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Why VCs shun outsourcing 

VCs and the tech scene have never been a fan of outsourcing.

After all, the tech scene is into tech. And sectors involving human capital are often considered the antithesis of tech. Fair enough.

VCs often assess a company’s efficiency based on the ratio of revenues-to-staff. The more money a company can generate per employee, the more efficient it is.

Maybe with AI, we’ll soon have the world’s first unicorn with only one founding employee. Imagine that!

Offshore staffing is the opposite of (human capital) efficiency. It is collectively one of the largest employers in the world, and highly dependent on human contribution.

In a paradigm where ‘software is eating the world,’ it’s no wonder that old-school ‘staffing solutions’ are passé for the VCs.

But that’s not the whole story, and the industry is missing the tectonic shift toward the globalization of employment.

Hungry machines

In truth, the tech industry employs a vast number of people. Google employees 185k, Apple 165k, and Facebook 70k. Until the recent layoffs, the tech world desperately needed qualified, capable staff. And there continue to be severe staff shortages across the economy generally, and salaries are skyrocketing as a result.

So why don’t these forward-thinking, liberal techies embrace global employment more?

Unfortunately, tech companies have traditionally had a prima donna complex. They argue that startups should only be run by the world’s best and brightest minds. And those ‘bright minds’ don’t come cheap. They assume that offshore staff could not possibly perform at the same level as their Western counterparts.

This is fine in good times when cash is flowing and valuations are crazy, but in the real world, companies have to make profits and stick to a budget.

As the world heads into a recession and tech companies lay off thousands of people, they may consider leveraging global employment to cut costs while still maintaining productivity.

The world has close to 8 billion people and tens of millions of highly capable professionals living well outside the Silicon Valley bubble. The vast majority of the planet earn a fraction of a US salary. They are bright, qualified, and eager to work.

It’s a fantastic opportunity for the US to find great workers – in spite of the labor shortage – at excellent prices.

With the rise of remote work, these once-distant professionals are increasingly connected to the global workforce. And as the economic recession starts to bite, more companies are looking for ways to cut costs whilst maintaining productivity.

There is enormous value in the unification of a single global workforce. The puck is moving in this direction. And VCs and the tech community are slowly starting to catch on.

Watch this space.

The question for your business

Are snobby misconceptions about offshore talent holding your business back from leveraging a near-infinite pool of global talent?

Read more thought leadership articles here:

• Why is outsourcing so polarizing?
• What businesses can learn from the Champion-Challenger model