Tuesday, December 25, 2007

Different point of view!

A while ago I was traveling the back-roads behind the South-Eastern Coast of Australia and on one occasion drove up the Illawarra Highway and over the Macquarie Pass. This is a pretty spectacular road but not for the faint of heart as it’s hairpin bends (switchbacks) and step climbs mean that you will not see any 18 wheelers (or, 22 wheelers, as is often the case in Australia) using this highway. But the pass does support one of Australia’s southernmost sub-tropical rainforest, and to suddenly drive into the forest’s gloom is quite a memorable sight.

I first tackled this road back in 1970 – and on my first motorcycle. I elected to make the climb up to a village pub in the small town of Robertson just the other side of Macquarie Pass. It was an exciting first ride as my headlamp stopped emitting light about halfway up the highway and remained non-functioning for the rest of the night. The ride down as I tried to pick out the apex of hidden corners was a ride I will always remember.

On my most recent trip up this road I once again stopped in at the pub at Robertson just for old time’s sake. Robertson produces a good local cheddar cheese so a cold lager with some cheese and crackers made it worthwhile. But as I settled into the bar, I couldn’t help overhearing the local’s having a healthy debate over the issues of the day. Central to the exchange was the concerns over selling land (mineral resources) to foreigners and how, in the words of one of the locals, piece by piece the whole country could end up in the hands of offshore developers. “Why are we selling it one holding at a time? Why don’t we just sell the whole bloody country, and then we could all go live in the Riviera?”

The picture I have included here is by a local South-East Coast painter, Max Mannix, which captures the casual nature of the folks at the bar, and reflects the attitude of the locals as they debate such heavy topics. And it was against this background that I caught the Lou Dobbs report on CNN last week where they reported on the subject of “Best Careers for a Changing Job Landscape” from a recent US News and World Report article. The magazine reporter was seeing “more students are graduating from college at the same time that employers are off-shoring more professional jobs. So, many holders of a bachelor's degree are having trouble finding jobs that require college-graduate skills.”

CNN then went on to highlight that, for the first time, the US News and World Report had added four careers that didn’t require a college degree “biomedical equipment technician, firefighter, hairstylist / cosmetologist, ad locksmith / security system technician” to their best career list. This really floored me – best career options were now being promoted on the basis of least threat to being off-shored rather than on the basis of value they will bring to the community. Don’t pursue engineering or science as you will not be able to compete! Get a job as a firefighter or a hairstylist, as we don’t see much off-shoring potential with these vocational choices!

The fear of off-shoring has now created a situation where we are now telling our kids – the gigs up! Let’s find something else to do now! We are essentially letting them know we are more concerned about them having a job, rather than taking on a career with global challenges. In effect we are writing them off before we even put them into the game.

Off-shoring has its upside and many corporations have picked up on the most significant element, the economic advantage. But as I look at what’s now happening in the marketplace, I am becoming concerned on three levels.

The first level is something I call development creep. Nearly every offshore project I have been involved with starts out on the understanding that it’s about support and maintenance of older products. It often includes products and features often no longer considered mainstream or current, which are frequently based on older infrastructure technology and / or programming languages. But after a couple of years, I see these off-shore companies approaching their partners and begin to solicit new-development opportunities. Their argument is that it’s just becoming too hard to keep any group of programmers together without some development projects and so, over time, development creep begins.

But the price paid by the partner, and eventually the ecosystem of ISV’s supporting that partner, becomes pretty obvious. The reach of these new-development projects often overlaps with what ISVs offer – and I have seen this overlap happen a number of times. Left unchecked, development creep will collapse any viable ISV ecosystem as the primary vendor looses credibility with the partners it had attracted.

The second level is something I call direct funding of our future competitors. Whether we even realize it, or not, the fact is that any off-shore community learns quickly when presented with real business problems to solve. And with their predisposition to only want to use the latest architectures, infrastructures, and technologies, this focus accelerates their movement to the front of the curve.

But the price paid by the industry is that, over time, we end up funding a future powerhouse with only limited resources remaining to stay competitive. And I find this very real and I am becoming extremely concerned. I do not want to appear to be an alarmist, but I do want to make sure we are all aware of this potential and that we act with measured caution when we select projects for off-shoring. Clearly, this off-shore funding is what we see today fostering the reluctance of our student populations to take on careers in IT.

The final level is what I call leadership-ciphering, and by this I mean the shrinking pool of IT on-shore activities is lessening the opportunity for real leadership to develop. As you cut away at our entry-level positions and remove the need to even have junior IT positions staffed, how do we really expect to nurture the next generation of IT Architects, DBA’s, and Operations leaders? Even if we do provide ladders that bridge to higher positions, what good will they be if there’s no one around to climb the steps?

Of the three levels, this last one is potentially the most damaging. By taking a short term view and off-shoring to a partner, we begin to strip away at our own ability to apply IT as a business differentiator. We quickly turn to a short-list of global service companies tuned to rolling out variations on a couple of themes, and then wonder why our application of technology to solving business problems isn’t generating the benefits it once did.

But before I go any further on this topic, I want to say I am not anti–globalization. I view the actions of company’s that set up their own operations in a foreign country and then build a company operation around the development of the local community, is something I view very positively. Balancing the development needs across different locations and accommodating different cultures are all key ingredients in promoting innovation. Globalization is quite different to "contract" off-shoring where little consideration is given to anything other than handing over key intellectual assets to anyone who can do something similar for less. And really, the days of savings of 70 percent are over as most of us, with today’s shifting currency valuations, struggle to eek out even 20 or 30 percent savings!

Whether we think in terms of abandoning our sovereignty and letting others exploit our natural resources (let’s sell the whole country!) or we just let other nations capitalize on our intellectual resources (let’s not compete in engineering or the sciences!), the end result is much the same and it’s pretty depressing.

I have developed a different point of view on this. It hasn’t just surfaced but rather, has been slowly percolating to the top. Isn’t it time we seriously challenged the “business norm” of just stripping our ability to compete and allowing our financing to slowly build our future competitors? Isn’t it time to encourage our students to once again, tackle the difficult curriculums of engineering and science?

Firefighters and hairstylists will always be needed, but do we really want to build our society exclusively around these kinds of skill-sets? Or are we going to sit quietly by and wait for new jobs as we become the low-cost off-shore center of the new economies we finance? In the spirit of my mate, back at the pub in Robertson, “why do we off-shore our projects a piece at a time? Why don’t we off-shore all of IT and go live in the Riviera!”

7 comments:

David Finnie said...

Richard,

Excellent points ! There are some other issues that concern me somewhat :

- The payback for using off-shored resources for development is no where near that predicted. Off-shore resources almost always come with a time-zone issue, and sometimes with some language issues also. By the time the architects (there's that term again) have spec'd changes to the required degree to allow the off-shore resources to work independently, architect time on projects is drastically increased. Apart from the fact that it is probably boring the architects to tears, it is also eating up the "savings" that the bean-counters assume they will get from off-shore resources.

- Unfortunately I don't have any good stories to tell about development performed by off-shore resources. I certainly do have some bad ones to tell :-) Whether it is communication problems, skills, ethos/mindset, or some other thing, the projects have not met the same standard as "on-shore" development, in my experience. This can have some very real effects on market perception of the main vendor.

Dave

bhonaker said...

Richard brings back up some thorny issues. I'd like to comment that the 'global' perspective can easily be taken without any negativity toward any particular region of the world.

To understand why we believe that the cost issues mentioned by David don't work out in the 'expected' way, here are three realities of successful projects we have worked on over our 18 years of being in business (note particularly the third item):

- Projects with schedules longer than about 9 months have a very low chance of ever being finished -- and those that are finished incur costs that grow exponentially based on the length of the project

- The most successful projects have team sizes in the single digits; larger groups lead to more missed deadlines simply because more people are involved, and therefore there are more points of interaction between participants

- Even small variances in workday times (2 time zones apart) make it difficult to stay connected and on track – the less time each day that people can talk, the more impacted the schedule

To add to what David said, you also have to remember that the architects and the customers all fall within the 'team'; this may be one reason that projects don’t really save much money using offshored resources. Add that to the spiraling pay (due to local supply and demand) in the previously low-cost 'offshoring' countries, and the cost benefits seem to evaporate completely.

This would seem to lead to a situation where there will always be a demand for ‘local’ resources (around the world) to deliver ‘fast and good’ projects (since cheap doesn’t seem to exist anymore, the other two adjectives are achievable). This lack of true cost savings for 'offshoring' a deliverable, quality product is a point that a lot of the larger corporations are missing on new development, in my opinion.

That's just my (shrinking!) .02 US$

Bill Honaker
XID, Ltd.
(USA for the reference of the readers)

Anonymous said...

G'day Mate

Good read RKB – and I agree with your thoughts. The baby is being thrown out with the bathwater in order to save a few lousy bucks to pass onto greedy shareholders. Eventually any IP asset will be worthless – but to them that’s OK ‘cause they've made a short-term profit. It’s another form of asset stripping isn’t it?

Yes, our kids should be encouraged to pursue degrees in the fields you mention otherwise it is just another sell-off. Of course, we probably need more plumbers!

Kevin

(another grumpy old Aussie)

Bill H said...

This is a box that we are getting into with no way out that I can see. I was part of a major Y2K project that was out-sourced over my objections to India. It turned out that they did a supurb job to my surprise. They had a small coordinating staff of senior people on site, and we had daily conference calls over a TI link. Deliverables were small and frequent so that they could be managed well.

I am now the archtect on another project that is being outsourced to Russia. Based on past experience and cost, there is no way that I could recommend to management that they not outsource.

As long as managers are judged by their quarterly bottom line, I don't see a way out of this. I am afraid that many of Richard's dire predictions may well come true.

Randall Becker said...

Happy New Year!

Richard and the posters make good points. Distilling much of this down to one long standing
good practice, a very important process to be included in the overall cost of managing an outsource relationship is the ability to in-source quickly. If you can't do that, don't outsource a major effort. That implies maintaining architectural control, which we on this side of the pond have been notoriously bad at cost-quantifying and to maintaining a serious commitment. Many of us in the business have seen executives make short term decisions to send work out of a company - outsourcing is decidedly not necessarily a border issue, but one of control and budget - to make shareholders happy in the short term; but when intellectual control of the end product leaves the organization that depends on it, it's a risk that must be quantified and potentially mitigated. Personally, I'd like to see that level of mitigation signed off in the same vein as a SOX sign-off - transparent disclosure to the shareholders so that informed investing decisions can be made.

Have a profitable and open New Year,

Randall
Nexbridge Inc.

dauber said...

From CrossTalk, The Journal of Defense Software Engineering: “It is our view that Computer Science (CS) education is neglecting basic skills, in particular in the areas of programming and formal methods. We consider that the general adoption of Java as a first programming language is in part responsible for this decline.”

JavaSchools are not operating in a vacuum: they're dumbing down their curriculum because they think it's the only way to keep CS students. The real problem is that these schools are not doing anything positive to attract the kids who are really interesting in programming, not computer science. I think one solution would be to create a programming-intensive BofArts in Software Development--a Julliard for programmers. Such a program would consist of a practical studio requirement developing significant works of software on teams with very experienced teachers, with a sprinkling of liberal arts classes for balance. It would be a huge magnet to the talented high school kids who love programming, but can't get excited about proving theorums. I've always thought it odd you couldn't get a degree in software dev.

MartyT said...

You are so "right one" (actually, right bloody on) that it's scary; while you can tell from some of my previous emails that I'm a lot harsher than you are, you really have stated the crux of the outsourcing problem; …… and being a father and grandfather, as I now find myself, I have to say that it really bothers me to see the actions being taken at the highest levels in government and across corporations may not have any direct impact on their families, but that’s not true for the rest of us! Even down here in Australia, we are witnessing the same dismantling of technology jobs – all for the sake of shoring up the “bottom line”. There will always be police actions somewhere in the world, and I wonder if you forgot to add soldier to your list of hairdressers and locksmiths!


Upon further reflection, this topic has made me troubled both as a father and grandfather: our IT technical superiority was not taken from us because they're better; it wasn't taken from us because they took it under force; it was given away BY US because we wanted cheaper labor for better return on our investments (e.g., our 401Ks and other "retirement options"); the culpability, cupidity (and I believe, stupidity) on this loss is all ours. As my paternal grandmother chided me at least once when I pointed my finger at someone for doing something to me: "remember young man, three fingers are pointing back at you...".
For those interested in this topic, send an email to Dr. Norm Matloff at UC Davis and ask him about his Com-Sci enrollments; he has various sigs where he address the US brain shrinkage with just the items you mentioned in your blog. (A couple of years ago during the initial outsourcing "boom" (and H1B invasion) Dr. Matloff saw enrollment drop by around 40% if memory serves me.)

Check out:

http://www.cs.ucdavis.edu/people/faculty/matloff.html
http://heather.cs.ucdavis.edu/itaa.real.html

Marty T in OZ