I am moderating a panel discussion in Palo Alto, California this Thursday evening at a Software Development Forum event entitled “Outsourcing Horror Stories: Lessons Learned the Hard Way”.
We have five terrific panelists who have learned a great deal about offshore outsourcing (and not always in the most positive, career enhancing way). They have lived to tell about it and now they can help you avoid the same pitfalls.
Here are four stories of outsourcing horror, the panel will likely talk about on Thursday:
(1) I got red tape and a run-around trying to create an offshore subsidiary
You may think a subsidiary in a foreign country is the way to pay the lowest salary for software engineers.
You’re right!
But wait! If you only need just a dozen engineers, then the startup time and cost will destroy your eventual savings. You have to find a facility, hire the engineers, handle the legal, business and government issues and so on.
You will hear success stories where a technical team member goes back to the “old country” where they are from and sets up a small operation. Often it is a small team of engineers working from their homes. This “friends and family” approach to subsidiary creation only works when you are intimately familiar with the outsourcing destination.
The horror stories are about small U.S. companies that venture into another country where they have little or no experience. They spend time and money trying to get the operation off the ground. Additional complications ensue when they try to coordinate and integrate the work of the offshore team with the programming performed by their domestic engineering team.
Creating your own offshore operation is a reasonable strategy if you are prepared for the upfront cost and delay.
(2) My offshore vendor was a crook!
Instead of setting up a subsidiary you decide that contracting with an offshore vendor is the right approach. You search on-line and also get referrals from friends and associates. All this can take months of effort!
Even if you are careful, you can still get screwed. One company paid a startup fee but the engineers from the vendor never showed up for the kick-off conference call.
Good vendor selection and reference checking is critical to your success in outsourcing.
(3) My specs had the sweeping scope of War and Peace!
You spend so much time documenting what you need, you may as well write the code yourself! That is the way it feels when you have a fixed-price project and/or you hire junior engineers with little or no practical experience. Everything needs to be described in infinitesimal detail to get any useful code from them.
Is there an alternative?
Yes! You can hire a vendor that provides a team of engineers with the proper mix of junior and senior engineers. A senior engineer becomes your focal point for collaboration and directs the rest of the team.
You will pay more than the rock-bottom price of a junior team but still much less than full-time employee engineers.
Do you still need specifications?
Some, but not as much. You must provide enough of a description to get things started. The important point is you should hire the vendor team that has a level of experience that matches the depth of the specifications you have and the kind of outsourcing (fixed-price or time and materials) you need to do.
(4) I paid for custom code and found out later I didn’t own it!
Paying money and getting code from an offshore vendor is not enough. You need to have the proper legal agreements to ensure you own the code written for you. And the offshore vendor must have the same kind of agreements with their employees and contractors.
Other countries place more importance on the “moral rights” of work created by individuals. The concept of moral rights is the ability of an author to control his or her creative work, including software. Moral rights and the copyright of your code must be assigned to your company as part of your outsourcing agreement.
The worst case is, you will not really own the code you paid for. The programmer that wrote your code will retain ownership, and even sell it to someone else – like your competitor!
I am just scratching the surface of the bad outsourcing cesspool. Come to the talk this Thursday, September 21, 2006 at SAP in Palo Alto to hear real-world examples of how to avoid disaster.
You can read similar examples and get good advice in Software without Borders. The book is a rich source of the objective outsourcing advice you need to avoid the pitfalls and make your software outsourcing a success.
Software without Borders is available now on Amazon. See http://www.SoftwareWithoutBordersBook.com for a link to the Amazon.com website and to read samples and learn more about the book.
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The Runtime Bottom Line: Bad news of outsourcing gone wrong travels fast and can dampen your enthusiasm for considering outsourcing for your situation. But there are also many examples of successful outsourcing. Learn from the mistakes of others so you can stay on the successful side of the game.
Until next time,
Steve Mezak
Accelerance, Inc.
Risk-Free Outsourcing
Gosh, that does all sound pretty awful, but I was just wondering - when somebody puts in the hard work needed to become a professional and ends up living under a bridge for about a decade or two because there is no work and nobody will hire the overqualified, does that count as a horror story, too? Or do horrible things only happen to venture capitalists?
Could you clear that up for me?
Posted by: Joseph Dunphy | August 19, 2007 at 12:19 PM