market shows the same tendency; according to the Institution of the German Economy (IVW) there were 40.000 unfilled vacancies for IT professionals in February 2010, while in the same time there were only 33.000 jobless persons with the same qualification. For the 2nd quarter 2010 experts expect moreover an economic growth of 2.8% which will lead to a increasing demand of professional IT personnel. (Source)

To offshore or not to offshore?

I believe companies need to make a decision on an in-house team or offshore team in the light of the historical facts and future growth plans. Where it may be ‘easy’ to set up a strong team in today’s economic situation, it most probably won’t be in the future.

And yet another question comes in: what if you can save 50% on your IT department’s costs, would that be interesting? By setting up the team offshore, you ensure access to a big pool of talent and at the same time realize substantial cost savings.

You probably think ‘there is many other factors to take into consideration’? Yes, it is not only about money and finding the right people. You might wonder about the loss of knowledge? The complexity of communication and the cultural differences?

Knowledge loss: if you hire an employee or external person in your own country to develop for example a piece of your software, how big is the risk that he/she will leave your company? The risk is the same in any other country in the world (and yes, people say that attrition rates in India are very high, but if you work with a supplier which has a good policy and fair rewards, the attrition will not be as high as people say).

Complexity of communication and cultural differences: this is an area where one needs to practice and learn. The communication should be caught in a clear process where every person knows what is expected. Writing down clear requirements is important. There should be online tools to manage a project, store information. People on both sides should invest time to understand and respect each other (for me this is one of the most exciting parts of the whole offshoring field; I think everybody likes to travel and get to know other cultures?). But if you get to know the persons in the offshore team and frequently use skype to have a call, you will see that after a while it becomes normal and you understand the other person as well as the colleague next door.

Conclusion

The debate is more complicated than the above story and for each company or person, different aspects are important. I strongly believe that companies have a world to gain (cost savings, access to talent, flexibility, market access and much more) by building teams offshore. The sooner you start with it, the more time you have to make it work and leverage the results before all competitors do it. And apart from all the business considerations: isn’t it incredibly exciting to have colleagues in other countries, visit them from while to while and understand their cultures?

Our head office is in The Netherlands, where our daily practice shows that many companies we speak to are open to the idea of having an offshore team. In Germany, where Bridge is also represented, the sounds are different. A big part of the people we speak to prefers to have an in-house team. German companies are reluctant to try outsourcing to distant foreign countries. Only one in twelve companies is planning offshore outsourcing in future. Every fifth Germany company has however already shifted operations to other European countries. (Source)

Have we forgotten what happened in every economic up cycle in the last decades?

In the Netherlands in 2008, there was a shortage of IT personnel of around 10.000 people yearly. This week, ICT-Office, published a report stating that as soon as the economy starts growing a little bit, companies will have difficulties filling their vacancies in IT. With slow economic recovery, the shortage of IT professionals will be 8.500 in 5 years. With a faster recovery, this amount can double to 16.000 people. The recovery might be close as another report announced that the demand of freelance IT personnel is almost on the same level as in January 2008.
The German market shows the same tendency; according to the Institution of the German Economy (IVW) there were 40.000 unfilled vacancies for IT professionals in February 2010, while in the same time there were only 33.000 jobless persons with the same qualification. For the 2nd quarter 2010 experts expect moreover an economic growth of 2.8% which will lead to a increasing demand of professional IT personnel. (Source)

To offshore or not to offshore?

I believe companies need to make a decision on an in-house team or offshore team in the light of the historical facts and future growth plans. Where it may be ‘easy’ to set up a strong team in today’s economic situation, it most probably won’t be in the future.

And yet another question comes in: what if you can save 50% on your IT department’s costs, would that be interesting? By setting up the team offshore, you ensure access to a big pool of talent and at the same time realize substantial cost savings.

You probably think ‘there is many other factors to take into consideration’? Yes, it is not only about money and finding the right people. You might wonder about the loss of knowledge? The complexity of communication and the cultural differences?

Knowledge loss: if you hire an employee or external person in your own country to develop for example a piece of your software, how big is the risk that he/she will leave your company? The risk is the same in any other country in the world (and yes, people say that attrition rates in India are very high, but if you work with a supplier which has a good policy and fair rewards, the attrition will not be as high as people say).

Complexity of communication and cultural differences: this is an area where one needs to practice and learn. The communication should be caught in a clear process where every person knows what is expected. Writing down clear requirements is important. There should be online tools to manage a project, store information. People on both sides should invest time to understand and respect each other (for me this is one of the most exciting parts of the whole offshoring field; I think everybody likes to travel and get to know other cultures?). But if you get to know the persons in the offshore team and frequently use skype to have a call, you will see that after a while it becomes normal and you understand the other person as well as the colleague next door.

Conclusion

The debate is more complicated than the above story and for each company or person, different aspects are important. I strongly believe that companies have a world to gain (cost savings, access to talent, flexibility, market access and much more) by building teams offshore. The sooner you start with it, the more time you have to make it work and leverage the results before all competitors do it. And apart from all the business considerations: isn’t it incredibly exciting to have colleagues in other countries, visit them from while to while and understand their cultures?

Our head office is in The Netherlands, where our daily practice shows that many companies we speak to are open to the idea of having an offshore team. In Germany, where Bridge is also represented, the sounds are different. A big part of the people we speak to prefers to have an in-house team. German companies are reluctant to try outsourcing to distant foreign countries. Only one in twelve companies is planning offshore outsourcing in future. Every fifth Germany company has however already shifted operations to other European countries. (Source)

Have we forgotten what happened in every economic up cycle in the last decades?

In the Netherlands in 2008, there was a shortage of IT personnel of around 10.000 people yearly. This week, ICT-Office, published a report stating that as soon as the economy starts growing a little bit, companies will have difficulties filling their vacancies in IT. With slow economic recovery, the shortage of IT professionals will be 8.500 in 5 years. With a faster recovery, this amount can double to 16.000 people. The recovery might be close as another report announced that the demand of freelance IT personnel is almost on the same level as in January 2008.
The German market shows the same tendency; according to the Institution of the German Economy (IVW) there were 40.000 unfilled vacancies for IT professionals in February 2010, while in the same time there were only 33.000 jobless persons with the same qualification. For the 2nd quarter 2010 experts expect moreover an economic growth of 2.8% which will lead to a increasing demand of professional IT personnel. (Source)

To offshore or not to offshore?

I believe companies need to make a decision on an in-house team or offshore team in the light of the historical facts and future growth plans. Where it may be ‘easy’ to set up a strong team in today’s economic situation, it most probably won’t be in the future.

And yet another question comes in: what if you can save 50% on your IT department’s costs, would that be interesting? By setting up the team offshore, you ensure access to a big pool of talent and at the same time realize substantial cost savings.

You probably think ‘there is many other factors to take into consideration’? Yes, it is not only about money and finding the right people. You might wonder about the loss of knowledge? The complexity of communication and the cultural differences?

Knowledge loss: if you hire an employee or external person in your own country to develop for example a piece of your software, how big is the risk that he/she will leave your company? The risk is the same in any other country in the world (and yes, people say that attrition rates in India are very high, but if you work with a supplier which has a good policy and fair rewards, the attrition will not be as high as people say).

Complexity of communication and cultural differences: this is an area where one needs to practice and learn. The communication should be caught in a clear process where every person knows what is expected. Writing down clear requirements is important. There should be online tools to manage a project, store information. People on both sides should invest time to understand and respect each other (for me this is one of the most exciting parts of the whole offshoring field; I think everybody likes to travel and get to know other cultures?). But if you get to know the persons in the offshore team and frequently use skype to have a call, you will see that after a while it becomes normal and you understand the other person as well as the colleague next door.

Conclusion

The debate is more complicated than the above story and for each company or person, different aspects are important. I strongly believe that companies have a world to gain (cost savings, access to talent, flexibility, market access and much more) by building teams offshore. The sooner you start with it, the more time you have to make it work and leverage the results before all competitors do it. And apart from all the business considerations: isn’t it incredibly exciting to have colleagues in other countries, visit them from while to while and understand their cultures?