Andy Hilliard Master The Nuances of Outsourcing

This is Textron tv. Hey guys, thanks for the throw. We're here with Andy Hilliard, who's CEO for accelerants, and we're talking about how much software development is being outsourced and how much of that is a good thing, a bad thing.

Does it drive innovation faster? Does it slow people down? The debate and the opinions are all over the spectrum.

So let's dive in. Andy, welcome to the show. Thank you very much, Mike.

Appreciate it. Happy to be here. People have been outsourcing software development for ages.

So the question is, is are we seeing more of that, and if so, what drives that and what are some of the things that maybe are gotchas that people might wanna be looking out for? Oh, boy, that's a multi edge question. Uh, first, first and foremost, um, maybe we should all take a pledge to just stop using the word outsourcing because, uh, you know, if, if you want to build wicker chairs for pennies on the dollar, then you know, you can outsource it to China with some requirements and, and get it back.

Maybe good, maybe not. Depends on if, uh, your Costco or, or if you're someone else who can, you know, force quality. But, you know, outsourcing and software development or product development don't really go together.

Uh, we, we, we wanna use the word offshoring more because offshoring is more just a, a tactic and not necessarily a binary or transactional, uh, you know, effect between two parties. Now, when you're offshoring, you, you, you certainly might be using partners, uh, which is a relationship, uh, a contractual relationship, or you might be, you know, finding talent and using a PEO to contract with 'em. So, you know, it's, it's really important for us to sort of understand, um, what kind of relationships and what kind of models, uh, tend to drive more value and, and what kind of, sort of thinking and models and approaches will basically lead to a series of, uh, catastrophes.

Mm-Hmm. And, you know, the industry has changed quite a bit too. So I mean, we could talk about, you know, what's different about it now and, uh, versus then and, and what you need to do now versus then in order to have a chance to success.

Well, what is the quality of the offshoring experience these days? Because clearly, uh, stem skills are everywhere, and a lot of countries have invested in this capability. So are we seeing that pay off in terms of the skills that we're seeing for software development around the world?

You know, I'm in the offshoring industry, so I don't want to paint this as don't offshore. It's, it's really, it's getting worse and it's really bad because it's opportunistic. Uh, honestly, if you were to look at across small, medium, and large scale enterprises, or, or let's just take out large scale because large scale have, have their own models.

You know, they're working with tier one service providers. They have thousands of people. It's, it's sort of co-located, co-managed, you know, they have people in different countries.

It's a whole different animal. But for the other 97% of companies that are considering the benefits of offshoring, because, uh, they get fine talent at, at much more cost effective means, uh, talent is hard to come by. It's hard to retain.

You know, most clients aren't in the, they aren't in, they aren't in the industry of producing software or products. You know, they, they're focused on whatever they're focused on, and there's other people out there that have better models or, or better skillset. So there's a number of reasons to offshore.

Um, but the environment is a lot different. Now, take for example, pre covid, you know, my company Vets scorecards, uh, and certifies software development groups around the world. In fact, we, we were tracking and scoring 8,000 software development organizations that were somewhere between like 75 engineers and a thousand engineers.

That, that was the universe of software development, uh, organizations pre covid. Now it's around 28,000. And how did it grow from 8,000 to 28,000 just because of Covid?

Well, it's because Covid, you know, blew up the co-location model of outsourcing. People didn't commute into an office and have this sort of culture, and they're five days a week and, and, you know, we're trained there, we're taught English there, you know, coded together next to each other. Now it's like everyone's working everywhere.

So there's really no barriers to just flipping on a switch and starting a dev shop somewhere. You can virtually do it overnight. You can scrape someone else's website.

You can throw up a website, say like, we, we do everything and we have lots of people, but we have no one. It's like, how do you have lots of people? No one, it's whatever you want.

What do you mean it's whatever I want is what do you do? Well, we do everything well, how do you do everything well, because we can find the talent out there, you know, living at home and stuff. I, it's like, if that's not scary enough to think that I don't trust you.

And, you know, development is an art, a, a collaborative art, which starts with, you know, team building and trust and radical candor and all that sort of thing. And if people are saying like, you've only been in existence for a couple weeks, yet you supposedly have 500 people, but you don't have 500, but you can get 500 because they're out there and you're saying you have, it's like, it's insane. It is insane out there.

And, and what's really driving it is, you know, AI and the ease of starting up a dev shop, uh, it doesn't require capital costs. Um, platforms like Toptal and, and, you know, all these platforms that allow you to find developers easily, and then these PEO firms that allow you to contract with these developers, and you've just been given the keys to a, you know, a flaming dumpster fire because now you feel like you can do it yourself and find the talent, and all of a sudden all these promises that you've been given turn into just, you know, smoke and mirror. So if that doesn't scare you, I don't know what does.

So how do I navigate all that for something that might feel like a better outcome? Because it seems like there's a lot of options, and are there best practices? How do I get to this, uh, hopefully nirvana, but not wind up in the dumpster?

It can be, it can be nirvana, but there are so many ways, there are so many like attractive ways and tools and methods that, that have been given to people to get into more of a mess. You know, just like you, you are out of, you're being given the ways to, to make it as bad as possible. And, and how you navigate that, uh, is you have to change your mindset.

As I said before, software development is not transactional or binary. You're, you're not making wicker chairs in China. You know, uh, you are actually collaborating, integrating, embedding people together, uh, which requires a whole different mindset on how you outsource.

You have to outsource, uh, not with a, uh, a transactional mentality in mind, but you have to outsource with an integration embedded, um, ecosystem development mentality. Meaning I'm going to create a globally distributed, uh, software and product development ecosystem that is agile in nature, where people treat each other as, as equals regardless of whether you're an actual contractor or a full-time employee or, or, you know, whatever variation in no matter where you sit or how, how you sit. It, it's about forming, uh, teams that have a culture, uh, and an ecosystem that has a culture that has a, a degree of, uh, appreciation understanding of one another for each individual's role and for their cultural backgrounds and, and, and how they communicate with one another.

Because different cultures communicate very differently. You need to have interpretation of that. And, you know, the adage of you have to go slow to go fast, cannot apply more, you know, applicably here in this scenario because people say like, no, I just want to get, I wanna get bodies doing things as quickly as possible and as cheaply as possible.

I'm like, you are, you are just setting the stage up, uh, of paying for bodies to do things over a period of time, and you're gonna reach the end of that time, and it's gonna be a bunch of spaghetti, and it's, and it's gonna be slightly on fire. And your solution to that is it must be the vendor or the resource, and I'll just switch them out. And you're gonna continue to do the wrong things with another partner or another resource.

I mean. So don't do that. Go slow to go fast, create a culture, travel, appreciate, uh, you know, other individuals, put the right body in the right seat, uh, and create a whole team mentality around, you know, we're in this together.

Actually, that's, uh, yeah. Did, did we learn anything in the Covid era about how to manage this? 'cause we had so many people working from home, so they were more distributed, and they may have all been in the same region, but some people moved to other parts of the country and the other folks got hired when they were clearly on the other side of the country.

And effectively, a lot of what we're talking about is just applying that at a different level of scale with people around the world. So, you know, did we, are we getting better at this? Um, yes, we're getting better at this because, uh, we're continuing to do the wrong things over and over again.

And, you know, um, getting better. It, it does isn't overnight. It takes time, it takes years.

It, it takes best practices. It takes, you know, the value of a skin knee, and how many times are you gonna skin your knee? Mm-Hmm.

Uh, it's a book i I read when my kid was, uh, in, in high school, and it's like, don't be too hard on your kids because they're gonna skin their knee more than once, and it's gonna traumatize people. But you know, it, it adds to the knowledge base of people and then they eventually, uh, adopt, you know, we're evolving. It just doesn't happen overnight.

So, uh, you see every day, uh, Mike, you know, companies that are, uh, everyone's remote, okay? Everyone's back five days a week, okay? Everyone's back four days a week.

Okay? Everyone's back one day a week now. No, no, everyone's back five days a week.

And it's like, like, you know, there's, and you know, as people change and not invented here, uh, philosophy, people come and, you know, and it's frustrating because it's not as consistently applied and there, there's not a direction that seems to be, uh, a one size fits all direction for every company. All, all I'm stressing here is, um, 8,000 dev shops to 27,000 dev shops. A lot of smoke and mirrors.

Uh, it sounds like outsourcing or offshoring is, is, is not a good thing to do. But, but actually if you approach it with a holistic team orientation, ecosystem and culture, and with your service provider, if you approach it with a, uh, servant leadership mentality, meaning like, what is motivating you, service provider, what is motivating your people in order to get the best out of you and them, you know, how can I help you to help me? And, and if Americans just are typically not wired for that type of approach to relationships, it's mostly, it's what's in it for me?

How much does it cost? Here's your requirements. I'm like, you need to, you need to make wicker chairs in China.

You should get out of the software engineering because your whole mentality is so transactional. That's because I want something clean and simple. It's like, yeah, but this isn't a clean and simple thing.

This is getting teams to collaborate and, and to produce the most value together and, and to work for one another, have each other's backs. Is this somewhat related to the fact that we seem to think of software development as a factory activity when it's more creative than it is factory and therefore we need to figure out how to create a highly distributed team of creative individuals. Um, you know, I didn't feed you that, but you, you, you capitalize it amazingly well.

I mean, our approach when we, when we're helping clients find the right partners that, you know, sort of match on on certain obvious levels, like, you know, what technology does a partner always focus on? What technology do you need? What application are you trying to build?

Uh, what does the, you know, client need? What vertical expertise do you need? You know, and, and make sure that those are legitimate, credible fits and not just smoke and mirrors and promises.

Um, then comes the hard work of, uh, the client before you engage in a contract, you travel overseas, you spend some time there. You have the mentality that when you go overseas to meet your team, 50% of the time is spent, you know, working with your team 50% of the time is just, um, is fulfilling wonderlust and, and learning about the culture, just, you know, wandering around and, and getting an appreciation. So you have more to share with your teams over there, whether it's in Columbia or, or, uh, you know, Ukraine or India or Bangladesh.

You know, you, you demonstrate physically, tangibly to your, your people that you care about them, you're willing to go visit them, you're willing, you care about their culture. That means a lot to people, that you're not just treating them transactionally. I mean, Americans have a battle rap.

And, and, and what we're doing, like you said, Mike, is this is a, a, uh, creating software is an art, it's a people skill, it's a collaboration skill. Uh, it, it's really the epitome of, of team dynamics. Uh, and this is not a manufacturing plant.

And you may find people who speak English in these various countries, but just because they speak your language doesn't mean that they have your culture. And you need to kind of figure that out. Seems to me, um, you know, English in the Philippines is different than it is in India, and it's different than it is in, uh, Canada or pick any other country you want.

So With the learning curve, yeah, the learning curve that you have when you visit, you interact, you, you talk to people on a personal level is so fast, but people don't even go to that. They, they, you know, they, they ask the direct question, they want a direct answer, and they keep on doing that, and they're not learning how to interpret correctly, right? Mm-Hmm.

So how do you think AI is gonna impact all of this? 'cause in one level we can increase productivity, but are we in danger of taking away the personalization factor that we just described that's kind of critical to the success of the project? I mean, it, you know, AI is gonna have a tremendous impact.

It's going to make people think about the 80 20 effect. You know, what, what is 20% that is, is so humanistic in terms of, of, you know, experience and creativity and interpretation and, uh, versus, you know, things that can be sort of commoditized and, and, and replicated through ai. You know, and not until you reach, um, sentient, you know, capabilities from ai, let's not even go there.

But, uh, you know, AI is going to significantly modify the world of, of offshoring, um, it opens up a, a world of opportunity for developers to acquire new skill sets and to compete on a whole different level than they ever have before. They've, you know, in the past they've been treated as little widgets that can, you know, produce something for cheaper. And, uh, now they have a chance to redefine, you know, their entire, the entire way they, they add value to, to, companies still need teams to sit in certain seats in the product development, you know, function and to contribute, uh, each one of 'em is just gonna be more powerful with ai.

Yeah. I'm asking the question 'cause it seems like to me a lot of the lower level stuff that we once, you know, did shipped overseas to somebody will be automated. Hmm.

But collectively, we're going to need to operate together at a higher level. 'cause we're gonna maybe focus more on writing business logic together, or higher value deliverables than, you know, here's, you know, I need 50 scripts by Tuesday, so, yeah. Um, so will this kind of force everybody to, for lack of a better phrase, up their game?

Uh, yeah, that's a good thing. I mean, we're, we're all trying to up our games and, and, and, uh, you know, everyone wants to occupy a high level of higher level of value add and, and then, and then force humanity to find ways to deliver the lower level, um, you know, uh, commoditized activities at, at, at a, you know, at a more efficient manner. Um, this is all great.

I mean, it still requires a collaboration of, of teammates to coordinate, to approach things differently, to put things together. Um, and, um, you know, companies are still gonna retain their, their spec. They're still gonna want to segment their specific IP and their focus, and they're gonna want to offshore or outsource, uh, whether locally or internationally, you know, things that, that they aren't as good at as, as someone else.

Um, a smart company needs to do that in order to remain competitive because their competitors are gonna do that. So, Andy, you have a book out called Synergy, A blueprint for building effective globally Distributed Teams in the new era of software development. That's quite the mouthful, but, you know, what's the gist of that?

'cause, you know, I'm familiar with Pangaea, but what's a synergy? Yeah, so, uh, synergy comes from the combination of word synergy and Pangaea. Uh, Pangaea being, uh, a time in, in the world when the continents were one.

Uh, if you, if you think of John Lennon's, you know, imagine a world without borders, of course there were no humans back then, but if you can imagine a world with no borders, uh, and where, uh, the synergy comes in is, you know, people from around this world working together as one, as teammates in a very artistically team oriented sport like software and product development, um, where you're trying to create these fully integrated, cohesive, cross-functional, you know, outcome driven, uh, results in an agile organization with, with people that aren't designated as us versus them, or vendor versus client, or, you know, Indians versus Colombians versus, you know, Hondurans or, and, and Americans. But you're creating ecosystems. I mean, that's really where the world has come to dramatically over the last couple of years.

We've been forced that way by being distributed, uh, ourselves domestically, and we're distributed globally. So think of it as, uh, a pangea, and that's, you know, it's a whole different world out there today. It's the way offshoring and outsourcing works.

There's a whole new set of rules in order to make it successful. Well, folks, you heard it here. I think it's fair to say that AI and the machines are gonna make the world a smaller place, and as that occurs, we're all gonna have to figure out how to work a little more closely together, because, well, you're gonna be right next to somebody who's halfway around the world, and they're just gonna be instantly available.

And they may be your next best friend. You may know them better than you know, the guy down the street. Hey, Andy, I'll, I'll leave you again.

I'll say, and that is why you need double or triple down, especially today with so much smoke and mirrors and chaos and commoditization, uh, of outsourcing. That's why a smart company will spend the time and effort to, um, create a culture, an ecosystem with your partners, with your developers overseas, or wherever they happen to be, that is stronger because the bonds of human relationships are, are going to, you know, unlock a lot more value than trying to be more transactional and more hands off. If you want to compete, if you want to keep the best talent, if you want to get the most out of them, and, and reduce turnover and, and, you know, have people more fulfilled professionally, you gotta go slow to go fast.

You gotta spend the time to, to, you know, build these, these teams, these relationships. People crave connection, you know, and the people that are just trying to separate things more into like, you know, robotic units. Um, they think they're being smart, but they're actually being really foolish.

Well, there you go. Hey, my friend from your proverbial lips, the god's ears, and we'll see how it all turns out. Thanks for being on the show.

Thanks a lot, Mike. All right. And back to you guys in the studio.