Covid-19 and the Impact on Project Delivery
One of the most startling aspects of our industry’s response to the Covid-19 pandemic has been the pace at which delivery teams have been able to switch to remote working, while ensuring that critical systems and projects keep running.
India’s influential industry organisation NASSCOM stated this week that 90% of the country’s IT services workforce were currently working from home, with only critical staff going into work on campus.
We observe a similar picture among those IT services providers leveraging nearshore delivery teams in Eastern Europe. Allocating at least one day a work of homeworking has been standard practice in the region for some time, and most providers we’ve spoken with have told us that the shift to full-time home-working has been relatively pain-free.
Of course, most delivery leaders are also faced with the reality of having to bench or furlough many staff as work generated by new projects dries up – so not all team members need to be moved to remote working. There are also limits to how much work can be delivered from home-workers on projects involving the support or development of sensitive workloads and projects. Many IT departments or external providers will not be able to provide remote workers with secure corporate VPN access to provide secure, encrypted access via the public Internet, and this will be a focus area for investment in the future as companies reassess their business continuity planning.
But what will be the other longer-term impacts of the coronavirus pandemic on delivery models?
During the last five years, we have seen a huge shift towards agile delivery, with most favouring to use onshore, and more often than not, onsite teams to work in scrums in order to drive a more collaborative and productive approach between developers and business leaders. This has led to the rise of a thriving community of local agile development services providers across the region.
We don’t believe that the momentum towards agile will be checked once appetite for new development returns. Annual spending by European businesses on agile and DevOps services already exceeds €10bn according to our latest figures.
But one effect will be that many businesses will look at how they can scale their agile initiatives across global teams. This is something that we have discussed in recent blogs, with a growing number of companies working with international agile delivery teams on projects that don’t require a high degree of local market or regulatory focus.
The focus for most businesses across all industry sectors following the peak impact of the pandemic will be on cost efficiency, which will ensure lasting demand for competitively-priced delivery teams in offshore/nearshore delivery centers. We have over the last five years seen some providers reduce capacity at their Indian delivery locations as they rebalance their workforce away from legacy skills and retrain around new technology such as cloud, analytics and IoT. The economic aftermath of the pandemic will increase appetite for the labour arbitrage benefits of global delivery, turning up competition for talent in the main hubs. In the medium term, service providers may have to take a more open approach to remote and flexible working in order to retain their best people. This may be a challenge given the draconian approaches that some companies are taking to ensure productivity from their home workers, including the intrusive use of webcam and keyboard activity tracking.
Buyers will also continue their push towards gaining extra efficiency gains through process automation. While many have enjoyed some early success in automating aspects of service management, there remains huge scope for applying automation in areas such as software testing which remains hugely dependent on manual intervention. Our recent research into scaling robotic process automation (RPA) found that 60% of large and mid-sized businesses planned to more than double the proportion of their processes that are automated within the next five years. “Can this be automated?” will be the question that every project leader will ask once they are in a position to start new initiatives.
Another shift that we may see is a spike in the use of freelance resources as businesses look to keep their internal bench as lean as possible, while tapping into external experts to fill in specific gaps in their ranks. This is a role that will continued to be supported in more flexible labour markets such as the UK and Netherlands by the well-established body-shopping vendors (encouraged by a delay in the implementation of the IR35 regulation in the former country). But it will also drive interest in platforms such as the one run by Sweden’s eWork, which helps connects businesses to independent consultants with the relevant experience. The company recently reported a 14% increase in annual revenue to €1.2bn, making it Sweden’s largest provider of IT services.
In summary, the mass remote working experiment will have a lasting impact on the preferences of the workforce that services providers must respond to when the war for talent resumes. There will, in the short term at least, be a slight swing away from the recent focus on local delivery to using global teams – driven by a need to reduce cost and limit regional risk exposure. As new projects start to get off the ground, there will be interest in using freelance resources in order to keep internal teams as lean as possible.
Next week, we will share our thoughts on how the pandemic may reshape commercial models in IT services.
For full coverage of our analysis on the impact of Covid-19 on the software and IT services market, please visit our dedicated microsite.