Skills shortage drives SA outsourcing growth

Outsourcing - versus in-sourcing - is gaining traction in South Africa. While South African companies may now be more broadly catching up with their international counterparts in joining the trend, they are also realising a fundamental issue about outsourcing: it`s not about costs or saving money. It`s about efficiencies and gaining business benefits.

South African organisations today have a healthier appetite for outsourcing than at any time in our history, and one of the primary reasons is a dramatic reduction in the number of scientific and commercial graduates trickling into the industry. IT professionals are also highly mobile and leaving for countries desperate for skills. South Africa, on the other hand, seems unable to respond.

The outsourcing model is a natural response to the skills shortage. Outsourcing companies offer IT workers more challenging - and commensurately more rewarding - career opportunities. IT workers enjoy better mentoring opportunities. They have greater job diversity. Therefore outsourcing companies attract the brightest and the best in the industry.

When companies in-source, they need some sort of carrot. That generally boils down to larger salaries, which is costly, or more training, which also means higher costs. But it`s not the cost that concerns most companies; it`s the quality of worker. While outsourcing companies will attract better quality workers, as already mentioned, in-house IT employees will not get to practise their more valuable skills very often. And that means they won`t grow and won`t bring their true value to bear. And it`s not as if companies can afford to do without them. Specialised skills are only required a very small percentage of the time, but without their availability, projects may suffer time delays and excessive financial burdens or even complete project failure.

Outsourcing companies, by comparison, with their greater number of IT projects and services contracts, will use a far greater percentage of employees` most valuable skills.

The ability to use highly skilled people more selectively, thereby making more effective use of time and skill, means greater productivity and better salaries. And it also allows the most valuable skills, which are most in demand, to be shared across a number of critical projects. And that alleviates bottlenecks across the whole economy.

Behavioural drivers are much more difficult to manage and measure than financial indicators, but there is no doubt that the overall behaviour of suppliers is focused on retaining client business over the medium to long-term. It shifts the focus from individuals storing and retaining knowledge and making themselves indispensable, to suppliers managing succession and skills transfer tasks as part of the normal process of cycling skilled professionals across clients and projects. That, in turn, creates a culture of teamwork and co-operation over individual performance and secrecy. Productivity jumps when knowledge is freely shared and support and help is offered without negative connotations. Of course, this is dependent on how suppliers operate. The danger is that large outsourcing deals often involve the transfer of existing employees and management who then continue as before. It`s indicative of lazy management by both client and supplier.

It`s important to never forget that gaining business value is the number one priority of any outsourcing deal.