When the economy takes a turn for the worse, executives are often some of the first to jump ship. But what if there was a way to retain your top talent during challenging times? Outsourcing software development could be the solution, providing significant cost savings that can be used to increase executive pay and maintain competitive salaries, even during times of economic downturn.
Rising CEO Compensation
Outsourcing software development can be a cost-effective way to free up money to invest in executive pay. By working with a remote team of developers, businesses can eliminate the need for expensive office space, salaries, benefits, technology, and other overhead costs associated with an in-house team. In addition, they have access to a larger pool of talent by considering professionals outside the local market. That is a significant benefit, especially for companies in some of the world’s most expensive cities, like New York and Los Angeles.
Declining Employee Compensation
The CEO pay ratio is rising due to the combined impact of increasing CEO compensation and declining employee salaries. It is clear that companies are prioritizing executive positions that can guide the business to calmer waters in turbulent times. And they are willing to retain that talent at the expense of those lower in the hierarchy.
The same Harvard study found that while CEO earnings increased by 20%, non-executive employee earnings declined by 8.3% in just one year, from 2020 to 2021. This is a dramatic shift from previous years since employee earnings rose steadily between 2018 and 2020. One conclusion is that companies need to cut costs at the lower rungs to reapportion the funds to their C-Suite leaders.
Rising IT Expenses
While overall employee compensation has dropped, IT expenses continue to rise, making it more difficult for companies to hit their budget goals. The increase is partly due to the need for software developers and IT professionals. According to the US Bureau of Labor Statistics, the demand for software developers, testers, and QA experts will grow by an estimated 22% between 2020 and 2030, making them some of the fastest-growing occupations in the country. Another reason for the rise in IT expenses is the need to invest in new technology. Companies are under pressure to keep up with the latest trends and offer cutting-edge solutions to their customers. This means they must continually update their software development infrastructure, which can be costly.
How to Cut Costs Without Losing Quality
The rise in demand for IT work shifts the power from companies to employees. Ordinarily, that would push companies to increase salaries and benefits packages to attract the top IT talent. However, when you combine this with the need to increase executive compensation, one of these priorities will win out, and one will be sacrificed. While that may not seem possible without jeopardizing their business goals, many companies have found a solution. They are outsourcing tech jobs, like software development, to meet their needs for skills and savings, as demonstrated by recent studies. According to Statistic, the global IT outsourcing market is expected to exceed $396 billion in 2022.
Another outsourcing study found that the top reasons for IT outsourcing were cost reduction (71%), business transformation (50%), and improving service quality (50%), which makes the point that the benefits of outsourcing go beyond budgetary requirements alone. A significant concern for companies is that the caliber of talent they attract will plummet if they cut costs. It’s difficult, if not impossible, to recruit workers at the same level if you offer less compensation. Companies would likely experience expenses and delays related to worker inexperience and frequent turnover. But outsourcing helps companies avoid these issues and maintain a seamless process with legitimate experts on their team.
Outsourcing jobs to companies that are well-equipped to handle them can help your business maintain the level of talent and work that you are used to while saving substantial costs. Outsourcing software development, for example, will provide your company with access to highly experienced teams that are ready to work immediately. They do not require elaborate onboarding processes, which avoids delays and ensures your projects get to market on time and on budget. They also have their own tools and technology, so you don’t need to worry about investing in expensive software and hardware.
The Fight to Attract & Retain Talent Will Continue
The competition for IT talent will only increase with time. According to Forbes, software development is amongst the most in-demand skills in the IT industry. The projected demand for these jobs is expected to grow upwards of 35%. For companies to succeed in the long run, they will need to find a solution for maintaining talented software developers and tech teams without spending a fortune.
Tory’s Quarterly recently surveyed company directors about their top priorities in 2022. 72% said talent management, retention, and succession planning are at the top of the list. The conclusions from the study noted that companies are increasing compensation and providing senior management with enhanced incentive opportunities. 74% of respondents expected another increase in executive salaries going into the new year, which means that competition for executives is also here to stay, at least for the short term.
So long as executive retention and IT are both top priorities, outsourcing will be vital to business strategy. It enables companies to cut costs on software development and other IT skills while maintaining quality, delivery times, a competitive edge, and customer satisfaction. The cost savings can be allocated to executive compensation, achieving both corporate goals simultaneously.