Pragmatic Outsourcer, v. 1.0
The first volume of Pragmatic Outsourcer – the book primarily based on the materials of this blog is almost ready. There still a few things to clean up, pictures to pick, codes to request but I can see the light in the end of tunnel. The volume is going to be published as e-book and available as free download from this site.
The first volume is dedicated to the first step in outsourcing – making the decision – and that’s probably the most important step. The word “decision” comes from Latin “” meaning to cut. To make the decision means to cut other options. Many people do not look at decisions in such dramatic manner, in a way “let’s get married and if it doesn’t work out we’ll divorce”. Well, that’s a valid perspective, at least for some people. Of course any decision, even easily reversible has its consequences in many cases making reversibility quite expensive. Offshore decision is one of those thus one should chose wisely…
Choose well, your choice is brief, and yet endless. [Goethe]
I believe book format works better for delivery and consumption of material that is covered in this blog, yet it has its issues as well. In some way e-book is a static snapshot of one’s thought process while blog is a near real time stream. So both forms are important and would bring a better set of tools to the reader. That’s why I decided to take the effort to create the book.
Creating the book turned out to be harder than I thought even though a large portion of content was readily available. When you deliver material one random chapter you do not need to worry about blind spots (important material not covered), structure, consistency, etc. All that becomes a serious concern and takes substantial time to address.
With my ESL handicap I also have to deal with challenges of style, grammar, etc. that for some reason I decided to take much more serious than in this blog. I guess having ISBN number assigned to the written word raises the bar, at least in my mind. In that arena I had to seek professional help which naturally came from offshore. Eat your own dog food so to say.
Anyway, I am pretty excited and hope to put the first volume in front of you shortly and then immediately proceed to the second one – vendor selection. Hopefully in not so distant future the full scope of offshore outsourcing from decision to termination will be covered in the series of e-books I have in mind. And then… if the traffic to e-book justifies it I would love to put all my Tips, Tricks and Traps of IT Outsourcing in a hard or even better paper cover… for dummies or unleashed series… ha.. judging by what it takes to create e-book publishing in-print must be a very tough journey, so the traffic must be really good to justify it.
Offshore Technical Due Diligence
A couple years ago I went through a technical due diligence (TDD) of several relatively small offshore vendors. The vendors were providing product development services for one of my clients, the vendors also supported operations of the SaaS for all of the products. The client had fully outsourced s/w product development and support to those vendors and retained practically no technology resources internally with exception of MIS / SaaS IT support.
The goal of the TDD process was to asses whether the vendors are efficient and can continue performing fairly complex projects involving working with sensitive information. There are a couple important distinctions here:
- The vendors were in large degree focused on the product development for my client and the rest of their business was relatively small.
- The vendors have been performing services for a number of years with very light oversight from the client’s side.
- The quality of work to date has been on a low side yet deemed sufficient for the money.
Offshore, Nearshore, Right Shore, Best Shore… oh My
As we can see generating x-shore names is a popular among all kind of companies even established players such as capgemini and eds jumped on band-naming wagon.
It won’t take long till someone trademarks smartshore or ezshore or put a copyright on the word shore – too bad all nautical charts would have to be reprnted… Other companies find using shore words too mundane and invent their own words and phrases such as Chindus Strategy (China-India-US) or BRIC-sourcing. And Me2 – with my term of Disposable Outsourcing.
Hey, why not? That’s somewhat akin to starting companies in the dot-com era – the more confusing it was the high the chances VCs would be all over it … Well, let me tell you, there is no best shore when it comes to IT, there is no best of all shores, and there is no silver bullet. By all means why would anyone outsource if they could deliver on their obligations without headache of dealing with geographically distributed culturally remote third parties?
During those good old days when a Ph.D. from a 3rd world country was only $8K a year cost advantage was so profound that that it was practically impossible to resist the temptation of outsourcing. Today if Ph.D. is asking for $40K the chances are s/he bought the diploma on some black market. With average saving of mare 20-30% it’s not about cost advantage anymore, we go offshore for variety of reasons, goals and objectives. Defining those should be your first step before you even consider vendor search and daunting task of picking perfect destination. “If a man knows not what harbor he seeks, any wind is the right wind.” [Seneca] It should be set of your own objectives, reasons and goals specific to you organization, not taken verbatim form some book or my blog (even though I think you can find a lot of helpful ideas in Top Reasons for Outsourcing or My Reasons to Outsource).
When the reason are clear in your mind it’s time to start picking the “shore” and like with grocery shopping you may want to start with the nearest supermarket and only if what you need is not there you would consider taking a longer drive. Thinking of that metaphor it could be actually not that far off. I live in one of those cul-de-sac communities, the nearest supermarket to my place is expensive and offers limited selection, I do not often shop there, but it’s great when you just want to hop in a car and bring a gallon of milk and a loaf of bread. My main shopping place is about 15 min further driving, but it still doesn’t cover all what I need, for example Whole Foods is about 30- min drive from my place and I still go there once in a while, and add to it occasional trips to farmers market, wineries of Napa, or my friend’s organic farm…
I can’t tell what shore is going to be the best for you, chances are it is different from what is best for some of the vendors knocking on your door, but one thing I am sure of – chose it wisely. We are free to a point of choice, after that the choice controls the chooser.
10 Myths of Offshore IT Outsourcing Revised
Google search on 10 myths in offshore outsourcing brings a few good articles written 3 – 7 years ago, some of them are still worth looking at even though some of the top myths lost their mystical nature, some debunked myths turned out to be facts, so it is worth taking a new look at what the myths are and whether they are worth debunking…
Let me start with a few Facts that are often called Myths:
Fact # 1. Offshore outsourcing is costing U.S. jobs. This myth has been debunked so often that by now we should strongly believe in its opposite. Supposedly someone very trustworthy institution calculated that for every dollar spent on a business process that is outsourced to India, the U.S. economy gains at least $1.12. An easy way to fix the economy, isn’t it? Should we pass the idea to the new administration? Well, I am not planning on questioning this global statement. What I can say with certainty is that every outsourced IT job is a local IT opportunity lost.
Fact # 2. The cost benefits of outsourcing are overstated. I touched on this subject in several earlier posts (e.g. Outsourcing Myths: cost advantage). The reason I wrote on the topic is exactly that “the cost benefits of outsourcing are overstated”. I would not call IT outsourcing “the best story ever sold” yet there is a large portion of exaggeration to almost every offshore vendor presentation I’ve ever seen. Fortunately many of buyers came to grips with the fact that on any meaningful scale IT outsourcing can at best save 20-30%, if handled well.
Fact # 3. There are “huge” cultural barriers. For anyone who’s been through any substantial outsourcing initiative there is nothing mythical about cultural barriers. The fact that they are not necessarily huge and sometimes only subtle doesn’t make them easier to deal with. Especially now when “IT outsourcing” doesn’t equal “Outsourcing to India” underestimating complexity and challenges associated with cultural differences can trip over otherwise bulletproof engagements.
Now let me switch to some of the most popular misconceptions that fit the definition of “Myth”:
Myth 1: India is the best destination for IT outsourcing. India is a leader in IT outsourcing no matter what angle you look at – sheer volumes, number of providers, process maturity, breadth and depth of service offering and so on. It doesn’t make India the best destination in every case though. In particular India is farshore destination for European and US-based companies vs. nearshore option provided by Eastern Europe or Latin America correspondingly. There are other Cons to India as the destination (take a look at Pros and Cons of Outsourcing to India). Growing competition from almost every country in the world cuts into India market share and offers multiple alternatives to buyers across the world.
Myth 2: Offshoring is the best strategy for cutting costs. Offshore outsourcing is just one of the strategies that companies can use deploy in tough economic climate. There are many areas that should be considered by the companies looking for bottom line improvements. In many cases the steps should include rationalization of IT portfolio, SDLC and other process improvements, usage of tools, etc. Offshoring is a very powerful weapon and as other ones is a double-edged sward.
Myth 3: Offshoring drives IT salaries down. Offshore outsourcing is of course a contributor and plays its role in salary dynamics, it is however less important factor than other elements of the economy and geography. The areas that are affected the most are actually wages of “local outsourcers” – freelancers, contractors, etc. Take a look at oConomy you will see some staggering trends catering to the concept of “flat world”. Hit with homesourcing many US freelancers had to drop their rates to what market is ready to pay nowadays. On the other hand some comp. packages increased in size: consider for example rates you need to pay people running distributed engagements.
Myth 4: Offshoring will result in significant unemployment in the technology sector. Similar to salary dynamics offshoring affects employment trends, and so far did not deliver the impact feared. High-end IT professional continue to be one of the scarcest commodities in the world, even low-end IT workforce still remains gainfully employed in a large degree despite huge economy downturn. It remains to be seen how far IT unemployment figures would go and would be the geographical distribution.
Myth 5: Quality of offshore IT operations is lower than in the US. That is almost as bad of a generalization as they get. As a matter of fact having seen IT operations in many companies in this country and some of the best operations offshore I can say that there is much to be learn from IT companies in China, India and other countries. As a matter of fact how many CMMI5 companies are there in US and how many in India? It would be interesting to see average maturity across IT outfits in different countries.
Myth 6: Quality of code produced by offshore organizations is very poor. Quality of code produced by outsourcing companies is another topic being frequently discussed. And again I would not venture to generalize; the code is produced by people, not organizations. Bad programmers write bad code and bad programmers are one of the most numerous creatures in the IT habitat. High wages of IT and huge demand on it attracted large volume of mediocrity into the field across the world and even in exclusive locations such as Silicon Valley you will come across of horrible code on a regular basis. Add to that the possibilities of writing bad code that have been opened by new “forgiving” technologies such as Java or PHP and you get where we are today…
Myth 7: Offshoring is a never ending nightmare. Funny enough I hear this one more and more often nowadays. Yet when you deep dive into the reasons behind nightmare they often point much more towards the organization outsourcing the IT tasks rather than to the vendor. As I said many times it takes knowledge and skill to apply outsourcing tools to the benefit of your organization. You can not get rid of a problem by throwing offshoring at it. Organizational inefficiencies such as broken communications are only amplified by outsourcing and can result in the nightmares.
There are more common misconceptions about outsourcing, it’s not surprising as it is still a somewhat new and rapidly changing phenomenon, but I think I should stop at this point as I met my quota of top 10…
10 Things you Don’t Want Offshore Vendor to Know
I am an avid proponent of open communications and believe the more partners know about each other the better are the chances for the partnership to be successful. There are still a lot of things that you should keep to yourself for the same general reason – to increase the chances of the partnership being successful.
1. Game plan. Negotiations are an ongoing part of business relationship – not just the talks around the contract. Keep you card close to the chest and never disclose the game plan, even far after the game is over.
2. Decision making process. Whether you signing the initial contract, extending the scope of the engagement or making changes in the way the relationship is run you should not disclose the details of decision making process. In particular if you are the one making the decision you should not proudly announce it. There are many reasons for keeping it low, let me mention just a couple:
- Disclosing decision making process will limit you ability to use “high authority” negotiation gambit that is a powerful technique for getting more in negotiations.
- The last thing true decision makers need is all might of vendor sales force targeting them through every sales channel.
3. Budget. I always give my vendors an indication of the budget but never exact figures. One of the main reasons to keep it private is the nature of budgets – they change, funds get reallocated, etc. And of course something to be said about negotiation upper hand with less information at your partner disposal.
4. Roadmap. Product and relationship roadmaps should be shared with your vendor only at a very high level. Details should not be communicated for many reasons – business counterintelligence and agile nature of the roadmaps (similar to budget note above) being the most important.
5. Details of competition. The competition can offer a lot during contract negotiations: from cannon fodder to reasonable alternative. Your offshore partner should know that competition exists (at least that would keep them on their toes) but not the details, even the names of competing entities is not something to disclose. Among many reasons let me point out just a couple:
- You probably have an NDA in place, that’s already a strong reason to keep your lips sealed.
- The runner-up competitor today can be a vendor of choice tomorrow.
- You do not know what kind of back-end links your vendors have in place.
6. IP / Know-how. If you must share anything of that nature make sure that the information distribution is governed / controlled tightly. The vendors with the best intention have little power over disgruntle employees – the prime venue of information leak. Employ distribution of the information on a Need-to-Know basis.
7. Confidential information. Same as above applies to many aspects of your business, internal and external (e.g. customer data). Consider rules associated with on handling ePHI (electronic protected healthcare information) or financial information and penalties associated with its mishandling. This is a very comprehensive topic; I will cover it in a stand-alone post.
8. Dirty Laundry. Sharing it with your vendor can hurt you in many ways; in particular consider the scenario of the relationship gone sour for any reasons; won’t you prefer your ex-partner to know as little about you as possible?
9. Personal details. Do not get close and personal with the vendor / vendor employees. There are many ways it can end up costing you more than you bargained for. There is no harm in sharing you “public” personal details (married, three kids lived in Bay Area all your life, etc.) but sharing little known data may put you in a difficult situation.
10. Ulterior motives. Ulterior means hidden – so keep it that way, if you pick your vendor based on something rather than items stated in your RFP, keep it to yourself. It’s amazing what kind of confessions I heard in that department (e.g. “I picked the company in China because my wife is Chinese and it makes it easier for us to stay in touch with her family”). This won’t help you professional image / reputation and can actually hurt your career…
Top 10 Reasons NOT to Outsource
Remi Vespa suggested an interesting topic in his 10 reasons NOT to outsource; while I agree with most of the points he made, my top 10 would be somewhat different:
1. No reasons to outsource. Let me clear a suspected circular reference here: take a look at my earlier posts Top reasons for outsourcing and My reasons to outsource; if your reasons for outsourcing are not listed there and more so after some reading and thinking appear to be superficial, they probably are.
2. Personal. If you do not believe in outsourcing, if it could present a clear and present danger to your career, or outsourcing is likely to affect your life in some tangible negative manner (take a look at Offshore Risks: Team and Personal Impacts for some hints) stay away from offshoring as far as you can.
3. No executive support / sponsorship, no organizational / team support. If you running and uphill battle in your organization – your execs do not believe outsourcing is beneficial for the organization, if getting appropriate funds is questionable, if your team doesn’t support you. Well, maybe you are agent of change, yet still, you need to pick your battles.
4. Low risk tolerance. Your organization / your boss / yourself do not tolerate risk well and have high penalties for mistakes. Trying offshoring in environment like that is a very risky proposition.
5. No appropriate opportunity. There is always a risk in applying such a powerful yet delicate weapon as outsourcing to tasks that are not made for it. And there is not much use of trying to fit square pegs in round holes.
6. No offshore-ready management resources. If you and your management team doesn’t have any experience with outsourcing you might be better off without it unless you are mentally and financially ready to sustain a lot of pain.
7. No processes. If your organization is process free or still straggling to achieve CMM1 inviting outsourcing is likely to cost you an arm and a leg, so stay away from offshore, unless of course you’ve got spares.
8. You need to cut costs, now. Properly handled and with a bit of luck offshoring is likely to show some cost savings, yet as they say it takes money to make money. Your need to invest before you realize the savings. So if your need to immediately make up for the luck of sales or some other reasons behind a deep dive in P&L you might look for some other cost saving techniques.
9. No sufficient runway for taking off. Getting offshore engagement off the ground and getting it to the point it starts delivering value is not a trivial exercise. Do not expect immediate gratifications nor even start on that route if you have not enough runway (funds, time and energy), there is no glory in crash-landing.
10. No runway to land. No matter how skillful you are, how well financed is the project, how perfectly it is executed there is still a chance that your offshoring engagement fails. If that failure is likely to cause substantial damage, if there is no way you can safely terminate the engagement think twice before starting it.
Of course many of these reasons and the items listed in Remi’s post can be dealt with, risks mitigated, and challenges addressed. Nevertheless you should not take any of them lightly and do not move forward with your outsourcing initiative till you take the last item off your Top Reasons NOT to Outsource list.
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Outsourcing Impact on Technology Choice
I find LinkedIn to be a good idea generator for blog topics, for example a question from Vinay Joshi “.Net OR Java what technology projects you outsource — Does technology matter for making decision to whether outsource or not? …” deserves substantial discussion, beyond my brief answer on the site; especially considering that the rest of answers are more about religious war of .Net vs. Java rather than about the question itself.
Of course the answer depends on the context, if you are a technology company that already has the technology selected or a vendor that has a large team with specific expertise in place the discussion has little relevance. For those about to outsource it could be quite important decision though.
If you are planning on outsourcing but have not selected the technology yet, here are a few tips to consider:
- Flexibility offered by technology is not your friend. The more discipline the technology offers / requires the easier it is to control it, the less are the chances on-shore and off-shore teams drift apart. In particular using Java vs. .NET discussion – Java offers great flexibility and far less commonalities in solving even basic development task. There is always 10,000 ways to achieve the same objectives. It offers multiple schools of thought and competing technologies. .NET offers more disciplined approach, while it offers some flexibility it’s far less the focus or the modus operandi, typically in .NET there is “the right” way of dealing with majority of tasks.
- Emerging technologies are not made for outsourcing. That seems like a no-brainer, yet I’ve seen many companies moving projects using cutting edge technologies offshore, typically with painful consequences. So just in case, there are many reasons not to do so: lack of experienced resources, blind spots in understanding the technology on the both sides of the ocean, insufficient supporting community and documentation, undeveloped best practices, etc. Each of these issues by itself can destroy the engagement, when the issues combined the failure is guaranteed. Both Java and .NET by themselves are established technologies, however there is always something new being pitched by the respective camp.
- Close doors to Open Source. Well, that might be too strong of a statement. As a matter of fact I did quite well outsourcing development using Open Source technologies and products and so many people I know. Caveat emptor! If you go for Open Source make sure that you do not stray off the beaten track and stick to very stable and mature products with strong development community. Too frequent release cycle, fluctuating quality of products, unstable supporting community can add insult to injury when combined with inevitable issues of outsourcing.
- Don’t let the tail wag the dog. Some advanced technologies come with very costly or complex development tools. Some technologies require you to invest heavily in workstations or development environment. Some technologies require extremely high investment in training. And so on. Unless you have extremely compelling reason to do so, do not consider such technologies. Investing into a partner or their environment is not what you want to do especially in the early stages of the partnership. What if the partner already has it all in place? Well, do you want to be locked into using a specific partner? I don’t think so…
- You can only find free cheese in a mouse trap. In development today there are a plenty of “very simple” technologies. Those technologies could be quickly learned, and superficial or even spurious expertise sold to a naïve buyer. That usually attracts gazillions of providers and inevitably drives the price down. Have you heard about PHP freelancers for $4 an hour? Just go to elance.com or guru.com – you will find a plenty. The chances are you will get what you paid for. The main point here is while the technology at question could be extremely solid it doesn’t mean that any code monkey can operate it. Finding good providers in such technologies could be a challenging task due to the high pollution of the field. Unfortunately PHP today falls into that category, and I am certain tomorrow that will be the case with RoR.
Pros and Cons of Outsourcing to India
India offers the most developed, experienced and sophisticated outsourcing community. No surprise – embedded advantage of ESL, huge supply of IT talent, and low standards of living made it a top destination for IT outsourcing long time ago. Y2K and management talent solidified the success creating multi-billion dollar giants and changing ethnic landscape of many cities in the USA. As I mentioned in Offshore Vendor Selection: Choosing the Destination “if your risk tolerance is low and/or your organization is new to outsourcing go to India, you can not get fired for hiring IBM. Go to India if you have to choose on a spot, or have little knowledge of outsourcing, or have to deal with large scope ERP implementation, or … as a matter of fact if you have to ask this question chances are you should consider India as your top destination.” Now let me put a few bullets here supporting my statement:
Infrastructure. Unless your partner is tiny and located in a 3rd tier city you won’t have any problems with infrastructure. Well, you may have to deal with some irregularities in connectivity due to some natural disasters, it gets quite rainy during monsoon season out there, but I tell you that: we use AT&T as our internet provider in our San Francisco office and once in a while they drop connectivity despite blue sky and sun outside. With a huge supply of IT services in India you can find infrastructure that would cater to most ridiculous demands.
Operating Environment. Flying to India is far from fun especially from the west coast, in particular if your company doesn’t cover first class travel. 30 hours in transit plus you arrive there in the middle of the night. Unless you time your trip well the nature would great you with heat and humidity. Flying back could be so much better if you did not need to deal with airport lines and crowds. The good part, that’s pretty much the extent of the adversities. Chances are you will be staying in a good hotel, will have a personal driver, eat in good restaurants, and even corruption is wide spread in India at all levels you most like won’t need to deal with it.
Skills Availability. That’s is one of the strongest Pros of the country. No matter what skill you are looking for there will be at least 10,000 people who have it. Well, more seriously, the supply of IT talent in India is outstanding, some areas more than others of course. Mainstream technologies of today and yesterday – Java, .NET, C/C++, ERP, Cobol, etc. – have substantial oversupply. You also can find a lot of talent even on a cutting edge of the technology. The quality of the talent follows the bell curve and nowadays the median has gone up comparing to late 90th.
English Skills. Well, that’s a hidden gem isn’t it? Of course with English being widely popular in India the main issue you would need to deal with would be an accent. Maybe some idiomatic expressions, some speech forms, etc. but generally it is not an ever a showstopper and forms a huge Pro of the country.
Cultural Compatibility. While there are a plenty of cultural differences between India and USA I would put the Cultural Compatibility in a category of Pros, here are a few reasons:
- The cultural differences on business side were not so dramatic to begin with considering history of British influence on legal and business system of India.
- Resources from India have been in this country in large numbers and for a long time. People in the USA learned the differences, behavioral patterns, and idiosyncrasies to a pretty good degree.
- Many Indian vendors invest a great deal into cross-cultural training as well as in accent training. As a result the gap between cultures is narrowing considerably.
There are of course cultural differences that are deeply embedded in people’s psyche, here are a few most notable:
- “Never say No” or “Yes to Death” – while working with Indian resources you always need to keep in mind that they might have a very difficult time say “No” in any shape or form. “Can you do that? – Yes, we will do Nick.”, “Do you have access? – Yes we do Nick”. That doesn’t mean that they can cater to any need or demand, they just can’t say NO.
- No bad news is a no-news. While the times of chopping off bad news barer heads are over, the habit is still there. So if you do not hear about bad news, it doesn’t at all mean that everything is going well, it just simply means that you do not hear / do not know what is going on.
- Motivational hierarchy. Of course Maslow’s Pyramid rules. But there is a plenty of subtle differences in how its upper levels translate for a specific culture. Not bad / not good – just different. For example, personal success in India outsourcing is often measure in number of people the person supervises. “I have 100 people under me…” That pushes good developers away from the technical track towards managerial with inevitable profound negative impact on technical abilities of the organization.
Rates. India rates fall neither into Pro nor into Con category. They are benchmark against which other rates are compared. And I guess that makes for a nice segue into Cons discussion:
Resource Turnover. Turnover is very high, it is high to a degree that it almost outweighs all pros of the region. See my earlier post Myth for more thoughts on the subject.
Resource Quality / Technical Capability. IT Outsourcing proved to be a rather lucrative business for many social groups in India – entrepreneurs, engineers, education providers, etc. Millions of people moved into the field in the Golden Rush of the century. As a result average quality of resources started going down to a degree that even time-proven trademarks of quality do not work anymore. Not long time ago I was stunned when I had to fire a consultant for incompetence; the stunning part came from the fact that he had a master degree from IIT.
One more Con related to the Golden Rush is worth mentioning: huge number of companies with a large number of low quality fly-by-night vendors makes it extremely difficult to find a right provider. It’s very much like looking for gold – you have to go through the tons of dirt to find the right substance. However, you are looking for gold, and one thing I am certain of is that you can find that gold in India.
Pros and Cons of Outsourcing QA
I saw a question on LinkedIn early this morning on a topic I was planning to cover “Pros and Cons of QA Outsourcing” – I jumped to the answer and typed up an answer while on BART, ironically it turned out to be too big for LinkedIn and so I decided to put it here. The answer is not complete and I am planning to come back to it some time. In meanwhile here are my thoughts:
1) Outsourcing QA is often a meaningful thing to do, an easy way to start and a potentially very dangerous trap. In particular companies that shed internal QA resources and move their QA operation abroad typically pay the price in knowledge loss and ultimately in degradation of the product quality. I have seen it on numerous occasions. QA engineers in well run teams often have better product knowledge than any other part of the organization, and offshoring that knowledge falls in a category of “outsourcing crown jewels”.
2) Companies in US often consider outsourcing QA for all wrong reasons, like for example “Cost”. Cost advantage is just a myth, see my earlier post for details Outsourcing Myths: cost advantage. And going offshore for wrong reasons is guaranteed to give your wrong results.
3) QA as a subset of IT field offers a few interesting dynamics
a. It’s one of the most important areas of SDLC which typically is given the least attention.
b. The average quality of talent pool is dreadful, independently of geography. There are many reasons for that, for example here in SF Bay Area one of the main reasons is huge pollution of the pool by fraud and mediocrity – I met 100s of people who fake their QA background or think that a couple months of homegrown education makes them top notch professionals.
c. A perception of QA skills/occupation as a substandard one. It takes as much IQ to become a solid QA engineer as a Java developer, maybe more, but what can you do about perception? As one the best QA guys I’ve eve met put it talking about his resume “going to QA is like going to morgue – there is no way back”. And why don’t developers enjoy testing? Because it’s hard, it takes serious effort to put together a decent test harness, to organize your code, etc. Yet look at the average salaries, at layoff patterns, offshore dynamics – the trends are obvious.
4) Good QA engineers, automation specialists, functional testers, etc. like any other good resources are not easy to find, considering the quality of the pool, much harder. So it’s no surprise that that many organizations after interviewing a couple dozens of key-punchers who can’t tell the difference between priority and severity and ask for $90K move to offshore. The problem with such decision is obvious – it is as difficult to find good testers in Bangalore, Kiev or Beijing as it is in Boston. Of course a large supply of IT talent in countries like India and China makes it so much easier, yet the vendors in these countries have a plenty of own issues and challenges. Outsourcing the problem will not eliminate the problem, it only passes it to a different organization which is hopefully is better equipped to deal with it… But is it? Is your perspective vendor better equipped to do your job? How do you know it? By their brochures? Having interviewed hundreds of engineers in Asia, Eastern Europe, and Latin America I can tell you with certainty – far not ever vendor is equipped to do so, many of them are squarely in a business of selling mediocrity in bulk, and the quality of the resources is far less impressive comparing to what you can extrapolate based on what you see locally.
5) Having said all that I have to state that I still outsource a lot of my development and QA activities and get great results from my partners. There are a few ingredients to that success story, here are the most important:
a. Rigorous vendor selection process with the focus on “the match” between my organization and vendors’. Search for the match on multiple dimensions.
b. Resource augmentation and joined teams rather than complete outsourcing.
c. Abundant communications in all forms with fair portion of face-to-face meetings and on-site / offshore swaps
d. Control and ongoing preventive maintenance in all aspects of the engagement.
e. Adjusting SDLC to accommodate for idiosyncrasies introduced by offshore.
f. A “disposal outsourcing” model that I worked out with my one my partners – augmentsoft panned out quite well in QA arena.
g. Working with nearshore partners was much easier in many aspects especially when running agile projects.
Outsourcing Myths: Turnover Ratio
The impact of turnover on the total cost of outsourcing is difficult to overstate. Of course you know that and put a turnover question as one of the most important ones in the beginning of your RFP. You look at the proposal that just came back from your vendor and see 18% as the response, “whew, I think we found our guys!”… Welcome to the murky world of turnover ratios. The sad part is that this answer may mean very little; being the most infamous curse of offshore engagements the turnover ratio comes with a few extra traps.
The most frequently overlooked issue strangely enough is the meaning of the “turnover ratio”. When your prospect vendor tells you that their turnover ratio is lower than the country’s average (high changes that’s exactly what you are going to hear) what does the vendor mean?
On one of my recent engagements with a reputable company in Noida, India the staff on the project changed at an amazing rate – while working with 10 member team for about 1 year we saw over 20 people, and only one person stayed on the project from the beginning to the end. No matter what formula I tried apply to that situation it did not seem to align with 18% stated in vendors proposal. And yet every account review my vendor pushed the idea that the turnover ratio was not out of bounds. Ah? ‘Well, Nick:
- We moved Rajiv and Venkat off the project because they were not performing job well enough;
- Ramki’s mother got sick and he had to quit to do the right thing;
- Shushma got married and moved to Hyderabad…
And so on and on and on…
As it turned out my valued partner had a completely different view of the turnover ratio. My guess is that they calculated the ratio based only on the number people who’d left the company for competitors.
Another trap worth mentioning is an internal transfers. What difference the company’s average turnover rate makes if your project turnover exceeds it by two or three times? I’ve seen that numerous times and in a large degree it’s unavoidable. The vendor will move people around to increase their utilization, to appease the loudest customer, and to keep employees motivated.
And one more trap to mention is key resource turnover. If your team has an average turnover of 20% (you lose and have to retrain 2 people a year on a 10 member team) it might not be so bad if these two are junior QA engineers. What if these two spots both belong to the tech lead on the project? You find a great TL, he comes to your site for knowledge transfer and after two months go back to India just to resign the next week, two months and countless meetings later another one comes to your office, goes through K-transfer and goes back, and then gets hit by a typhoid fever?
Recognizing that there is much more to turnover than just a percentage sign is a huge step forward. Dealing with turnover is a much more complex issue and a rather large topic, so I’ll cover it in the next post.
Ready to Outsource?
Organization outsourcing maturity is one of the most important ingredients for an outsourcing initiative. Attempts to force outsourcing to an organization that is not prepared / not ready for it are likely to fail and chances are with a lot of collateral damage. That is true for any outsourcing initiative, not only for offshore; well, it applies to pretty much any organizational change, but my focus is on specifics of offshore though. What does it mean to have your organization ready for offshore outsourcing? Here is a high-level checklist to consider:
- Solid justification / objective reasons for outsourcing. Jumping into outsourcing following the lemming instinct would end up with pretty much the proverbial result. The industry is full of examples when organizations went after outsourcing just because it was “the best practice” and ended up with massive losses – financial, customer satisfaction, knowledge, etc. Take a look at “reasons for outsourcing” or “my reasons”, go through your own list, and make sure that you have solid objective reasons to even consider offshore. Go through a thorough and very conservative what-if analysis and unless you see a substantial ROI set the idea aside.
- Sufficient budget. You most likely heard about a hockey-stick or a J-curve – a curve / a pattern of success in business. Look at the budgets you have in-hand with the same perspective. Success requires initial investment and ability to sustain negative cash flow for some time, you need to survive that dip, before you start realizing ROI.
- Executive commitment / sponsorship. Lack of executive commitment is certain to ruin your offshore strategy. If your executives do not accept the realities of offshore savings, if they are not prepared to wait through a negative stage of the J-curve you are certain run out of budgets prior to getting offshore initiative on the path to success. It’s even worth if your executive team doesn’t buy into offshore idea due to political or personal preferences. The last thing you want to do is spear head an initiative that’s only purpose is to show a bad example.
- Team understanding, support and commitment. Chances are you can’t do it alone and through out all stages of outsourcing you will need to rely on support of your team. I do not think I need any mountaineering metaphors here. However, strangely enough, I have seen many times when offshore initiatives were driven down the thought of a core team, at the expense of the employee morale and wellbeing, without support and consideration. In my view that results at best in malicious compliance, more frequently in clever or blatant sabotage.
- Processes and procedures. Often undermined in small organizations immature processes and procedures, in particular in SDLC / project management, are almost certain to result in offshore failure. Large process-savvy organizations are also not immune as the need for the processes is proportional to organization’s size. The most important aspect of the processes is communication channels and their efficiency, inter-departmental handovers, and internal roles and responsibilities definitions.
Offshore Developer Rates
What is a fair rate for a mid-level Java developer working offshore? Seems like a simple question, yet the answer you are likely to receive from anyone familiar with the subject is “It depends…” A fair rate you need to negotiate towards to with your supplier depends on many attributes and circumstances. Here are the most important:
- Location. Almost like in the real estate business location plays utmost important role in the cost of the product (rates in this case). Location granularity is roughly at a city level, meaning that in a single city you will have roughly the same rates for specific position. Large cities such as Bangalore, Beijing, and Moscow may have some pockets / districts with higher / lower rates, those differences are not as dramatic. Raising level of granularity to a country level skews the results significantly unless you limit your horizon to only “first tier” cities.
- Other geopolitical factors. In countries experiencing explosive growth or political turmoil standards of leaving fluctuate greatly and that inevitably leads to dramatic changes in rates. Rates of vendors from Eastern Europe and China have been growing at the highest rate recently. It’s no surprise considering major improvements in standards of leaving of these countries and weakening dollar as well.
- Competency. That’s an interesting phenomena I have observed over the years. It appears that engineering community competency has very notable local preferences. For example there is a great deal of skills in mobile development in Russia, Vietnam developers seem to prefer to speak .NET, you find many developers working with OS cores in Israel.
- Company size. Unlike in the food industry where large chains offer lower prices s/w outsourcing has opposite trend – typically you will be able to negotiate better rates with smaller shops.
- Vendor business model. In high-level view there are several business models which offshore organizations operate on:
- “Body shop” – under this model the vendor is focused on billable hours / resource utilization and is typically in the business of selling mediocre resources in bulk. This not the business model you will find presented in RFP or website of the vendor, however you will see it between the lines of the proposal, in general practices, etc. This model scales well and you can see body shops ranging from Krishna’s Shack to multi-nationals of colossal proportions.
- “Consulting Organization” – same as above but with vigorous attention to the quality of resources. These organizations are typically smaller and have much higher quality of the resources.
- “Boutique shop” – I use this term for small sized high-end consulting firms which offer top quality resources often in a very narrow field / niche.
Rates naturally would be the lowest for first model and the highest for third. The questions of course is appropriate analysis as most of body shops present themselves as consulting organizations and some smaller one pretend to run “boutique” operations.
- Engagement model. There are plenty of models you can elect to work with offshore, for example resource augmentation on T&M basis, fixed bid engagements, Built-Operate-Transfer, Managed ODC, etc. Each model will offer slight adjustment to the actual rates.
- Contract details. Rate can vary greatly depending on the details of your contract, with each element being a double edged sward though. For example you can reduce the rate by committing to large number of the resources or longer term of the engagement, by agreeing with termination fees, etc.
Here are a couple links for more detailed view on this subject:
Offshore outsourcing statistics for services in 2007
Global Services Location Index (GSLI) for 2007
Choosing the Right Country for IT Offshoring
And finally, the rate table, take it with a huge grain of salt though
| Group of Countries | Outsourcing sweet spot | Rate Guideline, USD an hour |
| Canada, Israel, Ireland some Eastern European countries such as Hungary, Romania | R&D activities, Java/.NET, mainframe, product development | 35 + |
| Most of Eastern European countries such as Russia, Ukraine, Czech Republic, Poland, some South American countries such as Brazil, Argentina | Mobile development, some R&D, C/C++, Java/.NET, product development | 25 – 45 |
| India | ERP, maintenance, mainstream development, Java / .NET, QA | 20 – 35 |
| China, Philippines | Java / .NET, QA | 15 – 25 |
| Pakistan, Malaysia, Vietnam, Chile, Bolivia and many new outsourcing players | TBD | 10 – 20 |
Offshore Risks: Team and Personal Impacts
Transferring even a small portion of your development offshore has inevitable impacts on your team and yourself. The impact could be dramatic to a degree that it defeats the purpose of outsourcing. Each of the dimensions of the impact should be considered a risk that needs mitigation plan and is dealt with efficiently through out the lifecycle of outsourcing. I’ll touch upon most significant areas:
- Loss of team support / respect / relationships with the team. Even the most open minded employees on your team will be concerned with offshore introduction. And they should, the practice of outsourcers replacing the sheer fabric of the company, it’s all too familiar. As an instigator of the process you are likely to become a target of negativity. It comes in all shapes and forms with essence being “you are a traitor of ”. I remember well one of my key architects giving me an ultimatum “it’s me or them”. I do not know of any bullet proof shield here, the chances are some percentage of loss will happen no matter what you do. For me the best risk mitigation strategy in this case has always been transparency and honesty – when you can afford it. I do my best to personally deliver the message to every member of the team or alternatively setup a process which ensures consistent and accurate delivery of the message.
- Loss of team spirit / internal unease. Mutual trust even in small teams has some level below 100%. Even a perfectly delivered message will be taken with a grain of salt and generate negativity. So only medicine here is reinforcement of the message – positive reassurance is like food – you can not get enough for life time in one seating.
- Decrease in team’s productivity / commitment. Loss of key personnel / technology and business knowledge loss. Loss of team spirit / internal unease even if managed well is likely to result in tangible losses. You need to plan for them in advance of introducing the idea into your organization. Do you have sufficient redundancy in your organization to deal with inevitable loss of key personnel? Are your schedules have sufficient padding to cover for loss of productivity? Are your knowledge transfer / retention devices in place? If answer to any of these and similar questions is ‘No” you need to deal with closing the gap first and searching for vendor after that.
On a personal front the risks are substantial as well. What would championing an offshore initiative would do to your career? What’s your organization’s risk tolerance? What is its failure tolerance? How would the failures of the vendor affect your position in the organization? And so on – there are countless questions to ask here.
But even more important set of questions is around lifestyle impact. Are you prepared to shift work hours? Are you ready to deal with the never ending stress? What is your own failure tolerance?
I remember welcoming Paul Lake (an outstanding account manager for a prominent IT outsourcing company) to a role of AM on an offshore engagement. While no stranger to IT outsourcing he had never dealt with offshore side of the house. “That’s the end of the life as you know it…” – I told Paul – “You will now need to learn how to start every call with “I am sorry, I have to apologize…” I wish I was at least somewhat wrong…
Offshore Vendor Selection: Site Visits
The idea of this post partially came from Offshore Visits. Tom’s post is about visits to an existing vendor, the visits during vendor selection process are quite different though.
I am fairly convinced that the unwritten rule – “must visit perspective vendor site to make a selection” was originated by offshore sales force. This is a well known closing technique similar to test driving the car (“must drive before you buy”) a.k.a. “puppy close”. The goal of the salesperson is to build your commitment to purchase and getting you involved, getting you to invest the time paves the road to closure.
From vendor’s standpoint on-site visits help tremendously in many other dimensions, for example having you on their territory (care salesperson would take you to his office “just to discuss some details”), playing one of the strongest powers of persuasion – reciprocity, etc.
Does it mean that to avoid high pressure of sale you should avoid on-site visits? Not at all. You just need to keep your eyes on the ball and counter the pressure. Shear understanding of the role the site visits play in the selection process will help a great deal. Also here a few simple techniques that should help you counter the pressure:
- Visit several vendors on the same trip.
- Separation of duties may help a great deal – if it’s at all possible use people not involved in the final decision making to go on the trip.
- Be the driver of the agenda for all meetings on the trip.
- Concentrate on your needs and things you should accomplish on the trip.
- Take a few days off after the trip to do some personal travel and enjoy the scenery which you may never have a chance to see again.
The main goal is to make progress in your vendor selection in a way beneficial to you and not helping vendor to close the deal. In that light I find site visits extremely helpful and educational. My typical agenda would include:
- Interview with perspective team (I usually go for marathon interviews – 20-30 people per company, 20-30 min per person)
- Informal interview of managers, executives, etc. – I do not interview them per se, instead get a chance to see them in action
- Review infrastructure, take a pick in server rooms, see desktop environment
- Check out employee lifestyle – workstations, libraries, transportation, food, break rooms, wallpapers, etc.
- Assess physical and other aspects of security
I do my best to avoid:
- Meetings with large participation and no purpose
- Sales presentations in any shape or form
- Any optional activities that do not pass sniff test
Top 10 Technology Tasks to Outsource
If you listen to an offshore vendor you will quickly learn the top 10 or 1000 tasks you should outsource. The chances are anything and everything that you do will be on that list. And that would be the list of things the vendor wants you to outsource. Take a look for example at Top 100 Projects You Can Outsource. The real question is about what is good for you, and of course it depends on your specific needs and challenges. My first outsourcing item does not currently land itself well in offshore model so I did not include it in top 10 - Data Center / Hosting. That covers hardware / networking equipment / etc. for range of systems – production, staging, development, etc. environments. The “degree” of outsourcing may vary greatly and depends on the maturity of your staff, you demand dynamics, etc. You may only take the space, bandwidth and power; expand it to fully managed infrastructure or even consider grids such as Amazon elastic cloud.
Taking a viewpoint of a midsized software developments company here are 10 items I found to be on the top of list of tasks to outsource in technology.
1. Security / Availability Monitoring. In my experience I found that achieving aggressive service level benchmarks while maintaining high level security and privacy is practically impossible for a small or midsized company without use of Managed Security Monitoring. The scope of outsourcing may vary greatly depending on your needs. In my current place I outsource security monitoring and use third parties for security testing including ethical hacking.
2. Database Administration. I found outsourcing of DBA tasks, in particular related to supporting uptime of critical systems, extremely cost effective. Currently I use third party to monitor my production databases on 24×7 basis and use consulting from the same vendor on tough DBA design tasks.
3. Black Box Testing. I found that outsourcing some of QA tasks, in particular Black Box testing gives me great flexibility and has good price performance. In my view the key is to outsource appropriate portion of testing leaving sufficient portion in-house for acceptance, cross checking, knowledge retention and many other key elements of the development process.
4. Usability Testing. In my view Usability Testing is a perfect task to outsource due to many reasons with most important being an independent / objective feedback which is difficult to achieve with captive resources, other reasons include lack of in-house expertise and high cost of tools and infrastructure.
5. Graphical Arts, Writing and other Creative tasks. Assuming that Creative tasks are not the core of your business you may find outsourcing of it to offer dramatic price performance. With huge supply of freelance and offshore talent you can find high quality resources at a fraction of the price of high end firms and even in-house resources.
6. Tech Support. If you have to support your products the front line of Tech Support is one of the areas that can greatly benefit from outsourcing. Of course you have to be very careful in outsourcing any customer facing activities, and tech support is one of those arrears that got particular strong negative rap.
7. SEO. Search Engine Optimization could be quit laborious and requires in-depth knowledge of the techniques, latest trends, and subtle differences. Some offshore shops specializing on SEO offer performance based approach to compensation.
8. Software Maintenance and Sustenance. I found outsourcing of those “less glorious” tasks relatively meaningful, especially when I had a large legacy product to support. One of the value add items in outsourcing of maintenance task is potential morale boost for the local team. A word of caution here – as outsourcing of these tasks only pays off in a long run.
9. Reporting. Developing of a large variety of reports for internal and external clients often could become a considerable burden on technology team. Using offshore resources to produce and support custom reports in experience paid off quite well in many cases.
10. Technology Migration. Migration tasks could be perfect candidates for outsourcing, for example moving your database from MS SQL to Oracle, an app server from WebSphere to JBOSS, or migrating code from VB to VB .NET. The word of caution – some migration tasks could be IQ-demanding heavy lifting and require a lot of in-house efforts before they could be moved offshore.
I said earlier that these 10 items are on the top of my list. Well, in many cases they formed the list in its entirety. You may consider outsourcing all these items before you move on onto more challenging and riskier outsourcing tasks.
Selling offshore concept to your organization
Let’s assume that you are sufficiently sold on the idea of using offshore. If you are not, stop right there. You will not be able to sell your organization on any idea unless you believe it 100% yourself. There will be a plenty of people wildly against offshore and unless you are true champion of the idea it will be an uphill battle. More so there is a good chance that there will be a plenty of people supporting and even promoting the idea for all wrong reasons. Unless you know and believe in what you’ll be doing you will be stuck with delivering on wrongly set expectations against unachievable goals, and the time to update resume will come sooner than you think.
The next step is introducing offshore into your organization. Unless your organization has history of success in using offshore that will be a complex long-cycle process of selling the team on the concept itself, its benefits, and your abilities to mitigate the risks.
Your initial introduction may follow the traditional pattern, for example:
General state of the organization
- Strong foundations
- Budget cuts
- Competitive pressure
Challenges / pain points
- High attrition
- Recruiting failures
- Time to market pressure
Solutions considered
- Local subcontractors
- Internal structure changes
- Offshore
Why offshore
- Local subcontractors
- Pros
- Cons
- Decision
- Internal structure changes
- Pros
- Cons
- Decision
- Offshore
- Pros
- Cons
- Decision
Expected returns
- Goal 1 – SMART Success Criteria
- Goal 2 – SMART Success Criteria
- Goal 3 – SMART Success Criteria
Risks & Risk Mitigation
- Risk 1 – Mitigation Plan
- Risk 1 – Mitigation Plan
- Risk 1 – Mitigation Plan
Control mechanism
- Governance / Oversight
- Metrics / Feedback
- Exit strategy
You may have to sell to different groups and audiences such as execs, your team, and investors. – tune your presentations for each audience.
Couple words of caution:
- Do not overuse “negative sales approach” (something you might have learned from Sandler Training). You need to get your audience to support the idea for a long time, you need them jazzed up enough to get over the hump of initial rejection and even more important through the turbulence of establishing the relationship.
- At the same do not oversell – that’s a self death sentence. Remember that offshore is likely to fail your lowest expectations.
- Do not delegate selling to offshore account managers and/or sales execs. They will offer you that and will gladly act on your behalf. They will probably do a decent or maybe a marvelous job and you will lose control over the situation. Most likely they will over commit and you will be the one to under deliver.
Unlike in a traditional “hunter” selling model with a sole target of closing the deal you have to prepare yourself for never ending “farmer” selling process. As inevitable issues creep up and buyers remorse overwhelms some of the stakeholders you will need to manage the expectations and continue showing benefits of the offshore … of course if you see any.
Vendor Selection in China
This post is a summary of vendor selection trip to China made for a purpose of s/w outsourcing initiative for a midsized product company. The main focus of the trip was “profiling” of the vendors that made on a short list after a rather involved RFP process.
Profiling involved in-depth interviews of employees ranging from Sr. PM to Jr. QA analysts. I had a chance to interview over 60 people, and I believe that I had a chance to work with a somewhat fair sampling. I would expect that if employees were selected for interview completely randomly I would have the same professional skills ratings but English skills ratings would be substantially lower.
The table below presents a summary of my view on the software teams I’ve seen during the trip. Professional skills are rated from 0 to 10; 0 means no knowledge of the key subjects, 10 means exact or above expectations for the position. English skills are rated from 0 to 10, 0 means no knowledge, 10 means fluent (strong accent, minor grammar mistakes, etc. acceptable).
| Position | Professional Skills | English Skills | Comments |
| Account Management | 5-8 | 6-9 | I did not interview AMs per se, I had a plenty of time to observe their work though. Skills / understanding of AM practices were not at all impressive. While the hospitality was truly commendable understanding of AM activities was far from what I would expect from professional AM / sales / presales team. In particular the ability to listen and concentrate on my needs versus out of the box presentations and sales pitches was not demonstrated. |
| Project Management. | 4-6 | 5-8 | I interviewed 2 PMs, 2 were dreadful, one good, the rest were semi-decent but junior. Most of the PMs had almost no theoretical knowledge and border-line acceptable hands-on skills; only one was PMP certified, unfortunately he needed an interpreter to communicate. Real hands-on PM experience was ranging from 2 to 6 years. Most of the PM in US terms could probably be ranked somewhere between a Project Coordinator and Junior PM. |
| Business Analysis. | 3-5 | 3-7 | Unacceptable. I interviewed at least 8 of them and the only one I would possibly consider was a junior Indian girl. Most of them had moderate English skills, but still far less than you would expect from a BA. Their skills in written English were notably better but they really straggled in spoken language; understanding them was a challenge as well. Their domain expertise was not impressive even for the projects they worked on. Functional skills such as ability to gather requirements were very poor. Technical skills such as data modeling skills were practically non-existent. |
| Junior Developers (“coders”). | 3-8 | 4-8 | Developers range from very bad to pretty good. Most of them offered very poor theoretical skills and narrow and shallow practical. Need to be hand-picked, but there is a large pool to draw from. I would expect a hit ratio of 1 out of 4. I saw great deal of desire to succeed and multitude of signs of superb work ethics. |
| Senior Developers (“architects”) | 3-6 | 3-5 | Very poor, most of them at best would qualify for mid-level developers. English skills are notably worse than juniors. The more senior the person is the more difficult s/he is to understand. The only good guy I met (would rate highly in Silicon Valley) required an interpreter. |
| Technical
Leads |
5-6 | 4-7 | Mediocre. Probably not self sufficient on tasks requiring dealing with complex technical issues. They seem to be generally a combination of a mid-level developer with a junior PM. I would say on both PM and technical accounts they are a notch lower than I would expect in the USA. On the other hand I saw a very strong drive / desire to succeed which could possibly compensate to some degree for the lack of knowledge. |
| Junior QA, Black Box | 6-9 | 5-10 | Testing skills ranging from good to very good. English at pretty decent level (most of them came from English studies or had lived in English speaking countries). Most of the QA analysts I interviewed seemed to have a great personality to position match. |
| Junior QA, Automation | 4-5 | 5-7 | Very small pool, most of them were mediocre at best with very limited exposure to tools. Typical “record and play back” skill set. Most of them had a career path of black box tester to an automation engineer (no development background). |
| Senior QA, Automation |
4-5 | 3-5 | Bad. I saw only four of them though; both skills and language were below mediocre. |
| QA Lead | 7-8 | 5-8 | I saw 9 QA leads and all were OK, nothing spectacular but very focused, detailed oriented, well organized, etc. Good grasp on QA process (very specific to the company’s process though). Understanding / grasp of QA automation at very basic level. |
| General Management | 5-10 | 6-10 | Very strong business leaders with outstanding work ethics and commendable drive. Mostly ex-pats / returnees from Western countries / Hong Kong / Singapore. However some of them were not professionally strong as they seem to be able to get the jobs on the raising wave of outsourcing mainly due to their western credentials. For example one of the execs I met was a Ph.D. in theoretical physics with no prior consulting / sales / software experience, very smart guy with very little experience / exposure / understanding… |
Idiot Savant
It’s been almost two years since the story below shook up my organization yet it’s still quite fresh in my memory. This story stands out as rude reminder of how complex IP protection is and how many traps you need to consider. Even though the story is a bit old I still changed the names of the participants to protect the innocent…
Ravindra Gupta a senior java architect from a well respected local high-end consulting firm ThinkBig impressed us the first time we met him. He seemed to be exactly the person we’d been looking for a long time. With little hesitation we assigned him a challenging task in a user management and administration (UMA) space. He flew in our SF location and spent a couple weeks going through the analysis of the issue, discussions with our staff and me.
I consider UMA tasks some of the most challenging and was happy to have a very impressive guy deal with them. We spent days educating Ravi on functional aspects of the UMA, its issues, technical challenges, and numerous tricks and traps. I was very impressed with Ravi grasp and progress with it. After a few weeks in the office Ravi took off to work from home at the East Cost.
The year end frenzy took my mind of UMA and Ravi’s work. Ravi’s brief status reports and scant communications did not bother me much especially considering that he was apparently making good progress and we were expecting detailed technical review session right after the holidays. Unfortunately though the meeting never not took place, instead one of the first emails of ’07 was one from Ravi:
From: Ravindra S. Gupta [mailto:rgupta@thinkbigconsulting.com]
Sent: Saturday, January 06, 2007 1:33 PM
To: Nick Krym
Subject: U.M. Design Copyright
Hello Nick,
In the chaos of the holidays, I was fortunate to find some time to myself. This yielded an insight: I have to stop selling my copyright for the price of a copy. “R.S.G. Consulting” was therefore founded (finally) on 1/1/2007.
Consequently, the existing contract (made with ThinkBig) is no longer acceptable, and I want to proceed forward under the following general agreement:
I own the copyright to all parts and whole of the generic Access Control System (RACS) that I am creating. Medem does not pay for the development of RACS, but may buy a very favorably priced license. However, it is under no obligation to do so.
To demonstrate suitability-of-use, I will configure the RACS to support up to five (5) use-cases chosen by Medem, at no cost to Medem.
Should Medem then buy a license (still no obligation), it may buy my professional services to fully or partially configure the RACS for use with the new Medem system. All work done towards this task will belong to Medem (i.e. will bear Medem’s copyright), with exception of any modifications made to the RACS (which will bear my copyright). However, Medem may instead choose to have its own developers or other consultants configure the RACS.
The attached document describes the Pricing model, Availability, etc.
The design that’s taking shape is beautiful in its simplicity and power of expression. It will more than accommodate Medem’s needs for years to come.
Please feel free to contact me at any time.
Sincerely,
Ravi
R.S.G. Consulting
I red the email and picked up phone calling Mike, CEO of ThinkBig.
A month later, after the dust settled, legal bills were paid and separation agreement signed Mike and I were seeping coffee at our favorite spot at Montgomery and Bush. Mike was going in rounds about the fact that someone he’d been working for over ten years would do anything like that. In my mind there was just one answer, an expression that I had recently learned: “Idiot Savant”
Pros and Cons of doing business in China
From 30,000’ view Pros and Cons of giving your outsourcing business to China could be summarized as
Pros
- Comparatively low rates
- Low attrition rates
- Large pool of talent in many areas
- Superb work ethics of the workforce
- Well organized / highly disciplined organizations
- Staff’s desire to succeed (learning and becoming stronger professional rather than pure career move)
- Flexibility of the contract arrangements
Cons
- Poor English skills
- Weak grasp on western communications style, wide cultural gap
- Poor theoretical knowledge in many key areas
- Weak technical skills in comparison to the mainstream Silicon Valley resources
- Limited access to resources in several key areas (e.g. business analysis, architecture)
For most outsourcing initiatives that I managed and consulted on Cons outweighed the Pros. Yet I hope that sooner or later I find the right project and a team in China to match, more so I believe that the balance of Pros and Cons is changing as we speak; in particular
- Poor English skills – Chinese government and outsourcing companies are making very significant investments in English training.
- Weak grasp on western communications style, wide cultural gap – A large number of expatriates returning to China with their families after living in the USA and other countries is reshaping culture of Chinese outsourcing.
- Poor theoretical knowledge in many key areas – I am not seeing notable changes there; possibly due to the fact that majority of service buyers are not concerned with that issue.
- Weak technical skills in comparison to the mainstream Silicon Valley resources – Using an old joke as a metaphor – Chinese vendors do not need to outrun Silicon Valley they just need to outrun Indian vendors.
- Limited access to resources in several key areas (e.g. business analysis, architecture) – Influx of expatriates and attention to the issue should eventually take care of it.
| Of course as Cons are being addressed China may lose some of its competitive advantage in Pros category – attrition rates, cost, etc. That remains to be seen.
I always thought that China was destined to win, and if I ever had any doubts they were eliminated after my trip to Shenzhen. When you see what a combination of strong hand of the government and grass root entrepreneurship can do to transform a small fishing village into a megapolis in just 35 years you start to believe that there is nothing that China can not achieve. |
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eBook
The Pragmatic Outsourcer series consists of 5 volumes, each covering a different phase of the outsourcing process. Volume 1: Making the Decision is available today for your free download. Volumes 2 through 5 will be available during 2010.
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Tools & Links
Bidding Sites and Building Frustration
A couple weeks ago I put an RFP out for a very specific set of SEO activities on one of bidding sites. This SEO project was for my darling app – WWHOW!. Since WWHOW! is based on user generated content it offers serious SEO challenges. Having spent a few months fighting those I knew fairly well what I was looking for and did not make a secret out of my expectations. To no surprise my straightforward SEO request generated a lot of responses primarily from India-based providers. I just finished going through all responses I received to date and it looks like I will have to go through bid-response process again, maybe I have to try a new bidding site, maybe change my request format, content, layout… Frankly, I doubt that changing much on my side will affect the dynamics of the campaign and quality of responses. I might need to change the target development community…
The fact that I received not a single proposal that I could remotely go with was quite irritating. One of the reasons I was annoyed by it is its effect on my “buyer’s reputation”. In some way majority of established bidding sites penalize buyers for not accepting proposals. Some of them will even cut buyers off if they do not meet some criteria, e.g. certain percentage of project acceptance. It appears that they will cut you off independently from the reasons you do not accept the proposals. It happened to me on www.eLance.com a little while ago and since despite multiple attempts I could not reach the customer service I ended up moving to another bidding site.
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August 10, 2009 Posted by Nick Krym | Making Offshore Decision, News, Articles, Thoughts and Comments | Freelancing, Offshore Risks, Offshore Traps | No Comments Yet