Offshoring development

Dennis_Decoene · 2006-11-03

Hi,

At the risk of being flamed and disrispected for this, I must ask these questions. I'm not known to keep my mouth shut over hot issues. So here goes:

I just wanted to know if anyone has experience with offshoring development to countries like India.

Also, what does that mean for western individuals, who have heavily invested in (technical) knowledge (like me). I mean, we cannot possibly hope to compete with those guys pricewise.

I'm expressing my concerns. We recently see an increase in posts from Indian programmers asking questions. This must mean that navision development is growing in India.

So how do you feel the future is holding for us highpaid, higly trained people.

DenSter · 2006-11-03

I really don't see how if someone can do what you can do better/cheaper/more quickly/etc is unfair to you.... It does scare me a little that 'cheap labor' is competing for work, but that's just the way things are. If you really have a problem with that, take a hard look at all the tags in your clothes and see how much of it was made in China or Taiwan or any other place. Take a good look at the stereo equipment in your living room, or the make of your car.

If you would REALLY think this was all unfair, you would not purchase anything made in 'cheap labor' countries. But you won't because those things are the same quality (if not better) than local things, for half the price. That's called supply and demand, and you are part of it just like everybody else.

The folks in India work just as hard at getting their college degrees as you did, and are working just as many hours to do their job. The part that is really scary is that they might actually do the job better than us. Can you accept that someone from a 'less developed' country is better at what you do than you?

In the end it's the customer that decides what is important to them. Lower price and greater distances versus higher prices and local resources. It is much more complex than that, but in the end it will go to some sort of balance. We're in a global economy, and the worst thing that you can do is point to it and complain about how unfair it is. It is a fact of life and it is not going to go away.

ara3n · 2006-11-03

We tried to send upgrades to india, but there isn't much of difference for the customer money wise. An upgrade that cost around 50 K is now 40 K. Of course we were dealing with another solution center, if we get our own developers, that might change.
What I see could make a lot of sense to NSC if it's "PROPERLY MANAGED" to do the dev work in india and charge US rates. You basically need people here to deal directly with customer. So get your skills up so that you can do analysis and requirement gathering so that you'll still be needed at your company.
On the other side, most of the dev work requirements change so much that you almost need personal contact.

zeninoleg · 2006-11-03

I agree with Denster, if you think of it to be unfair - buy only local made stuff.
However, I personally had experiance with "changing" the programs that were written offshore. In my case "chanding" equals - completly rewriting. And managers decided not to send anything there again, so market balances itself.
It does not mean thta there is no good developers, there is plenty because of strong education and background, but these developers are not cheap. I talked to one of my buddies(he is from India) and he told me that engineers in India make not much less money then in Canada. So once again, the market will balance.
And of course do not forget thta development in many cases is live discussion with the client, and lots of company prefer personally know who is doing development.

Savatage · 2006-11-03

AVERAGE ANNUAL PAY-INDIA
Project manager: £5,220
Software engineer: £5,344
Accountant: £2,956
Sales rep: £2,464
Production worker: £964
Source: Mercer Human Resource Consulting

AVERAGE ANNUAL PAY-CHINA
Project manager: £12,173
Software engineer: £6,998
Accountant: £4,677
Sales rep: £2,649
Production worker: £1,214
Source: Mercer Human Resource Consulting

Hard to imaging those numbers here for a years pay.
check out the poverty level graph
http://savatage99.googlepages.com/untitled.gif

Shenpen · 2006-11-03

Basically, I think the very reason outsourcing will stop is that business software development reached an "agile manufacturing" phase: more and more companies accept that "big design up front" is a bad approach, strictly separated analysis/design/development phases are a bad approach, and instead, you need customer-facing, iterative development (do something, show it, change it etc. ) . The very word "specification" more and more seems to sound like a joke. At our company we usually use it as an irony, the term "it works as it's been specified" is just a tongue-in-cheek, joking, ironic way of saying "OK, seems we might have a bit misunderstood some of your requirements". Therefore, physical proximity in indispensable, having the very prgrammer visit the customer each week is indispensable. When there is no spec, you cannot send it the spec overseas.

Therefore I'm not afraid of outsourced competition. Those who outsourced are always inflexible, cannot use customer-facing, iterative extreme-programming techniques and therefore we can always outcompete them.

It's the same stuff as with agile manufacturing. For example, we have a client who makes doors. Why do they make doors in England, why don't they put it out to China? Well, because it seems everybody wants custom-made doors, being able to have 100% control of sizes, colours, features, everything. So the factory cannot be very far away. And they are willing to pay the price of it.

Just as a sidenote. BlackTiger, you are wrong in comparing costs of living. It's food and housing that can be different. iPods, Harley-Davidsons and PowerBooks must cost roughly the same. This is the reason that with an average English salary I feel like I hit the lottery. Because the percentage I spend on the basics of life might be the same as back in Hungary, but as both the salary and the costs of the basics are four times higher, therefore absolute value of that percentage that remains to be spent on iPod and Harley-Davidson (in a year I'll have one I hope) is, which cost the same everywhere, is amazingly higher. And this logic, in a reversed way, the same for India. I think an Indian programmer must literally save in order to buy an iPod and a Harley is out of question. And I think they aren't happy about it. I think they always struggle hard to push up their salaries because they - rightly - feel they are treatd unjustly. And with each raise they get their advantage of competing on costs gets lower and lower.

Miklos_Hollender · 2006-11-03

Oh, sorry, that was me, only that I used my old nick. Sometimes I have to log in with that because I get PMs to check (usually on CRM issues I have completely no idea about) and forgot to log out.

Alex_Chow · 2006-11-03

From my personal experience, outsourcing to India left a bad taste in my mouth. I know they worked real hard to get where they are in India, but I would probably not outsource programming to India ever again.

There are too many things that goes wrong and it's a pain to address these problems. Here's a couple:

1. Time zone. I really don't want to call a programmer in India at 11:00pm. I rather spend that time with my family.
2. You never know what you're going to get. Unless you micro-manage them, which defeats the purpose of outsourcing in the first place, it's hard to get the product you wrote in the design specification vs. what's actually delivered.
3. Questionable experience. India does a great job of marketing itself as a technological powerhouse. However, most people I briefly spoke with over the phone does not leave me a good feeling.
4. Cultural difference. This is a huge problem, the way things are done and the language used. Sometimes you have to go into detail and explain the most obvious questions.
5. Like a poster stated on this thread. Sometimes, when you receive the product. You take more time to rewrite the program instead of delivering it to the customer.

All these translates, to me, bad customer service. Personally, I would rather pay someone here at a higher rate than to outsource. You can also maintain a higher level of control and catch problems before they snowball into something huge.

Companies are still wow'ed by the price at this point. But once the honeymoon stage is gone and reality sets in, the pendulum will swing back.

I'm not saying outsourcing in general is bad. But I just don't think it's at that level where outsourcing can be the main model of your business, for Navision anyway.

Just my 2 cents.

DenSter · 2006-11-03

I'm not saying I am not afraid for my future, there is a very real possibility that IF (and that is a BIG if) they can get their services up to the levels that customers here expect, then there is really no more reason to even use local resources and offshoring could potentially become a threat.

But you know, there is always competition out there, if it's not from less expensive countries it is from younger faster kids straight out of college that spend every waking hour with the latest technologies.

What I am saying is that complaining about how unfair it is will not make it go away. Instead, we could be looking for other roles, perhaps more in the area of writing the specs, or reviewing code, maybe more of a Q&A type position.

Offshoring will never replace direct contact with the customer, so that part of what we do should be safe. You better find a way to deal with it is what I mean, because complaining about it is not going to make it go away.

Alex_Chow · 2006-11-03

DenSter wrote:

Offshoring will never replace direct contact with the customer, so that part of what we do should be safe. You better find a way to deal with it is what I mean, because complaining about it is not going to make it go away.

This is unless they invent a teleportation machine

DenSter wrote:

But you know, there is always competition out there, if it's not from less expensive countries it is from younger faster kids straight out of college that spend every waking hour with the latest technologies.

Personally, I think globalization of resources is great. This is how human race as a whole evolve to the next level. Politically, I dislike the mentaility of "protectionism". All protectionism does is kill productivity and discourage innovation because traditional business can operate as they did before, producing inferior products and charging high prices, without fear of competition.

Believe or not, more jobs are created than taken away because of outsourcing. If you ask your economists friends, you'll understand why.

This same fear is the along the same line as when computers are being accepted in businesses. Workers were afraid that they're jobs will be replaced by computers. But with the adoption of computers, the economy boomed and took how we did business to a whole new level.

Miklos_Hollender · 2006-11-03

Besides, outsourcing has the effect that the really bright Indian programmers who really learn the trade after a few outsourced project pack their belongings and move to England or to America. Because then they can get 10 times as much money for the same work and support their families. Actually my direct manager is Indian and he is one of the few folks I now that I openly admit are better Navision-hackers than me. And if we've got one more bright hacker here, that means outsourcers find one less bright hacker there. That's the point.

So basically it means that the quality of outsourcing will never increase as the bright people tend to move out, to the West.

Actually, it even might mean it will decrease. As if you outsourced in 2000, you might have been lucky to have inexperienced, but at least bright people work on your project. But bright people, as soon as they get the experience to get a good job, move West. Soon - maybe even now - you won't have any bright people work on ousourced projects. And that's the end of outsourcing.

Therefore - as a politically Libertarian - I think the problem of outsourcing solves itself, by the natural ways the markets work, without need for any special intervention.

Miklos_Hollender · 2006-11-03

All protectionism does is kill productivity and discourage innovation because traditional business can operate as they did before, producing inferior products and charging high prices, without fear of competition.

And as far as I know this resulted in the Great Depression. As far as I know, even the great opponents, Keynes and Hayek agreed that the reason is that wages are overpriced, the job market is not competitive internationally. They only differed in the cure of the illness.

Believe or not, more jobs are created than taken away because of outsourcing. If you ask your economists friends, you'll understand why.

Exactly so. Are you a fellow Hayekist?

I can recommend this blog: http://www.coyoteblog.com/

Alex_Chow · 2006-11-03

I just take the time to understand more of what's going on in the world instead of taking it "as is" as published by the media and expressed by politicians.

I think if we don't do so, we will find ourselves moving towards and establishing something that we do not want. Kind of like Mao when he started the Cultural Revolution. But that's a different subject.

As you can tell, I love history.

Dennis_Decoene · 2006-11-04

Wonderfull, this is the kind of debate I like ;-)

I myself feel it as many others in this thread that if we can combine our technical skillset with real in depth business knowledge, we can still be winners every time.

A trend should not be feared but used.

We can listen to the customers and users and be their direct contact. We gather the specs and make sure the orther party can understand clearly what is wanted. Then, we could have the development done in countries like India. We would follow-up these projects in detail. Maybe iteratively. It often happens only the consultant is having contact with the customer, not the programmer (although I heavily believe in direct communication).

Those of us that can really smooth the communication between customer and developer are allways in hot demand, right? So who cares if the developer is in a low wage country? Better for everyone involved, everyone gains something out of it.

I don't know what the future will hold. But I'm not afraid at all. I know I will allways find something. Westerners often want personalised services and such. Managers and owners of company's want to focus on their business, not their supporting IT. So who can fill in that need? We can.

Yes some company's are developing in house (that has allways been the case since IT was introduced in company's) and yes some of them are now testing the offshoring trend. So What... Many of them are coming back with horrorstory's. Communication is often, if not allways, the bad guy.

On a more philosophical note: I hope that the engineers in India and China and elsewhere wil some day have the same quality of living as we do. Nobody should be poor just because they were born in the wrong place. I hope the extreme differences will someday be levelled.

DenSter · 2006-11-04

Miklos Hollender wrote:

So basically it means that the quality of outsourcing will never increase as the bright people tend to move out, to the West.

Actually, it even might mean it will decrease. As if you outsourced in 2000, you might have been lucky to have inexperienced, but at least bright people work on your project. But bright people, as soon as they get the experience to get a good job, move West. Soon - maybe even now - you won't have any bright people work on ousourced projects. And that's the end of outsourcing.

You should really do your homework a little better Miklos. Outsourcing has been around a lot longer than since 2000. The brightest stars in India/China do not want to move to the west, they want to make India/China more prosperous.

This business just for programming services has increased over the last decades from just a few hundred million :shock: to TRILLIONS of dollars, and it is being reported that it is only at the beginning of its potential. And don't be fooled by a few rookie postings here on mibuso, or your personal experience with a handful of bad programmers. They are doing it by being better than anybody else, in every aspect. This is definately NOT going anywhere.

DenSter · 2006-11-05

Look... I won't argue about your opinion, we're all entitled to one and I respect everyone's opinion. Just don't mix opinion with facts.

FACTS:
Outsourcing has grown into a multi-trillion dollar business over the last two decades, and it is growing faster than ever, which means that there are many success stories out there that you obviously do not know about. The ONLY way to grow a business is to be good at what you do. There is not a single company that will invest a single dime in something that is not worth the money (at least theoretically

). The outsourcing business is giving more value than keeping the work in our own countries. On one hand that has to do with lower prices, and on the other hand there is enough quality to sustain the business, or otherwise it would have died years ago.

This has nothing to do with marketing, it has to do with cold hard facts.

OPINION:
Now my personal opinion is that I am very skeptical about this, but I also know that it is here to stay. I need to find a way to work WITH it, or otherwise I WILL find myself without employment. So rather than complaining about it, I am researching it, trying to understand what it is about, and looking for the niche that I can fit in.

Alex_Chow · 2006-11-05

To requote Black Tiger in more detail, I've never seen a successful implementation in Navision where the full development was being outsourced.

This is not the say that it was never successful, I'm sure there are great stories out there, but I'm just stating that I never came across one.

Like I stated before, I just don't believe that, in the Navision world, a company can have outsourcing as it's main model. It's hard enough to work with local contractors already.

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Miklos_Hollender · 2006-11-06

DenSter,

wha don't you think the "stars" don't come over as soon as they get the experience? As far as I know, even dedicated nationalists agree that loyalty to your family has a priority over loyalty to your homeland. If you have to choose between improving your country and waiting for the results, or jump countries immediately, earn a lot more and support your family, I think even conservatives/nationalists agree that this is the more ethical choice. I simply see no reason why wouldn't it happen.

Also, the laws of economics work only on the long run. Six years is nothing, it might just be a "fashion" it might turn out the next bubble like the dotcom was or the "web 2.0" is starting to become. I might be that the early adopters already started to move away from outsourcing and the trillions pouring into it are from companies who are simply slow to react, who have a lag in picking up trends. Of course, it might not be the case, but the point is we don't yet know. An outsourcep project started in 2004 will show it's long-term results only in 2009 when the question will arise that how easily it is to maintain, are the original developers around to maintain it, or is the code good enough quality to be maintained by others and so on.

Also, the application are, the given field makes things different. In a more technical kind of development, like a web server or something like that, the "waterfall" modell, the "big design upfront" is not so disastrous and therefore the separation of developers and users might not be such a big problem. In business logic developent, close cooperation between developers and users is indispensable as it is a huge problem to understand each other and therefore physical proximity (and similar culture) is very important. Even the cultural differences between Western and Eastern Europe, which are smaller than between the West and Asia, can make things very hard, I had a lot of complaints posted in this subject (mainly with Shenpen nick). For example, I had no idea what the hell would you use Customized Calendars in Navision before I came to England - and found out that here agreements between vendor and customer on shipping on each Tuesdays and Fridays really do exists, so this features is very important for purchase planning. With Asia, the cultural differences I think even bigger. You can explain the specification of a web server or something like PhotoShop to overseas because these software are culture-neutral and mostly everybody thinks in the same concepts. But business logic is not culture-neutral. Western Europe seems to concentrate on macro-level business management (analyzing Material and Capacity Variances for example and finding out reasons of waste) while Eastern Europe concentrates on micro-management (making reports how many order lines did the salespeople enter on each day etc.) I don't know what's the case with India or China, but there are surely differences.

As far as I know, most outsourced projects are done in Java and I'm sure no sane person would want to write business logic in Java because a Python-team of 1 guy would achieve the same thing three times quicker than a Java-team of 4 people. Therefore I presume outsourced projects tend to be architecture-oriented (building an servlet-container etc. ) and not business logic-oriented.

HalMdy · 2006-11-06

Very interesting topic, but ... why nobody from concerned countries give their opinion ?

DenSter · 2006-11-06

Miklos... Of course there will always be adventurous people that go to other countries to see if they can find a better life. I did it myself, you did it, and there are many that do from other countries as well.

However, I believe that out of 100 'stars', maybe 5 or 10 will go to another country, heck maybe even as many as 20 or 25. But I believe that most of them will stay where their families are, where they grew up, where they are at home. This has nothing to do with whether they choose to 'make their country better', it has to do with making a good living for their families where they are.

If you had had the choice to make the kind of living you are making now where you came from, would you still have moved?

Your economics are flawed as well Miklos

this trend is not slowing down at all, it is picking up speed. It is picking up speed, because they are getting better at what they do, and they are still relatively inexpensive. It is only a matter of time until they learn how to make NAV development work. I can think of a bunch of things that could be done offshore (upgrades, localizations, things like that).

Miklos_Hollender · 2006-11-06

"Your economics are flawed as well Miklos

this trend is not slowing down at all, it is picking up speed. It is picking up speed, because they are getting better at what they do, and they are still relatively inexpensive."

Yeah, because the proper economic method is to base a prediction on one piece of data (growth) and assume it's reason being only one factor (learning)?

Unless we are willing to dig deep for detailed and trustable statistics including application areas, programming languages, architecture, budgets, project success measurements like overspending, overdueness, customer satisfaction, long-term TCO, long-term ROI, long-term code maintenance costs and so on, it's not economics we are talking about, just intuitions. Well, my intuition says that the trend of outsourcing is in direct conflict with the trend of Agile Development because Agile means (besides a lot of things) the elimination of the designer between the user and the developer and a formal design and specification process. One of these two trends will have to give and I suspect it's not Agile that will.

Another input to my intuition is team sizes. As long as you have the task that 1 or 2 developer can solve, all is fine. At 4 or 5, the costs of internal communication will go up sharply. (Read this, this is a very amusing story: http://www.csd.uwo.ca/staff/magi/person ... mmers.html)
Therefore, one of the trends is to create so productive programming languages and frameworks that most problems can be tackled by 1-2 programmers. F.e. Python and Django, Ruby and Ruby on Rails for web development and so on. And whenever the cost of writing a spec will be more than the actual coding itself then outsourcing is over.

And it can happen. I've put a bit of Rails example here: http://ideasonrails.blogspot.com/ and for example, which is longer: writing a spec that contains that besides each link submitted to the website, there must be a text that explains how long ago was that link submitted in words, specifying each possibility as "x minutes ago", "x hours ago", "x days ago" etc. or just going to your text editor and typing this:

<%= time_ago_in_words link.created_at %>

?

DenSter · 2006-11-08

Miklos Hollender wrote:

<snipsnip>... Well, my intuition says ... </snipsnip>

Nuff said

out the door go all the economic theories, all the meetings discussions... We shoul have listened to Miklos' intuition!!

Miklos_Hollender · 2006-11-09

This question is complicated enough that it would provide fuel for half a dozen Ph.D theses. Therefore whatever we do here is as far from economics as casting Tarot cards would be

It's just honest to call it intuition.

DenSter · 2006-11-10

Of course, hence the

in my posts. I think if we'd try hard enough we would be able to use legitimate scientific economic parameters to argue both sides.

What I think should be very valuable is all of our intuitions combined should give a pretty good understanding of the challenges involved in offshoring NAV development. In fact, I would dare to say that the intuition of some of the mibuso members is probably more accurate than any scientist could be.

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