H1B or outsourcing | Tooploox

Konrad Budek

Jul 22, 2020 - 

5 min read - 

H1B or outsourcing

which is the better pick?

H1B or outsourcing - which is the better pick

With rising uncertainty around the H1-B visas and their impact on the US-based tech industry, companies are looking for ways to secure their required skills and workforce regardless of the changing environment. Thus, offshoring is one of the most efficient ways to do so. 

Having an on-site employee on payroll can be considered a way to build his or her loyalty. When it comes to the H1-B visa, this mechanism was also supported by the visa rules. The H-1B visa holder only had a legal right to be in the United States based upon his or her unique skills and, when the contract ended, one had only 60 days to find a new employer willing to sponsor the visa or was forced to go back to their home country.

H1-B visa stats – Tech stars imported

According to the US Citizenship and Immigration Services report for 2019, there were 420,549 petitions filled out in 2019, marking a 0.4% improvement from the year 2018. Also, there was a 16.9% increase in visa approvals, resulting in 388,403 candidates accepted for work in 2019, as  compared to 332,358 in 2018. 

The same report highlights that the H1-B visa approvals are dominated by the tech industry. There were a total of 256,226 visa beneficiaries working for the IT industry, accounting for nearly two-thirds (66.1% to be precise) of all beneficiaries. 

The popularity of the H1-B visa among tech-related companies has its roots in the tech skill gap that haunts the industry around the world. According to Wall Street Journal reports, the demand for skilled IT professionals is constantly increasing. There were about 918,000 unfilled IT sector jobs in the US in 2019. Moreover, there were 370,000 new jobs posted in January 2020 and the COVID-related crisis didn’t change much – despite a slowdown in May (only 30 000 new job postings for IT specialists), June saw a revival with 260,000 new job postings.

Even by making the false assumption that all of the Science, Technology, Engineering, and Math (STEM) graduates will stay in the country to work for tech and IT-related employers, national education does not provide enough capacity to provide a skilled workforce. Of all 1.8 million bachelor degrees awarded in 2016 (latest data available in National Center for Education Statistics) only 18% (331,000) came from the STEM fields. Thus, the yearly capacity of education is not enough to fulfill all roles posted in January 2020-alone.

The problem of a skill shortage is not limited to the US – the World Economic Forum indicates that the same problem will hit the European ICT market with up to 756,000 unfilled positions by 2020

Last but not least, the nature of IT jobs has changed in recent years. The ethos of a hacker who solitarily codes a project no longer remains relevant. Modern IT requires a multidisciplinary team consisting of several engineers with front-end and back-end teams supported by AI and multiple other technologies which one can imagine. 

Thus, it is not a surprise that tech companies, be they giants or start-ups, supply their workforce with skilled foreign workers. Yet the recent suspension and the increasing unrest around the future of this type of employment makes it difficult, if not impossible, in the long term. 

With an insufficient workforce on the local job market, companies turn their sight towards outsourcing and offshoring services and are getting ready for a workforce H1-B offshore transfer.

Why do companies choose to outsource work?

A Deloitte study indicates that outsourcing and offshoring has noted a significant increase in demand. The global Outsourcing market is predicted to reach $779.7 billion by the end of 2020 and grow further without losing any momentum. Also, IT operations outsourcing is estimated to reach $444.9 billion by the end of 2020, making it 57% of the whole market. 

The main reason behind outsourcing and offshoring is to optimize costs, yet currently, outsourcing is also an innovation driver and a way to build a competitive advantage. The benefits of outsourcing or offshoring are both intuitive and much less so. 

Staffing

The first and most important reason for the H1-B visa context. Companies that lack the human resources to build or maintain products themselves can support their operations by hiring remote teams. This approach brings flexibility that is hard to match when the company uses internal staff. 

Internally, the company needs not only to build the team and take care of other staffing-related issues, like replacing specialists on their way out or in building a friendly atmosphere. The last one is especially tricky, with tech employees looking not only for a competitive paycheck but also for benefits and an overall friendly environment in which to work. With outsourcing, the company can take advantage of the “not-my-problem” attitude and pay only for the skills it needs for as long as they are required. 

Last but not least, building a team is also time-consuming. That can be especially challenging for start-ups that usually need to upscale fast. Also, this business sector has been severely hit by the COVID pandemic, and rebuilding teams can be even more difficult. But losing staff is only one side of the coin. Another one is building up a team fast enough to please investors and get further funding – and getting funding for a startup during the recession may be hard, but it is not impossible. When combining the COVID pandemic, the H1B visa 2020 ban, and the need to upscale fast, outsourcing or offshoring can quickly become the only reasonable way to go. 

Time Zones

Being placed in different timezones comes with challenges, but also with some unexpected benefits.

The most challenging part of cooperation with offshore teams is the need to coordinate meetings, so there is no way to arrange one ad-hoc. On the other hand, there are countless ways to deal with that, starting from asynchronous communication via chat or email to making appointments in an overlapping time, with one team being early and the second one near the finish of their workday.

When it comes to benefits, being placed in different time zones can be seen as an additional day during the cooperation – it is not uncommon to send some feedback or requests during the day and having them done by the morning – the offshore team had a full workday while their client’s team was sleeping.

Access to specialists

For an IT outsourcing company, coding and technology are the core of its business. For other companies, IT operations (or marketing, outsourcing, or anything else) are only business support. That’s not where they earn their money.

The retail company is interested in hiring retail stars. The pharmaceutical giant is interested in pharmaceutical prodigies. Examples are countless, but the key takeaway remains the same – if IT is not the core business of the company, it is unlikely for it to hire an IT-star. 

Also, tech specialists don’t often feel encouraged to work in a non-tech industry largely due to a lack of challenges and opportunities for personal development (with several exceptions like cybersecurity teams in banks or similarly narrow cases). 

In an outsourcing company, even the most narrowly-specialized IT expert can find a myriad of projects to do for multiple client companies. A typical client may need access to his or her skills for only an hour or two in a month, only to solve a problem and come in with a bit of consulting, and certainly not for full-time. Considering that, the highest-end tech skills are available only in an outsourcing model, where these specialists remain gainfully employed.

Costs 

Considering all the above, outsourcing and offshoring can come with significant savings due to the inherent nature of outsourcing itself. The company gets rid of multiple problems associated with having an internal team, and gains access to multiple specialists and already established teams. 

Also, the external perspective of an outsourced team can come with a fresh perspective and experience taken from multiple projects, be they similar or completely different ones. Another benefit is the “not-my-problem” attitude mentioned above, that makes agile up- or downscaling much easier than can be done with internal staff.

Summary

No matter how the fate of H1-B visas will look in the near future, general business trends are obvious – IT outsourcing, be that in team augmentation or hiring a fully remote team, is a great idea to build in flexibility and gain a competitive advantage in the more challenging world of today. 

If you would like to know more about this or you have some IT-related challenges to solve for our team, feel free to contact us, so we can find your solution right away!

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