The following information is excerpted from Softletter’s forthcoming Software Company Staffing Report. Very little information or data is available on this topic in the industry and given the recent controversy over such topics as outsourcing, H-1B, the relocation of jobs from the U.S. to international venues, the possible misuse of H-1B by companies such as Disney and Southern California Edison and the ongoing questions about how software companies staff up, we think this information very timely.  Both parts of this article will be open through the end of the year and then only be available to Softletter subscribers.)

The Softletter 2016 Software Company Staffing Survey was launched in autumn of 2016 and will still be open for a few more days in order to enable industry executives to participate and receive the complete summary results.The MatrixCX (www.allegiance.com) online system is used to generate and manage the survey. The survey has currently recorded over 300 valid responses from senior software executives, enough to ensure the summary results are stable and will not change significantly. The purpose of this survey is to develop a comprehensive snapshot of the current state of how software companies staff, what jobs are most typically outsourced, and how staffing resources are typically allocated.

Throughout this article, numbers of particular interest have been bolded. Decimals have been rounded off to one degree of precision for summary results and percentages may not equal 100%.

 H-1B Personnel Usage (cont.)

For what positions are you most likely to recruit for H-1B personnel?

The Other answers all centered around technical and customer support personnel. We thought the 13% reporting they recruited H-1B personnel for sales positions very intriguing.

Please include all functional groups within your company for whom you recruit  H-1B personnel.

The 27% recruiting H-1B for sales personnel was interesting. We will be looking into this number more deeply in the future.

Temporary Personnel Usage

Do you rely on temporary personnel to meet your staffing needs?

Temporary personnel usage in software companies has always been popular and is increasing with the advent of freelance systems such as Fiverr, Freelance, Upwork and others. We believe the very high 49% number presages the increasing trend towards creating virtual corporations.

On a yearly basis, what % of your entire employee base consists of temporary employees? (This number should include “temps,” contractors, consultants, and freelancers. It should NOT include H-1B employees)

While we have not included drill downs by company size in this article, the 14% reporting 40+% is dominated by smaller, younger companies.

Please tell us your primary source of non-payroll personnel

Please tell us all the sources you rely on for non-payroll personnel

Please note the high number companies who use the “new generation” of temporary employment sources in both the “primary” and “all” questions.

Staffing Allocation

Is your product development group staffed primarily by internal resources? Answer “Yes” even if your product development personnel are located out of your company’s HQ or home country but are considered company employees, not contractors.

The trend towards outsourcing development, driven by the rise of SaaS and apps, is growing steadily. Some early research we did

Is your sales group staffed primarily by internal resources? Answer “Yes” even if your sales personnel are located out of your company’s HQ or home country but are considered company employees, not contractors.

Is your marketing communications group staffed primarily by internal resources? Answer “Yes” even if your marketing personnel are located out of your company’s HQ or home county but are considered company employees, not contractors.

We were not surprised by the high numbers of companies reporting No. In the past, software firms often supported large documentation, design, and art production departments. The future of these positions lies in contracting and work for hire projects.

Is your product management group staffed primarily by internal resources? Answer “Yes” even if your product management personnel are located out of your company’s HQ or home county but are considered company employees, not contractors.

We’re aware of some circumstances where firms have attempted to run their product management from HQs located internationally, but these efforts have always failed. Idiom, local customs, knowledge of local business processes, commercial law, and other factors make product management at a distance very problematic.

Is your administrative group staffed primarily by internal resources? Answer “Yes” even if your administrative personnel are located out of your company’s HQ or home county but are considered company employees, not contractors

We expect the No cohort to grow over the next several years as the concept of hiring remote admins gains traction.

Analysis

It’s not surprising that software companies rely on H-1B primarily developmental talent, but we were surprised by the 24% of companies reporting that their key developmental resources were staffed externally. We would have predicted a number between 10% to 15%. What accounts for this?

One major factor is that as software leaves local servers, the idea that that software code can be maintained and upgraded internationally becomes conceptually easier for companies to accept. Another driver is that in SaaS and mobile, the concept of domain specialists experts creating online software systems has gained traction. In this model, a person or group expert in the business processes and environment of an industry, i.e. a cosmetic surgeon, for example, developing an application to schedule surgery consults remotely, dictates product specifications to a hired group of developers. This is a different perspective from the traditional mythology surrounding software, where software is created by boy genius programmers (B. Gates, M. Zuckerberg, Bobby Murphy, et al).

A final question swirling around the issue of H-1B and development ties back to Silicon Valley’s pervasive aegism. There has been a great deal of skepticism directed at claims made by major firms such as Microsoft, Apple, and many others that there is an actual shortage of programming talent in the U.S. Is it true that a 50 year old C++ programmer can’t be quickly retrained to code in Python? Swift? Whatever the latest wonder language happens to be? We’re unaware of any objective tests and it would be interesting to see some.

One thing is becoming clearer as the Trump administration prepares to take power is that H-1B as it’s now constituted will undergo extensive revision if its current form. Increased focus on American firms such as Carnival outsourcing their IT departments in order to cut costs are reaching increasingly sympathetic ears in Congress, and with the active support of the nascent Trump administration, several initiatives are underway to completely revamp the program.  While high-tech has been a reliable supporter of the Democratic Party and its candidates, as we noted in our previous article, support for IT outsourcing is a PR and political nightmare. Software companies should anticipate sharp increases in the future of the costs of hiring H-1B personnel.

The high usage of temporary personnel was also outside our expectations, with usage split almost equally at 50%/50%between usage of. The growth of online outsources such Upwork and Freelance is striking. Only five years ago, such services did not exist.

The increasing usage of contractors and temporary workers also presents a challenge to critics of H-1B. Software companies are not easy, soft political targets in the manner of established companies such as Carnival and Disney, particularly startups and new firms such as Snapchat and Slack (if you’re IBM, Microsoft, or even Facebook, your PR exposure is much higher). Startups are expected to be small, scrappy, and cheap. By nature, software development is becoming increasingly international and distributed. A Ruby on Rails coder hired in Islamabad to help produce a new online collaboration app is not going to attract negative press attention, and attempting to police and limit such hiring would be a pointless exercise. Ultimately, the battle against H-1B may simply drive the increasing growth of virtual companies.