Outsourcing is not the Solution to the Great Resignation

The “Great Resignation” is one of the lingering after-effects of the COVID-19 pandemic. First proposed by Professor Anthony Klotz of Texas A&M University, this phenomenon refers to a multitude of professionals leaving their jobs as the pandemic meanders along and life returns in fits and starts to pre-pandemic levels of normalcy. For instance, in July 2021, some 4 million Americans quit their jobs, while the number of open jobs hits a record-breaking high of 10.9 million.

According to one in-depth analysis, resignation rates are exceptionally high among mid-career employees and the technology industry.

In this situation, it can be tempting for Independent Software Vendors (ISVs) to turn to short-term solutions like outsourcing to pick up the slack. But is this the best way to deal with this challenge? We think not. Here’s why.

The Great Resignation in Technology – Should ISVs be Concerned?

The Facts

The Great Resignation is not a U.S.-specific problem. According to Microsoft’s 2021 Work Trend Index report, over 40% of the global workforce considered leaving their jobs in 2021. One reason is an increasing sense of “disconnect” with the work and employer — with 37% of respondents complaining that their companies are asking “too much of them” at a “time like this.”

The crisis is consistently reported to fare worse in the technology and information services sector, with one survey documenting that about 40% of tech workers had quit between August and December 2021.

During the same time, another survey reported that 72% of tech/IT employees in the U.S. are considering quitting their jobs in the next 12 months, compared to 55% of the overall U.S. workforce. While the latter figure is not small by any means, it does show how the Great Resignation has made an enormous impact on the IT/Tech sector compared to other industries.

The Reasons

Some of the reasons tech professionals give for resigning include limited career progression, toxic work environments, and a lack of flexibility in working hours. Many seem to be quitting due to a lack of remote work options, inadequate training opportunities, and burnout, not to mention the unhappiness about companies’ overwhelming emphasis on attracting new employees instead of investing in existing ones.

The Impact

As it stands, the Great Resignation is affecting many tech companies, especially ISVs. The afflictions include:

Severe staff shortages and the associated inability to operate without disruptions

Hindrance to innovation capabilities and the slowing down of product’s time-to-market

Decrement in overall revenues and profitability.

The Tech Industry’s (Wrong) Answer to the Great Resignation

In the wake of the Great Resignation, many ISVs are struggling to find talented people with the specific skills required to progress product roadmaps and move project deliveries forward. Thus, it has become commonplace to look for outsourcing vendors to deal with the phenomenon and arrest its impact on talent shortage.

This strategy aims to pick up the slack left behind by resigning employees and quickly adding the much-needed engineering bandwidth to the depleted workforce.

Outsourcing can indeed yield several benefits, particularly when back-end processes or non-core business functions are outsourced. However, outsourcing to gain additional bandwidth and fill gaps left by the Great Resignation is not a sustainable idea for the long term.

Most engagements with outsourcing vendors focus on the short term, and on specific positions and roles. While this approach can help overcome immediate talent shortage problems, it cannot address the long-term implications of the Great Resignation. Here’s why:

  • Considering the breadth and depth of the problem, ISVs cannot permanently resolve it simply by onboarding a temporary outsourcing vendor.
  • If the ‘outsourcing’ solution only helps for this interim period, it does not address the root cause of the problem, which is more oriented toward the overall work environment and the dynamics between employees and employers.
  • As ISVs outsource more and more, they will probably have to keep increasing project budgets (just to support the outsourced solution) without any commensurate ROI increase. This is unjustifiable and unsustainable.
  • Over-reliance on outsourcing can make ISVs less agile. This could translate into a chronic case of indecision, where managers are unable to make timely decisions as they wait around for the outsourced vendor’s recommendation.

The (Right) Answer to the Great Resignation

Instead of relying on outsourcing for the short term, ISVs and tech product companies would be better off looking for a strategic partner like Calsoft who can be with them for the long term. Contractually, you may call this outsourcing, but the intent is very different. Here the focus is on the long-term from the very start. The evaluation, project definition, ongoing management, and commercials are all aligned to long-term goals.

Of course, it’s perfectly okay to kick off this engagement with a pilot project. That helps to validate the partner’s capabilities and working style. But that out of the way, the focus must necessarily shift.

Still, the best way to deal with the longstanding implications of the Great Resignation is to consider what more the company can get out of the relationship once the immediate crisis passes. It’s also essential to think about the value this strategic partner can add to the company’s R&D efforts. A partner that brings deep experience, advanced domain knowledge, and a “technology-first” approach can help ISVs solve hard problems, both in the short and long term.

Equally importantly, the partner can help unlock innovation, accelerate go-to-market, and realize digital transformation — all of which are crucial for sustainable growth and competitiveness. Thus, while an outsourcing vendor may deliver value in the “now,” it cannot match the value in the “now” and “tomorrow” that a strategic partnership can deliver.

The Final Word

As explained above, recruiters and employers in the IT space struggle to retain existing talent and attract new talent to fill open roles. As such, they are tempted to look at outsourcing vendors as viable short-term options.

However, this strategy is akin to throwing a bucket of water on a fast-spreading fire. While the bucket may contain the fire in a small area, it’s nowhere near enough to stop it from spreading to other areas. So, instead of this myopic fire-fighting approach, tech product companies would be better off thinking about long-term relationships with strategic tech partners.

Such partnerships can not only address the immediate talent shortage problem, but they can also deliver tangible value over the long term – in terms of business sustainability, measurable R&D progress, and accelerated innovation.

Calsoft partners with companies worldwide to fast-track their march towards product transformation and competitive success in a post-pandemic/post-Great Resignation world.

Connect with us to know how our technology-first approach can prepare your business for future opportunities in this new and challenging world.