Tuesday, 29 May 2007

A case for outsourcing (and its slippery slope)

I think there is a case for outsourcing software development in a software development company: when you have so much work in a temporary basis that you can do it yourself. I think I can't strength temporary enough: if it isn't temporary, you are outsourcing your supposedly main value-creation activity, and getting yourself in a problem (read the previous posts once again).
However, as stated in the title, there is a slippery slope. You may presume that it is temporary, and suddenly, it becomes a permanent assignment. The best people to do the job are the ones who are already doing it, so you keep outsourcing to them. VoilĂ , you are outsourcing a permanent position, depending on your contractor, etc.
How often this slippery slope happens? Only 90% of succesful outsourcings; if it is succesful, you don't want to change, do you?
On the bright side, if your outsourcing failed miserably, as they usually do, you don't have to worry about this
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Monday, 21 May 2007

Off-shoring won't save you money

If you don't enjoy rants against off-shoring, WTO and certain leaders who still support Iraq war, skip this post; instead, you can use your time to join the kill-a-baby-seal & don't-save-the-stinkin'-Pandas club.
Still deciding????!!!!

OK, you are still reading. In this post I want to write about how off-shoring won't really save you money; or at least, not be worth the little money you do save.
Let's say that an average programmer in the US earns 100.000 U$S per annum (it's a bit high, I know, but I don't want to get into statistics and such). The off-shored programmer will make a third of that, let's say 33.333 U$S. Now you need someone to manage off-shorers' administrative tasks (like time-tracking, cost-tracking, etc.). Let's be optimistic and say that you will need 1 person in the U$S for each 40 off-shorers. And certainly, off-shorers will have the equivalent of system analysis, but you don't want them to interact directly with your customer. So for very 3 programmers you need an extra analyst. Your 33K are now 46.900.
Certainly, all that long distance communication is not easy (TANSTAAFL); so you are bound to have make mistakes here and there (or maybe from you staff waking up at 5 AM to manage to get these people late in their business hours); if your error rate increases by 20%, you will need 20% more developers AND 20% more testers (your testers are in the US, aren't they? Otherwise, Quis custodiet ipsos custodes?); even if they don't charge you for bug fixing, it will be in the bill somehow. Your costs are near 76K now. And what about the delays? Are they free? (not in my world). Let's assume it is just a 5% of the overall cost (I don't want to be pessimistic), so we have just crossed the 80K barrier.
Finally, your off-shorer will want to have some earnings (damn bastards!). With a 10% margin, it will be something like 85K. Are 15% savings worth the bad reputation, being dependent on external parties and not really knowing your own product?

Not in my book.

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Friday, 18 May 2007

The obvious case for outsourcing

If you own a small clinic, a large store, or whatever is not really IT related, you should seriously consider outsourcing the brunt of your software needs until you grow large. You might have "a reference person", but it will be a waste of effort to put money in a whole IT infrastructure. Most companies apply this idea to all their non core competences (i.e., how many maintenance companies are around, who provide janitors, plumbers, etc. in order to save the effort of having full time employees?).
However if your main competence is IT, it is pretty stupid to outsource, well, IT. Where are you adding value? With your mighty knowledge of outsourcing? The basic rule of economics is that the output of your company should be larger than the summed inputs; if you are an IT shop outsourcing IT, then your core competency is not IT: it's marketing. Making buyers and sellers meet each other is a worthy quest, but certainly it is, not IT; as long as you do it right, focusing as a marketing operation it is great, but don't try to show yourself as an IT shop. People will either discover the truth and cut the middleman or see that you provide a terrible service as an IT shop and buy somewhere else.
Going back to the clinic example, I think your company might hire a different company to sweep the floors and clean the bathrooms; however, any clinic will certainly clean it's operating rooms by itself. Being clean is so important in this business that you don't want somebody you can't control doing it for you.
So, the main idea behind this barrage of words is: Don't outsource your main competence. You will suck. And it will show.

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Outsourcing and offshoring

This will be the first of a series of articles where I give some opinions about offshoring and outsourcing. They are bound to be controversial (if read by anyone), but who cares... I guess your common sense will guide you better than anything that you read.
So far I've seen outsourcing and offshoring implemented in different ways: bad, worse and worst. Actually, that's not completely true; I've also seen a couple of cases when it was done really well: when I was hired as the outsourcer :-). Seriously, I've seen it done OK, and I guess there are a few cases when outsourcing can be the right thing to do.

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Tuesday, 15 May 2007

this is my first post, so I will write a small introduction of what I'll talk about in this blog (i.e., I'll copy-paste the description).
As stated, I will ramble about software (using, describing, programming, or whatever I feel like), languages (not programming) and other topics I find interesting.
The title...
well, it's a small piece of wit in Spanish (actually, Argentinean Spanish). "To bike" is slang for "to procrastinate", and I am quite sure that I will procrastinate adding new posts, even though I intend to do it regularly.
By the way, as you can see, it is not going to be completely serious, some jokes will be tolerated (by you, my dear reader, who will have to suffer them)