Enabling a Smart Factory on a Budget
Smart factories are transforming the manufacturing industry, giving companies that figure out how to best use digital technology a vast competitive advantage. Most large manufacturers are implementing their digital strategies, but many small and midsize manufacturers (SMMs) need help to keep up.
The main barriers that we see stopping many SMMs from effectively using digital technology are:
A lack of clarity on what their “high-value” digital use cases are: We see that a lot of SMM leaders know they need to be doing more with digital technology but fail to make it a top priority because they don’t have a clear view of the specific use cases that will provide them with substantial business value and project ROI.
Limited access to in-demand technical talent: When a company defines its top priority digital use cases, highly skilled technical talent is needed to implement them. These include developers, data engineers, and data scientists, who are typically not on staff at most SMMs and are in high demand in the market.
Prohibitive cost/budget: Getting access to these technical resources can be very costly for SMMs, as they typically do not have the budgets of their large company counterparts to build full in-house teams, and using onshore consultants is cost prohibitive.
This blog discusses solutions to two of these three barriers - limited access to talent and prohibitive cost/budget. We examine these issues and provide a viable approach for SMMs to get access to top-notch digital talent at a cost-effective price.
The technical talent gap
For over ten years, a technical talent gap has been growing globally, and the United States is not exempt. The availability of skilled technical talent is significantly below market demand. In fact, Gartner has reported that the talent shortage is the top emerging risk factor for businesses worldwide. So, there is fierce competition to attract, hire and retain top technical talent.
The graph below is from PwC’s 22nd Annual Global CEO Survey. It shows the impact of the technical talent gap on the growth of organizations that took part in the survey. More than half of the respondents said they were unable to innovate effectively due to a lack of technical skills - leaving them exposed to significant competitive risk.
High-skilled personnel turnover: The high demand for technical talent makes it difficult to keep technical resources on the job. The US tech labor force has the highest staff turnover among other industries at 13%. Job hopping has become an all-too-common practice among tech workers, who quickly move on to better-paying jobs with each new opportunity. This not only creates operational instability but also exposes businesses to real financial risk as they have to repeat the hiring cycle and put the execution of their digital strategy on hold until the right people are found.
Impact on SMMs: Large manufacturers with big budgets are fighting over a small pool of talented IT personnel, and SMMs are on the sidelines because they can’t match the financial muscle of these large manufacturers. This precludes many SMMs from realizing the value of digital technology for their businesses, putting them at a competitive disadvantage.
A better way: offshoring your digital team
Significant resources have been invested in finding a lasting solution, as the talent shortage affects businesses of all sizes. Several initiatives have been tested - including hiring from minority groups as well as “those without a college education.” - all in search of loyalty - a scarce trait in the tech workforce market.
These models have provided some good returns, but they are not enough to fill the talent gap in the market. More people are needed to turn the wheel at viable price points. This is where offshoring comes in.
This approach, which has been frowned upon and misunderstood by some, levels the playing field. It takes advantage of the “Global Village” to provide access to talent from virtually every corner of the planet at costs that are significantly lower than onshore options. Through offshoring, both large and small to medium manufacturers can gain sufficient access to highly qualified personnel to meet their digital strategy goals.
The cost of a local vs. an offshore technical resource: Take a data engineer for example. According to Glassdoor, the average salary for a senior data engineer in the US is $154,182 per year. With benefits, this number increases to about $192,727. Compare this with an offshore senior data engineer who costs $79,000 per year flat.
These offshore resources receive the same training as their onshore counterparts and possess identical credentials. They are trained and certified by the same vendors who train and certify local personnel using the same material.
So then, using the example above, this means that a company can get 2.4 offshore senior data engineers for the price of 1 onshore data engineer. This applies to other resources as well, including business analysts, developers, data engineers, etc. This is truly game-changing for SMMs who adopt an offshore model!
Key benefits of an offshore staffing model include:
Get talent on demand: Get the people you need for your projects on demand to scale operations fast, without waiting for long recruitment periods.
Reduce technical staffing costs by 50 to 70%: Offshore technical resources typically reduce a company’s staffing expense by 50 to 70%.
Enable fractional teams: Instead of paying for 100% of a technical resource’s time, you can work with your outsourcing partner to share these resources across multiple clients, further reducing your technical staffing costs.
Shift the HR headache: Let your outsourcing partner/agency handle all the HR for you so you can focus on getting work done rather than spending time looking for people to do the work.
Some of the top offshoring challenges to be aware of include:
Poor resource quality: Some agencies are driven by margins, and will provide poorly trained people. Be sure to scrutinize your agency properly and have references verify the quality of their teams and work.
Time zone differences: A 100% offshore team based in a different country and time zone poses a threat to business operations when not properly planned for. This can lead to the absence of sufficient management and, ultimately, substandard output.
Doers and not thinkers: We’ve seen this quite a lot. Typically, offshore resources are implementers. This means that you need someone on your team - a consultant or team member - to create your technology strategy and drive the delivery of your roadmap with your offshore team.
How to offshore the right way:
The benefits of outsourcing are compelling reasons for any business to leverage offshore teams. Here at Adaptive Product, we’ve come up with a highly effective and cost-efficient model of leveraging offshore resources along with an onshore presence to maximize a company’s ability to implement high-impact digital solutions. This is how it works:
Secure an onshore digital strategist: Identify a digital strategist who is the brain behind the solutioning for your digital transformation process. This person should be onshore so that they can meet onsite with your team. They are responsible for identifying and prioritizing your digital use cases as well as engaging with your offshore team to drive the effective delivery of your digital solutions.
Build a strong offshore team: Build an offshore team led by a competent project manager who handles the day-to-day operations of the technical team. He or she takes instructions from your digital strategist.
Establish effective team management: Make sure that your project manager and his or her team belong to an agency or vendor that has a good reputation, is trusted, and has a demonstrated history of effectively managing all the HR issues related to a project. You should not have to trouble yourself with addressing absenteeism, poor work ethics, etc. When performance is questioned, your offshore partner should be ready to quickly replace a non-performing team member with one better suited for the role.
Protect yourself with good contract language: Have well-written contracts that protect your company from liabilities and compel the agency or vendor to deliver on their promise with reasonable consequences for failing to do so.
Digital technology is changing the competitive landscape, rewarding manufacturers who use it well with more efficient operations, greater profitability, and increased market share. While SMMs are lagging behind large manufacturers in the adoption of digital technology due to 1) limited access to the technical talent needed to build and manage these solutions, and 2) the cost of typical onshore technical resource staffing models, this can be addressed using the offshoring model.
Establishing a partnership with one or more offshore outsourcing firms can help SMMs gain access to the needed technical skills that will enable their digital strategies at a viable price point.
Along with our consulting services, Adaptive Product provides offshore team building and management services. Through our relationships with multiple elite-tier offshore firms, we are able to:
Build the right team to meet your specific technology needs at a price point that cannot be beaten.
Drive highly efficient solution delivery through effective offshore team management.
We can help you establish an exceptional digital solution team that is efficient and highly cost-effective so you can leverage the full value of offshore technical resources. Book a meeting with one of our senior consultants to discuss your specific needs.