In Part three of the digital transformation series we discuss technology resources in greater detail and why some of them just cannot solve IT’s digital transformation problem.
Gartner, Inc. a leading technology analyst and consulting company, recently released a grid that defines what technical resource solution should be engaged for a particular type of technology being deployed. Digital transformation is in the upper left and right quadrants. We agree with Gartner (as many of Gartner’s conclusions came from Eagle Creek interviews), but would like to take a more pragmatic view to this conclusion in this blog post.
We ask every IT department the same question—on a scale of 1 to 10, 10 being perfect, how effective are your mid-level managers in managing offshore? (A mid-level manager has responsibility for overseeing the day-to-day activities of technical resources associated with a technical project.) Without hesitation the answer is always the same, “We’re a 2 or 3.” For most businesses this statement is a reflection of no less than 7 years of Offshore experience and for some as many as 15 years of experience.
On a new scale of 1 to 10, if technologies were measured by complexity, digital transformation will be considered a 9 or 10. This is compared to technologies that have been traditionally sent offshore for the last decade, technologies generally considered to be at a 2, 3, 4 and 5 levels. Most IT departments have concluded if offshore hasn’t been successful with the easier technologies, the more difficult technologies of today will never work.
Regardless of why offshore isn’t working, the real issue is—it isn’t working. Most U.S. businesses have concluded it can’t make offshore work for digital transformation or digital business.
Onsite contractors are the most expensive resource an IT department can engage. These resources are approximately 1.5x to 2x the cost of Employees, 3x to 5x the cost of offshore, and 2x to 3x the cost of onshore. Because of increased demand issues resulting from digital transformation and the limited new supply of technical resources entering the market this differential will only continue to increase making it mathematically impossible to solve an IT backlog problem, constrained by a budget, with onsite technical resources.
But, onsite will play a role in digital transformation. It is our estimation for every four to six remote resources (either onshore or offshore) there will be a requirement for one onsite or employee resource. Generally, the onsite technical resource has a greater depth of knowledge of the technical issues associated with a project.
Every IT department prefers an employee for a technical resource position, but this isn’t practical for the following reasons:
1. There are too many technologies within an IT department to staff all positions internally.
2. Many of these positions require unique to semi unique skillsets.
3. Many times the technical position is engaged for a limited period of time, e.g. an implementation.
4. The positions referenced in the above three points will probably disrupt the pay scale of most IT departments. These positions are generally paying 25% more than a similar grade employee.
5. It is unlikely IT departments will revert to training new employees. The cost of training is too great when all factors are considered.
The above applies to digital transformation—and are the reasons why IT departments cannot internally staff its way to a solution. It’s our expectation that employees will only make up 25% of digital transformation resource requirements in the future.
Stay tuned for part four of the digital transformation series to learn why onshore resources can solve IT’s digital transformation problems.