War for Talent - IT Outsourcing in the Developing World

I recently spoke at the “War for Talent – Recruitment in the IT sector online forum” with my colleague, Dmitry Gusev ,and felt it was a good idea to put the main points of our presentation into an article.

Our discussion covered the subject of IT Outsourcing in the developing world, looking at the differences between mature and immature markets and uncovering many of the myths and challenges faced when engaging with outsource partners across the world.

The benefits of outsourcing your IT to the developing world are well known and widely discussed. A huge pool of super talented, loyal candidates at a fraction of the cost. What’s not to like?

And while there are huge benefits to working with partners to outsource the whole development process (BPO), or tapping into international markets of freelance contractors, there are several things that must be considered before taking the plunge.

Firstly, the myths:

It’s not as cheap as you think! The adage, you get what you pay for springs to mind here. Yes, you will be paying less than what you are in London, but will the quality of the work meet your expectations? And in many cases, the real top end service providers or contractors are charging a pretty sum irrespective of where they are based!

No there’s not endless pools of super talented developers locked in a big, dark production factory just waiting for your project. Talent shortages are real, everywhere in the world and the developing world is no different – in many cases it’s even harder to find good developers than in the West!
And finally, sorry to break it to you, retention rates for IT staff absolutely suck here in Asia too! This image of a loyal team of developers grateful for your work, who will never leave just doesn’t exist, I’m afraid.

So, now the reality of the situation is clear let’s have a look at some of the challenges you will face once you have decided to outsource your project to that well known, global firm based in Asia:

Cultural differences – As an English guy, working for an international company in Thailand, with mainly Thai staff I can speak first-hand about the working differences between nations. What is a perfectly acceptable way of approaching a situation or addressing someone in one culture, is extremely rude or confrontational in another. How your stakeholders interact with your outsourcing partners will have a massive impact on the success of the project

Now it’s a given these big firms will speak English, but often it’s with an accent. That’s not even considering that on your end you may have a native French speaker, with an accent, speaking English to a native Indian speaker, again with an accent. I don’t have to explain the potential issues here

Depending on where you are in the world, there could be a 12-hour time difference between your HQ and where the work is being done. No one likes dealing with a work-based emergency at 2am!

And most importantly there’s always potential for quality issues. I’ve lost count of how many times I’ve worked with an American or European company that are looking to hire a team of developers in Vietnam, Thailand or the Philippines and their expectations for the skills of the team has not been matched. Often the bar is higher and the expectations, and reality of what is available in the market just doesn’t align

And finally, when looking at IT contract staff, the market just isn’t like it is in mature markets. Being a contractor is not only accepted, but preferred by many in places around the world, and for good reason. Quite often they get paid 2 or 3 times more than their permanent counterpart and have lots of exciting companies and projects waiting to engage their services. This isn’t the case here in Thailand, or across SEA for that matter. Often contractors will get paid the same as they would for a permanent role without any of the benefits – it’s therefore looked down upon by many as being inferior! This makes it incredibly hard to find talented IT staff on a contract basis

Things are changing though!

The gig economy is booming worldwide, accelerated by the Covid-19 pandemic but here to stay. It’s estimated that currently 35% of the American workforce are now freelance, Statista estimates this will be 50% by 2027.
For the first time in its history, Google now hires more contractors than it does permanent staff. This is not only unique to mature markets like the USA, this is a truly global phenomenon.

A 2019 World Bank study estimated that the gig economy in Southeast Asia is growing by 30% year on year.
Due to growing demand by our clients, ANCOR Thailand launched our IT Outsourcing division this year and are seeing huge growth in this area.

With the tide changing, I feel markets like Thailand will evolve to look more like contract markets I experienced in the UK with it being accepted, financially lucrative and a preferred employment option for many.

James Hine, Head of Technology & Executive Search at ANCOR Group
Dmitry Gusev, Head of Outsourcing Department at ANCOR Group