Staffing trends 2020 change the way business acquire tech talents
Author Dasha Zi
IT Staffing market overview
1.1 Global IT market overview
On July 13, 2020, an analytical company Gartner released an updated forecast of the global IT market. Although, in January, experts had expected IT spending to raise by 3.4 percent by the end of 2020 (up to $3.9 trillion), summer revision indicated a negative index -7.3% (up to $3.5 trillion) compared to 2019. Analysts linked the industry’s decline to COVID-19, which is causing a global economic recession.
Source [ Gartner]
Gartner considers companies’ responses to the pandemic in three phases-response, recovery, and renewal. As companies move to the second phase, recovery, they will shift their development priorities based on a lack of funds for IT expenses. Their focus will shift toward “critical” purchases, spending money on technologies and services that facilitate business transformation. Despite the difficulties, the easing of lockdown restrictions will help many businesses quickly return to high-income levels and resume spending on IT projects. In addition, many decision-makers will increasingly see investment in technology as necessary to maintain productivity and business continuity, even when businesses are shrinking in other areas.
The global IT Staffing market has also been changing. In January 2020, CompTIA published a report on the research “ International Trends in Technology and Labour Force.” According to the study, 72% of respondents considered technology to be the main factor in achieving business goals. However, recruiting technical specialists to achieve these goals isn’t easy because qualified employees are lacking.
The next problem with hiring skilled tech talents is the wage gap. In more developed economies, pay rates are too high and don’t match the skills and experience of hired employees. Because of this wage gap, 87% of surveyed companies use IT outsourcing or used the experience of other companies and 34% of U.S. companies use oversea staffing solutions on a regular basis.
COVID-19 has forced enterprises around the world to change the way they operate to allow for remote work and the implementation of digital workflows, optimized business processes, and other innovative needs of the new market.
1.2 U.S. IT staffing market overview
SIA, the global advisor on staffing and workforce solutions, predicts a large-scale economic downturn that will lead to a decline in IT temporary staffing in 2020. The SIA predicts this decline to be the largest in the industry in the U.S. since 2009.
Source [ SIA Staffing Industry Analyst]
However, the technology staffing market is less affected by COVID-19 than other industry and is recovering quickly. This fast recovery is due to 77% of surveyed U.S. companies spending money to technologically modernize their business process as they had planned, despite the economic consequences of COVID-19. Such high IT staffing potential is also due to tech employees quickly responding to the pandemic challenges, allowing for a painless shift to remote work.
The temporary IT Staffing market has fear of a growing shortage of qualified employees. CompTIA data shows that 49% of the interviewed companies in the U.S. have noticed a lack of tech professionals in the last 2 years. They have identified the main factors hampering the hiring of technical staff in the U.S. as adaptation to innovation, unreasonably high hourly rates, and lack of necessary soft skills among candidates.
- Integrating different apps, data sources; platform, devices [US 62%, global 55%]
- Emerging tech — [62% vs 55% global]
- Software or app development — [58% vs 54% global]
- Digital business transformation/ modernizing legacy hardware or software — [57% vs 54% global]
- Cybersecurity [56% vs 55%global]
Skills gap (the situation in which employee performance falls short of employer expectations) is causing businesses to require constant training and professional upgrading, leading to 40% of the surveyed U.S. companies having already outsourced tech staffing services or used managed services.
IT Staffing market trends
2.1 Temporary staffing or gig economy are getting popular
According to American Staffing Associations, U.S. HR companies hired 16 million temporary and contract employees during 2019. Before the pandemic, gig economy (a free market system in which temporary positions are commonplace and organizations hire employees on a contractual basis) had been developing rapidly. In fact, a great part of the U.S. labor force consisted of temporary employees.
However, the situation changed in 2020. Before the pandemic, IT staff were seeking to contract out and be more flexible in their choices, but the economic uncertainty caused by the pandemic has forced them to search for more stable work.
On the other hand, this period of uncertainty has caused more and more businesses to favor contract IT specialists more than regular employees.
Recommendations for SMB and Startups
Correctly estimating the development prospects of a company or a project is reasonable. Interviewed companies notice that cooperating with IT staffing providers or outsourcing companies allows managing teams to augment issues when necessary. In the case of project break-up or the under-funding of an open position, companies sign a contract with an IT contractor. This contract protects companies from paying expenses that they would have had to pay if they had hired a regular staff member.
2.2 Fully remote dedicated software development teams or staff augmentation services
SMB owners and startups focus on a project’s effectiveness and task fulfillment. Compared to large enterprises, these companies cannot afford to frequently change the required resources or open new departments to meet short-term project requirements or temporary flow challenges.
The pandemic has showcased the enormous potential of cloud technology, creating optimal conditions for fully remote, dedicated teams. Despite the fierce competition for qualified IT staff on the local market, a hard recruitment/dismissal system, SMB, and startups have already used remote teams.
Recommendations for SMB and Startups
Outsourcing is not only available for large companies. Following a survey conducted by B2B rating and review company (Clutch.co) in 2019, more than 37% of surveyed small and medium-sized companies have already outsourced their business processes.
The most common outsourced business processes are:
- Accounting — 37%
- IT matters (software, web, mobile development) — 37%
- Internet marketing — 34%
Remote employees may be a needed extension of existing in-house teams or project-assigned teams. By cooperating with nearshore IT staffing service providers, company outsourcers can get high-tech specialists on affordable rates. As more pressure on the core team reduces, the company and the startup are becoming more competitive.
The main outsourcing IT destinations are Eastern and Central Europe, Latin America, and South Asia. Read more about destinations here (link to post about comparison of directions).
2.3. Ongoing tech-talent shortage lead to hiring offshore tech recruitment
Analytical companies, CompTIA, American Staffing Associations, Korn Ferry Institute, and others have been investigating and raising concerns about technical staffing shortages for several years now. According to their forecasts, a shortage of technical specialists will slow development and stop the mass adoption of advanced technologies such as VR, AR, AI, ML, and others.
Recommendations for SMB and Startups
National markets in the U.S. are involved in fierce competition with each other for qualified personnel, resulting in unreasonably high rates. Therefore, startups and small-to-medium businesses, as the most flexible economic entities, are looking for new opportunities to overcome this shortage of tech-talents. Most often, they apply for the services of offshore outsourcing companies, optimizing recruitment and salary costs. According to Glassdoor, the average annual salary of a middle software engineer in the U.S. is $89,000 (September 2020) and the average annual salary of a similar specialist in Ukraine is $38,400 (September 2020). The internal business processes of outsourcing companies differ based upon outsourcing destinations, IT staff salaries, and the number of qualified IT specialists. For information about how to choose an outsourcing destination and a company, read here.
2.4. Recruitment process acceleration by reducing on-boarding time
Although the demand for tech talents is growing rapidly, the process of finding and approving a candidate for a position is terribly slow. In 2017, Workable published a study on the time taken to hire an IT candidate. The on-boarding process for IT positions in North America was 51 days. Fierce competition and long enrollment processes risk the loss of companies’ ideal candidates. Hiring managers note that companies should review recruitment processes and accelerate them after COVID-19 has run its course.
Recommendations for SMB and Startups
The competitive advantage of SMBs and startups is their flexibility. Companies are creative, adaptable, and sustainable in uncertain environments and rapid transformations. One way for a company to speed up the onboarding process is to apply to an IT-staffing company.
An IT staffing provider will promptly form a dedicated team or provides a candidate to perform the necessary work. Tech staffing agencies shorten the recruitment process because they do not need to look for outside staff. Businesses can find many trusted resources online, including providers, rates, and reviews browsing the following platforms:
The next prospective field involves the integration of technological processes and AI to recruitment workflows. By reducing the time spent on screening, skills testing, and interviewing, HR and Talent teams can focus more on attracting and retaining employees.
Popular AI platforms:
Be ready for the future
External factors such as global challenges, political and trade wars, and international economic instability hugely influence any national economy and its industries, teaching businesses the importance of following trends and being flexible.
Integrating technologies into business processes allows companies to learn flexibility and respond quickly to new challenges. However, technological transformations take place within such conditions as skills and wage gaps, fierce competition, and complex hiring processes. Because of these factors, businesses look for other options. They delegate IT processes to outsourcing companies, augment teams with temporary employees (offshore IT-staffing services), and integrate AI into recruitment processes.
Changes in the IT labor market are challenging companies. Now more than ever, they need tech talents. Understanding these trends and learning to cope with them is already a step toward a competitive business.
Talk with Active Bridge about your business’s technical challenges. With help from our team, you can manage IT staffing trends.