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Outsourcing is for Dummies

December 3, 2007 11 comments

Putting Space Between Parts of Your Team is a Sure Way to FailLet’s get one thing out of the way fast: There is no possible way to build and ship quality software on a tight schedule by outsourcing the development, period. If you are in the business of software, then be in the business of software and suck it up and build a team that can write the code. Outsourcing your primary application development is the equivalent of outsourcing the defense of a country. Here’s the primary thing you are admitting when you outsource:

By outsourcing the development of your software, your company is admitting that another company is better than you are at creating the very product that you want to create. You’re also admitting that they can do it cheaper and they can do it better than you can while still making a profit selling it back to you.

If that’s true, then why are you in the business of building software? You should be selling dogfood or cat litter. If you are in the business of selling dogfood or cat litter, then great, continue outsourcing. But even Amazon.com, a company that by any measure is in the “retail” business, builds their own technology and they consider it one of their primary business advantages. If Amazon.com considers it a major advantage to build their own technology and doesn’t outsource its development, then why would you even consider it?

Outsourcing breaks some of the primary laws of building great products. To build a great product, you must have a great team. Notice I didn’t say “you should” or “it would be nice to” have a great team, but rather you must have a great team. A team is inclusive of the designers and developers and testers and trainers and support personnel! If you think that the designers can throw the design over the wall and have the developers give them back a great product, you’re sadly living in a dream world. Although the threshold of importance is substantially reduced with each of the latter items (such as testing, training and support), the quality of those items are also substantially reduced when those items are outsourced.

Lets take a closer look at the most common area of outsourcing: support. Of all the parts of software development, support is by far the easiest to outsource. It requires the least amount of technical knowledge and support managers will often tell you it’s all about “respecting the customer” and “having patience.” So if you can find people in India or Romania who can provide respect and patience to your customers at less than 1/3 the price, theoretically, you should be golden. But anybody who has spoken to a support rep recently from Microsoft, Dell, HP or any other larger tech company who is supposedly saving money by outsourcing support knows from experience that no matter how much “respect” these customer service reps provide, you end the conversation more frustrated than the start, swearing into the air and vowing to never buy from that company again. Of course you end up going ahead and buying from them again because you have no choice, but this time you know, with a heavy heart, that your purchase price doesn’t really include the promised support. Ironically, from the perspective of these companies, their outsourcing strategies save millions of dollars and not just because of the lower cost of labor. The fact that you are less likely to make a 2nd call into an outsourced support center provides an even bigger savings. So here’s what happens when a large company outsources support:

  • Initial costs are substantially reduced due to lower labor costs.
  • Call volume is reduced (due to frustrated users who give up calling) implying that the new call center is doing a fantastic job or the overall support strategy is working great, reinforcing the behavior that outsourcing was the right thing to do.
  • Surveys will reveal nothing because A) nobody fills out 20 minute surveys and B) those who do are almost always complaining, so the percentage of complaints does not appear to be any higher than when the support was in-house.
  • It does not appear that outsourcing support has had any impact on sales. This is, of course, is only a temporary effect as customers often don’t have a choice, but as soon as they do have a choice, it’s over!

So, the outsourcing strategy may initially seem like a success, even while it’s failing miserably. If you can outsource support, then why not documentation or testing? Eventually, why not development? Nobody dares outsource Design. At least not yet. But the metrics are flawed and those who rely solely on metrics for the operation of their business shouldn’t be in business. They’ll get what’s coming to them.

Note that I’m not picking on India or Romania. It would be equally stupid for an Indian company to outsource its software development or support to a US company if labor costs were reversed. I’m also not against outsourcing from the standpoint of “keeping jobs in America.” That’s about the worst possible reason not to outsource. It disrespects humanity and implies that an American’s life is somehow worth more than a non-American. Outsourcing simply doesn’t make good business sense. At least not for a company that wants to be great.

The Optimum Team

At Axosoft, we often move people around, even as little as 20 feet, just to be closer to somebody that they expect to work with on a project. It’s amazing how much productivity can be gained by being next to a person vs. 20 feet away. It encourages conversations and questions about design items, issues, features and things that would have been passed on if the people were simply 20 feet further apart. Having these conversations allows the teams to build a better more solid product in a shorter period of time with fewer defects. Increase the distance by 20 feet and you lower the overall productivity and product quality by some amount. Increase the distance to 20 miles and your productivity and product quality tanks. Increase that by to 10,000 miles and an equally large cultural gap — and you can imagine what will happen. There is a reason why companies like Microsoft, Google and Apple have built corporate “Campuses” that are focused in a single location. The close proximity of all the engineers to one another is a good thing. It creates a healthy feedback loop, which helps increase productivity and increase the overal quality of products and what’s possible. So the optimum team is one who’s physical proximity is as close as possible and its different functions such as design, development, testing and support are not outsourced.

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