More Companies Turn to Outsourcing As a Foundation for Innovation

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Apple, Amazon, Google, and Tesla routinely harness customer insights to uncover new market opportunities. By leveraging their vast talent pools and financial resources, they develop future-focused proneducts and services – creating astonishing customer experiences while generating healthy revenue streams. Accessing top-tier developers via IT outsourcing allows these companies to address widespread talent shortages – an issue that is currently plaguing companies of all sizes.

Technology is empowering us to do things that were unheard of just a few years ago – like hailing a car with our smartphones or using 3D printers to create artificial limbs. Yet as technology creation becomes more automated, the scarcest and most valuable resource will be highly talented, innovative people.

For every Amazon success story, there are also hundreds of companies that had the vision, the creativity, and the drive to produce the next jaw-dropping Big Thing. The Big Thing that could potentially have created new markets while engaging employees and delivering superior customer experiences. Yet many of them lacked the talent needed to successfully bring their concepts to the marketplace.Second Machine Age

Without access to a steady stream of top-tier, creative talent, organizations will become stagnant – losing their edge, their market share and their chance to turn their visions into reality.

Delivering the Next Technology Breakthrough

According to Gartner’s March 2017 Top 10 Strategic Technology Trends for 2017, a Gartner Trend Insight report, some Gartner predictions1 say that “By 2020, 100 million consumers will shop in augmented reality.” Simultaneously, “30% of web browsing sessions will be done without a screen.”

In the  March 2017 report, Gartner states, “Organizations gain competitive advantage when they identify trends that are poised to break out of the emerging state and exploit them before they become mainstream.” This requires a deep talent base – something that many organizations struggle to build.

According to the 2017 Gartner CIO Agenda Report, representing input from 2,598 CIOs across 93 countries, “CIOs across the board identify lack of skills and other human resources as their No. 1 barrier to success;” a situation that has gone unchanged for the past five years. When just considering U.S. respondents2 Gartner notes “U.S. CIOs face the same analytic skill gaps as the rest of the survey respondents. But they adopt bimodal* practices more slowly, making it difficult to realize innovation and as a result, pay the costs of bimodal implementation longer.” And in a survey of more than 1,000 hiring managers and recruiters by Indeed.com, 53% of respondents hired candidates for tech jobs that did not meet requirements due to immediate need.

Outsourcing As a Foundation for Innovation

Smart companies know that hiring mediocre talent can be worse than having no talent at all. In some cases, some global organizations have adopted a “pay to play” model in which they acquire creative, design and development firms in order to gain the talent they need to build a foundation for innovation. However, companies without deep pockets are accessing quality talent through strategic outsourcing.

According to Deloitte’s 2016 Outsourcing Report, 72% of IT respondents engage in outsourcing, and 28% utilize outsourcing for access to intellectual capital. By deploying strategic, flexible, highly-skilled engineers and product managers as agile team extensions, these companies can continue to focus on developing future innovations, including:

  •      Cloud-based business and delivery models
  •      Artificial Intelligence (AI)
  •      Augmented Reality (AR)
  •      Robotics
  •      Agile and componentized solutions to business problems
  •      Cognitive process automation
  •      Internet-of-Things (IoT)
  •      Security

 

While strategic outsourcing is a viable means of addressing talent shortages, companies need to be selective regarding where they tap into these resources. According to ATKearney’s 2016 Global Services Location Index™, India remains the #1 outsourcing provider. However Latin American companies, particularly those in Costa Rica, are rapidly gaining ground. U.S. companies often select a Costa Rica-based Agile team for its deep technology expertise, English fluency, and cultural affinity.

Costa Rica – Latin America’s IT Epicenter

Anticipating Skills Gap

See Footnote 5

Costa Rica offers the advantage of being in the same time zone as their U.S.-based clients. When working with a nearshore team, communication occurs in real-time – critical for the collaboration needed on high-stakes dev projects. Many of these teams use daily standups in which questions can be answered and clarifications provided immediately. Offshore teams, such as those based in India or Eastern Europe, present a time difference of eleven hours and eight hours, respectively. This time lag can cause a significant delay getting approvals and questions answered, slowing progress.

Costa Rica’s economy is diverse and thriving. According to the United Nations, Costa Rica invests a greater percentage of its GDP in economic infrastructure than any other country in Latin America. Site Selection magazine also points out:

  • Costa Rica boasts a wide range of high-tech industries including “software development, robotic process automation (RPA), electronics manufacturing, superfood development, and R&D for the MedTech industry.”
  • “More than 280 high-tech companies, 24 percent of which are Fortune 100, have established successful operations in Costa Rica and are still growing.”
  • “The country ranks No. 1 in innovation in Latin America and in pay to productivity, as recognized by the World Economic Forum.”

In addition to having a vast portfolio of high-tech industries, Costa Rica has cultivated long-standing relationships with Silicon Valley titans such as Intel. The company established an assembly and test plant in Costa Rica in 1997. In 2014, Intel transformed the operations into the largest Research and Development Center in the country. More than 2,000 Costa Rican employees work on the design, prototyping, testing, and validation of integrated circuit and software solutions. The center also provides end-to-end multi-functional corporate services from finance, HR, procurement, sales and marketing, and IT.

Conclusion

According to Professor Brynjolfsson, “The main fuel to speed the world’s progress is our stock of knowledge, and the brake is our lack of imagination.” In this age of innovation, companies are replete with the drive, and all-in commitment to success. However, only those companies who can find and use the most creative, intelligent and innovative developers – wherever they are located – will realize their visions.

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*According to Gartner, “Marrying a more predictable evolution of products and technologies (Mode 1) with the new and innovative (Mode 2) is the essence of an enterprise bimodal capability.”3 The goal of Mode 1 is to focus “on predictability and has a goal of stability.… Mode 2 is exploratory or experimental… This work often begins with a hypothesis that is proven, disproven or evolves during a process typically involving short iterations/projects.”4

1. Gartner, Smarter with Gartner, Gartner Predicts a Virtual World of Exponential Change, October 2016, http://www.gartner.com/smarterwithgartner/gartner-predicts-a-virtual-world-of-exponential-change/.

2. Gartner, 2017 CIO Agenda: A U.S. Perspective, February 2017.

3. Gartner, Technology Procurement: Become a Trusted Advisor to the Business With Gartner’s Bimodal Engagement Model, March 2017.

4. Gartner, What Is Gartner’s Pace-Layered Application Strategy and Why Should You Use It?, June 2017.

5. Bureau of Labor Statistics, https://www.bls.gov/ooh/computer-and-information-technology/home.htm, December 2015.

Cindy O'Keeffe

Cindy’s passion is aiding others in untangling complex situations and plotting a path forward, enabling organizations to realize their goals. Her genuine interest in people is at the core of her ability to connect their needs with solutions. Through deep experience as a marketer, non-profit board member and executive coach, she has developed a strong strategic orientation, creative pragmatism, and adeptness for quickly grasping her customers’ business. To recharge, she hikes with her family, travels, reads good books and tries to unlock the mysteries of her golden retriever.

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