IS YOUR IT STRATEGY ON POINT? DISCOVER THE KEY TO SECURING IT RESOURCES IN SYSTEM DEVELOPMENT

October 9th, 2024

As the digital transformation (DX) wave sweeps across Japan, businesses are under immense pressure to innovate and stay competitive. However, many Japanese companies are struggling to secure IT resources to meet the demands of this shift. To cope with this, many companies choose IT in-house development while others think outsourcing like onshore, nearshore, and offshore will bring more advantages. However, these solutions are not optimal in the long run.

What will be the most ideal model for businesses to secure IT resources in system development in the mid and long term? Discover now in this article!

Why Not In-house Development?

In-house development may seem like an attractive option for many businesses. In fact, developing an in-house team provides firms with better control over their development process and greater protection for confidential data and intellectual property. However, in-house development also brings some drawbacks. According to IPA’s 2024 report, 87,4% of Japanese firms are having difficulties to secure IT resources for in-house development. There are several key issues for this problem, including:

・ Shortage of IT resources: The IT labor market in Japan is currently facing a severe shortage and it is predicted to worsen by 2030, with an estimated deficit of around 590,000 professionals in Japan alone. The higher demand for technological solutions and Dx has created greater pressure on companies, making it more and more difficult to recruit and retain top IT talent.

・ Escalating costs: The financial burden related to maintaining an IT in-house team is on the rise. According to a report, over the last decade (from 2013 to 2023), the average minimum annual salary of an IT personnel increased by approximately 1,5 times, creating an invisible burden on businesses.

・ Higher turnover rate: A recent research revealed that 80% of highly qualified IT personnel express a willingness to change their jobs. This not only creates instability in the IT workforce market but also leads to the loss of expertise and experience in companies.

How About Outsourcing?

In the case that in-house development becomes more and more challenging and costly, many firms turn to outsourcing models (onshore, nearshore, and offshore) to secure IT resources. These solutions might be effective in the short run but they introduce additional pitfalls in the long run, including:

・ Communication barriers: The differences in languages and cultures between in-house and outsourcing teams might lead to several severe communication problems and misunderstandings. This, in fact, not only affects negatively timelines but also decreases the efficiency of the projects.

・ Management difficulties: Managing remote teams can be complex, and ineffective oversight is a common reason for project failures. In reality, many companies have failed due to poor management, including a lack of oversight and ineffective coordination.

・ Misalignment with business objectives: Utilizing external resources may result in a disconnect from the company’s culture and long-term goals. This can negatively influence the overall efficiency and the inconsistency in operations.

・ Hidden costs: The collaboration between internal and external teams can cause many unpredictable hidden costs. This can increase the total cost of the project and diminish the overall benefits of outsourcing.

So What Will Be The Right Answer To Secure IT Resources?

If your organization is grappling with the challenges of in-house development and the shortcomings of traditional outsourcing, you are not alone.

To address these pressing issues, Miichisoft is excited to announce an upcoming webinar “Can In-House Development Cut Costs? How the Hybrid & BOT Model Solves the Problem”.