IT vacancy costs: Reducing Cost of Vacancy through IT outsourcing

Cost of Vacancy reduction

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August 23, 2023

IT vacancy costs: Reducing Cost of Vacancy through IT outsourcing

IT Staff

Introduction

The Cost of Vacancy is a critical metric for companies to quantify the impact of vacant positions. The term describes the financial impact and productivity losses caused by unfilled vacancies. Especially in the context of the ongoing shortage of IT experts, these costs have become a key concern. In this article, we will look at the impact of the shortage of skilled IT experts on business operations and present you solutions on how to effectively reduce the Cost of Vacancy. Let us take a deep dive into this important topic and explore the benefits of optimized IT resource planning.

What does Cost of Vacancy mean and what impact does it have on companies in the IT sector?

Cost of Vacancy refers to the costs incurred by a company until the respective position is filled. In the IT sector, these costs are particularly high because qualified professionals are scarce and demand exceeds supply. A lack of IT professionals can lead to delays in projects, reduce productivity and ultimately reduce profits.

What impact does the shortage of IT experts have on productivity and business success?

The shortage of skilled IT experts in Germany can have a significant impact on the productivity and business success of companies. It can cause delays in project implementation and reduce efficiency as existing employees have to take on more tasks. This in turn can lead to higher staff turnover. Furthermore, it can be difficult to keep up with technological developments, which can result in competitive disadvantages.

Challenges of the IT experts gap: How does the shortage of IT experts affect companies’ costs and operations?

The shortage of skilled experts in the IT sector has a significant impact on the costs and operations of companies. Finding qualified IT professionals incurs high recruitment costs and often requires the provision of attractive salaries and benefits. In addition, companies may be forced to hire less qualified staff and invest in their training and development. Productivity losses, limited innovation capacity, the emergence of gaps in IT security and possible impairments in customer satisfaction are further consequences of the shortage of skilled IT experts. It is therefore crucial to proactively develop strategies to counteract this skills shortage and minimize the costs as well as the impact on operations.

The benefits of IT outsourcing

Why can IT outsourcing be a solution to the shortage of IT experts?

IT outsourcing offers a promising solution to the shortage of skilled IT experts by giving companies access to a broad network of highly skilled IT professionals. By working with experienced IT outsourcing service providers, companies can access talents with a range of skills that may not be available in the local labor market. The flexibility, cost savings, expertise and quick filling of IT vacancies are other benefits that mark IT outsourcing as an effective way to bridge the gap of IT experts. This strategy enables companies to successfully advance their IT projects, effectively meet the challenges of the shortage of skilled IT experts and at the same time benefit from many other advantages of IT outsourcing.

Example calculation for cost savings:

Presenting a sample calculation of how IT outsourcing can reduce the Cost of Vacancy compared to traditional staffing.

Cost of Vacancy is a critical metric that measures the financial impact of unfilled IT positions on organizations. To illustrate how IT outsourcing can reduce the Cost of Vacancy compared to traditional staffing, let us look at two scenarios:

Example calculation no. 1 – traditional job filling:

Assume a company has a vacant IT position with an annual salary of 60,000 Euros. The average number of working days per year is 250. The factor* for the Cost of Vacancy is 2 to account for indirect costs such as lost productivity, training and induction time. The average time-to-fill, i.e. the time needed to fill IT positions, is 90 days.

Annual salary: 60,000 Euros; ø working days per year: 250; factor*: 2; ø time-to-fill: 90 days
Cost of Vacancy = 60,000 Euros / 250 working days x 2 factor x 90 days = 7,200 Euros

Example calculation no. 2 – IT outsourcing with job filling in 2 weeks:

Now let us consider the same IT job filled by IT outsourcing. In this scenario, the time-to-fill is only 14 days, as competent IT outsourcing partners quickly provide qualified IT experts.

Annual salary: 60,000 Euros; ø working days per year: 250; factor*: 2; ø time-to-fill: 14 days
Cost of Vacancy = 60,000 Euros / 250 working days x 2 factor x 14 days = 1,680 Euros

Summary of IT vacancy costs:

As the example calculations show, IT outsourcing can significantly reduce the Cost of Vacancy. In the conventional job-filling process (example calculation 1), the Cost of Vacancy is 7,200 Euros, whereas with IT outsourcing (example calculation 2) it is only 1,680 Euros. With a drastically reduced time-to-fill through IT outsourcing, companies can not only minimize the financial burden, but also reduce the negative impact on productivity and the company. The decision to attract IT professionals through IT outsourcing can prove to be an effective strategy to reduce the Cost of Vacancy and thus increase business success in the long run.

*The factor that takes into account indirect costs such as lost productivity, training and onboarding time. The higher the factor, the more costs are included.

Factor* Explanation
1 The gap of IT experts has very little to no impact on the company’s operations. Only very low costs are incurred.
1.5 Low impact: The shortage of skilled IT experts has a minor impact on the productivity and operations of the business. There are low replacement and induction costs.
2 Medium impact: The shortage of skilled IT experts has a moderate impact on productivity and business operations. There are high costs of lost productivity, induction and training.
2.5 High impact: The gap of IT experts has a high impact on the business. There are very high costs due to lost productivity, induction and training.
3 Very high impact: The shortage of skilled IT experts has extensive and severe impacts on business operations. Significant costs are incurred.

Conclusion: Solution for reducing IT vacancy costs

The article has shown that the shortage of skilled IT experts can have a significant impact on organizations, including cost increases, productivity losses and business impact. In this context, IT outsourcing is proving to be a promising way to reduce the Cost of Vacancy and address the gap of IT experts. With access to a wide network of talented IT experts, flexibility and scalability of resources, cost savings and fast filling of IT positions, companies can reap the benefits of IT outsourcing.

Take the opportunity to future-proof your business by considering IT outsourcing as an effective solution to the shortage of IT experts.

FAQ

What are vacancy costs (cost of vacancy)?

Vacancy costs, or cost of vacancy, are the costs incurred by a company until a vacancy is filled. These costs are particularly high in the IT sector, as qualified specialists are rare, and demand exceeds supply.

How to calculate vacancy costs?

Vacancy costs are calculated by dividing the annual salary of the vacant position by the number of working days per year and then multiplying this by a factor that takes into account indirect costs such as productivity losses, training and induction time. Finally, the result is multiplied by the number of days the position remains unfilled (time-to-fill). The formula goes like this:
Cost of Vacancy = (annual salary / working days per year) x factor x time-to-fill days.

How is IT outsourcing a solution to the shortage of skilled workers?

IT outsourcing provides access to a broad network of highly qualified IT experts who may not be available on the local job market. It offers flexibility, cost savings and fast staffing of IT vacancies.

How can IT outsourcing reduce the cost of vacancies?

IT outsourcing allows vacant IT positions to be filled much more quickly, which significantly reduces the cost of vacancy. Sample calculations show that the costs can be significantly lower with IT outsourcing than with conventional staffing.

What are the additional benefits of IT outsourcing apart from reducing vacancy costs?

In addition to reducing costs, IT outsourcing offers increased flexibility and scalability of IT resources, access to specialized experts, rapid staffing of vacant IT positions and the ability to focus internal resources on core competencies.