How Long Will The Acute Talent Shortage Last?
getty  Companies now face an acute talent shortage, particularly for digital skills. As I described in my recent blog, this talent shortage means companies must now pay a lot more for new talent and pay more for existing talent to keep them from leaving. Consequently, it will bust corporate budgets for 2021, and it is already causing a boom in offshoring. Company executives now ask me whether I believe this will turn out to be a short-term imbalance between supply and demand or if secular forces at play that will make the talent shortage a much longer-term issue. I think the answer is somewhat mixed. Part 1 Of The Answer To How Long?  Consider first the perfect-storm factors that caused the current talent crisis:   Pent-up demand of projects that were delayed during the COVID-19 pandemic   Demand associated with a V-shaped recovery in an expanding US economy   Demand driven by a renewed focus on digital transformation that focuses on embedding technology and building technology platforms in businesses that allows companies to compete better in the marketplace  These factors are a perfect storm of demand, which results in acute talent shortage in the marketplace. Yes. Like all storms, the conditions eventually abate or diminish. There is no doubt that the imbalance between demand and supply will somewhat lessen. For example, companies will work through the pent-up demand from COVID-caused delays; and now at the beginning of July, most are probably a month or two away from achieving that objective. In addition, the Biden Administration is more open to immigration than the previous administration. So, companies have more access to import talent into the US as H1B visas are easier to obtain. That will modestly affect the market demand. Furthermore, keep in mind that economic cycles come and go. Therefore, at some point, the US economy expansion will slow down; and that will lessen the demand for talent. Whether that happens one or three years from now is unclear, but it will happen since economies move in cycles. However, one factor driving the demand for talent, especially in digital, IT and engineering skills, will not change. Part 2 Of The Answer To How Long?  What will not change is the underlying secular forces driving the demand for talent. I think it is easy to underestimate just how powerful these secular forces are, specifically the forces driving digital transformation. This comes as companies now recognize that they can compete much more effectively by introducing IT and engineering more heavily into a business and use them to improve efficiencies and create new value for improving customer experiences and other stakeholder demands. I believe this will be a five-year mega-cycle in the acute talent shortage. The preparation for this five-year mega-cycle began building prior to the COVID pandemic because of a lot of talk and focus on novel digital technologies. The talk and focus are different now in the post-pandemic environment. During the pandemic, companies that had already implemented digital technologies fared much better than others and gained greater conviction about what worked best and what did not meet expectations. Now they eagerly want the benefits of those technologies and want to implement them at scale. Eager for the benefits of the technologies and the new digital operating models, companies are committing to drive the change management in their organizations that allows them to evolve their operating models to take clear advantage of digital benefits. Considering the breadth of these investments, both already on the books and coming down the pike, it is almost impossible to believe that we are not facing a three-to-five-year mega-cycle  most likely five years. And it will work independently of the rebounding US economy and the pent-up demand from COVID-delayed projects. Consequently, we will have five years of intense competition for talent. Implications  The implication of five years of acute talent shortages and talent wars is hugely significant. If you agree with my opinion, then your company should change how it builds an assured supply of talent, both internally and externally. Moreover, if you believe this, then your company should invest heavily into building offshore Global Business Service (GBS) centers so that you can get access to the talent where they live, whether that be India, Eastern Europe, the Philippines or other low-cost destinations. Finally, your company needs to change its practices around buying services from third-party service providers. Look more aggressively at service providers. Consider whether you should expand what they do for your company. Look at them from a more strategic perspective. In addition, look now at how your company can evolve its services portfolio so that it will have an assured supply of the quantity and quality of talent, especially in the areas where you need talent with digital skills to grow your business.