GLOBAL DELIVERY IN 2024

Chris Ford, CEO & Managing Partner

Published: September 25, 2024 in Blog

Large corporates have been offshoring technology work for over 30 years. Offshore came to Canada in a big way in the early 2000’s. The dot com bubble had burst and Pets.com went bankrupt. As a result, business leaders were quick to re-categorize technology as an unpleasant cost versus something that could transform their business.

Thankfully, Steve Jobs revitalized technology as a force for good when he gave everybody iPhones. Thus began the 10+ year explosion of mobile as billions of people around the world got online and new products and services proliferated. Business leaders were forced to pay attention again as they watched new businesses like Uber, Netflix and Airbnb change customer experience. The same strategy consultants that had told us to offshore now told us to embrace technology as a strategic advantage. It’s 2024 and it’s been 25 years since the dot com bust. In a wobbly economy, the same strategy consultants that told us to offshore in the 2000’s, and to reshore in the 2010’s, are now telling us to offshore again. This article expresses my collected thoughts on this topic.

Solving the Right Problem

For most of my clients, the biggest problem they face is organizational complexity. It is just too hard to get things done because the company is strangled by hierarchy, silos, legacy technology, and process. Technology delivery is expensive because we have complicated the organizations and processes by which we deliver technology. The advent of agile has been a tremendous help, but in most cases, we have over-complicated that as well. More on that later.

If your organization has a complex delivery model, adding offshore into the mix is an added complexity. In my experience, any benefit you might see from a lower unit cost of development is offset by the additional organizational complexity you introduce.

When it Makes Sense

Offshore makes sense for tasks that can be completed autonomously, independently and with limited team interaction. Contact center work is a great example of this. The unit of work in a call center is a call. Calls are repetitive and there is a finite problem space within which the agent needs to operate. This scenario suits offshore because it doesn’t require ongoing organizational interaction. Contact center is also a domain where it may make sense to “no-shore”, i.e. automate to the point where offshoring is no longer required. Application support is also one of the more obvious and suitable scenarios to offshore.

Value and Cost

Offshore is not what it used to be. For example, the best engineers in India don’t want to work for offshore providers anymore. In 2024, the best engineers in India want to work for Indian software companies, start-ups, domestic large corporates where they can build a career, etc. For many, it is a transitional job to something better. Low wages and poor job quality translate to a high degree of churn and attrition. As wages for engineers in India have increased, global delivery providers have maintained margins through reliance on increasingly junior and lower quality talent. The result is large offshore teams of commodity developers flailing away to produce software.

I have become numb to the number of sprawling, legacy custom-built applications I encounter built by global delivery partners. In most cases, the talent building these solutions do not have the design experience to guide the construction of quality, scalable solutions. And even when they do, they don’t stick around long enough to see it through. The solution advances with a new cadre of inexperienced resources who turn over every year. Indian engineers are some of the best in the world, but they are unlikely to be on the team you get.

Sustainability

Where do tomorrow’s technology leaders come from? i.e. the ones who grew up building systems and doing every job function there is in technology such that they are expert, qualified individuals to lead their organizations. There is a severe shortage of experienced technology executives today because we starved supply in the early 2000’s. The experience of many of today’s CIO’s is vender management, administration, and finance. If you offshore the doers in your organization, you are crippling your supply of experienced leaders in the future. A related topic to sustainability is dependence. Many of my clients over the years have become frustrated at their dependence on offshore suppliers for basic application domain knowledge, which can be an expensive and risky position to unwind.

Culture and Purpose

Like history, I tend to repeat myself. I often say, “Technology projects are rarely about technology. They are about people.” As in, how do I get a bunch of people organized and working together to define a business problem and then design, build, and bring to life an actual solution. You make this challenge smaller by limiting team size and organizational complexity. Unlocking productivity (and efficiency) are all about solving this problem. A high performing IT organization is one where people feel engaged with their teammates and the purpose driving their work. When businesses introduce offshore, the message to employees is that technology work is a commodity that they are willing to outsource to the lowest bidder. It demeans the work, and it becomes a big obstacle to culture-building.

There is absolutely no reason why most businesses could not offshore product management, business analysts and most business management functions as well. For some reason, we focus exclusively on technology resources. If we did this with business resources, it would be clunky, and occasionally inefficient, but we could save a lot of money and that is the point, isn’t it?

You can’t work from home, but you can work from India. In the wake of the pandemic, this is the message that employees are hearing. Business leaders have been evangelizing the importance of in office experiences for reasons of culture, innovation, mentorship. It is hard to reconcile this with an offshore agenda.

Do the Right Thing

Lastly, I am going to make the argument from a Canadian national perspective. Most Canadian economists will tell you that we need to transition from a primary resources-based economy to information and services. We have highly educated immigrants and world class education. If there is anything our future depends on, it is people who understand how to create opportunities and solve problems with technology. If we move these jobs overseas, we are exporting the opportunity we want for ourselves. And the evidence supports this. Like never before, India has created software companies and technology-enabled domestic industries at a torrid pace.

In Canada, we have faced a productivity challenge for my entire lifetime. We are falling behind even Western Europe now. Not only have we made zero progress, it is getting worse. We continue to have protected industries like banking and telecommunications that exact significant rents from Canadians. Financial services alone is estimated to extract $7B in excess fees from Canadians, based on the reduced competition from their oligopoly. Canadians are right to expect that these businesses increase competitiveness through business innovation, and technology invention versus simplistic talent strategies like offshore that kneecap the future of the country.

Lots of opinion so far. Do I have any actual advice?

Is this article just a long rant about offshore? This is a complex topic, but here is what I can offer as advice.

• Most experienced people will tell you to relocate entire functions, this means businesspeople too. People are more likely to feel part of a team and to find purpose in their work. It also doesn’t exacerbate the organizational complexity problem.
• If you are really committed to offshore, you should probably consider a captive investment, versus a service provider who is beholden to deliver 30% profitability over cost of goods. Your team in India will also feel more engaged and connected to the organization and its goals
• Get agile right first. Or whatever your delivery system is before you complicate things with global delivery. If you are still tinkering with how you deliver, then it may not be the right stage to introduce global delivery, especially if you are doing it on a functional basis (e.g. development) versus full teams that are aligned to business outcomes.
• Make technology a first-class citizen in your organization. In many places, the equivalent technology executive is one rung below the corresponding business leader. If you deteriorate the technology organization further with global delivery, you worsen the equilibrium. Technology is intrinsic to business, and the best performing organizations understand this.
• Who is giving you advice? “Results” are difficult to measure in technology delivery which is why unit cost is such an appealing metric. The reality is that productivity, culture, solution quality are all critically important. If your consultants don’t deliver technology themselves, why are they giving you advice on technology delivery?
• Invest in you onshore workforce. Have them learn the business they support. And give them autonomy. Most teams I work with would love to have control over how they deliver technology, but nobody ever asks them how they could be better. In most corporates, process is supreme, and no one feels empowered to make anything better.
• Lastly, if you’re a Canadian software developer, your differentiation over your offshore equivalent is your ability to build relationships with your team and the business you support. If you sit in your basement and never go into the office,  you are foregoing this advantage. Don’t be surprised if your organization decides that your job can be done just as well in India.