5 ms·

A combination of reasons: 1) Most companies are not institutionally comfortable with remote working, to say nothing of remote working internationally. 2) Th

by patio11 12y ago

A combination of reasons: 1) Most companies are not institutionally comfortable with remote working, to say nothing of remote working internationally. 2) There exist pervasive skill gaps between talented engineers available to work at $150k per year and talented engineers available to work for $12k per year. I respect that many people wished this was not the case. 3) Many investors in the Valley, whose opinions are quite relevant given that one cannot self-fund employee salaries, are of the opinion that outsourcing development work suggests a tech company which will never achieve the path to $100 million in revenue followed by a $N billion valuation, which is what their business model counsels them to search for. They would point out "I cannot think of a single company whose product was not produced in-house in history which achieved that" and they would not be far from wrong. 4) Managing outsourced development is a skill, and its a skill that most companies and individuals suck at, and do not particularly wish to become great at. 5) It is the widespread perception in the American tech industry that BPO companies produce software whose quality is abominable and that the process of dealing with them is pathological, as evidenced by the fact that only companies which institutionally hate software and software people are willing to work with BPO companies. Many in the American tech industry do not hate software or software people, and thus would have a very high bar to be convinced to use a BPO company.

tuyguntn 12y ago
Yes, remote working maybe not an option, but founders can visit and open their development office. I have worked for 3 companies so far and all of them are selling product in overseas and doing development here, by putting someone experienced as a CTO in development office. Ratio between salary ($150K vs $12K ) are too high comparing to ratio of skillset, 10x low salary doesnt mean 10x low skillset, thats just financial state in countries. A lot of guys are working at Amazon, Google, Microsoft and other big corps who took experience here, developers are not bad, they might not have enough experience. ~$300K is avg. spending for 10 developers with office and perks included annually. Compare it to $750K spending for 5developers where each of them has 2x skillset of outsorced developer just for salary and other spendings annually, which I guess will be around $1M/annually.
- hawkice 12y ago
  It's tricky. Being 2x better means 1/2 time to delivery, 1/2 maintenance burden, 2x more flexible software, and 1/2 the management burden, and very often all at the same time. It's also much harder to find cream of the crop workers in cultures you are less familiar with, so the average case (where some people are quite bad at it) is, from what I've seen, a little larger than 2x. Maybe 3-4x, sometimes more? And compounding across all those disadvantages (2x more work to make a change due to worse design, 2x times slower because of lower skill, with every week needing 2x as much management, slowed down by the extra daily operations and keeping-things-going, can be... a lot), it can actually work out to be a worse deal unless you're pretty careful. Personal experience shows that this involves both careful hiring and on the job training.
- eropple 12y ago
  > I have worked for 3 companies so far and all of them are selling product in overseas and doing development here, by putting someone experienced as a CTO in development office. That's great (no snark intended) if you have a CTO who wants to move to Central Asia. Most startups probably don't.
xentronium 12y ago
Also, HR practices of startups leave much to be desired. I've sent 20 emails more than a month ago to companies who had remote positions for developers (stackoverflow, github and wfh.io). Only two bothered with reply (one interview, one "sorry, no non-us developers").
- mfisher87 12y ago
  I think this is common across the board. The exceptions are the HR departments that keep applicants and interested parties updated and answer your questions quickly.
PaulHoule 12y ago
I know of some social media startups in LA that are doing OK that outsource their development to a particular shop in India that specializes in that kind of work. As for the quality of developers, you will find everything across the board. The best shops in India are process driven and serious about continuous improvement and can be a joy to work with. The dirty little secret of IBM Watson and other commercial NLP systems is that it takes a small army to code those kind of things and you can get the manpower there. I think the #1 fear about a tech company outsourcing is that you don't really control the intellectual property. This might not matter so much if you are running a two-sided market (Uber could outsource development because anybody who wants to rip them off has to go fight city hall in thousands of places) but if you really are a "tech" company you want to keep your knowledge close.
- joesmo 12y ago
  Why wouldn't you control the IP with outsourced development? Obviously, any competent company would make the outsourced developers / development house hand over all rights to anything they produce under contract so this would be a non-issue.
  - notahacker 12y ago
    Legal threats against ex-employees based in your home country carry an awful lot more weight than legal threats against a subcontractor based in India, Russia or China.
  - eropple 12y ago
    YM, of course, MV, but I've worked with outsourced teams (plural) before and the decisions I've observed have suggested to me that, regardless of whatever IP agreements you've made, some will obviously be trying to build stuff they can reuse elsewhere. It's hard to enforce an IP agreement when you're in Boston and they're a couple continents away.
  - logfromblammo 12y ago
    And, surely, they will honor their contracts to the letter. Your employees might take home your entire code base in the US, while working on-site on an air-gapped network. They can certainly do it when you're set up for remote work, almost by definition. In the US, the payoff for stealing your employer's code is low, and the risk of punishment high, but it still happens. I can't speak for non-US countries, but I would guess that most have a bit more relaxed attitude toward enforcement, especially when it would be on behalf of a US company. If you think your IP is secure from the software developers who wrote it, you do not understand how they work. If you do not hold the loyalty of your developers, you do not control the IP, regardless of what the contracts say.
nthj 12y ago
A large piece of delivering value to a business as a developer is, in the words of PG, "knowing what to build, not just how to build." Day-to-day, an on-site developer might be expected to sift through customers' feedback, join in on customer meetings, visit a customer to watch their product being used, and have the opportunity to overhear what issues the customer service team seems to be dealing with over and over again. He or she may well end up writing fewer lines of code than a remote developer because of these interruptions, but when those fewer lines of code have a greater financial impact on the business, the business is happy to continue to pay 10x salaries. Also, many startups strive for amazing customer service, which usually means fixing issues on the spot when a customer calls in, American business hours. (I realize many remote developers are in similar time zones, but it is worth noting.)
- conductr 12y ago
  Seems like the optimal mix of skills and location is; find someone local that is good at doing what you're talking about and teach/force them to get good at #4 on patio11's list. This one person (or small local team) can then 1) drive the product 2) act as a project manager with a big workforce and 3) stop coding, start reviewing code written by the minions and 4) get them where they need to be on new tech stack etc. Timezone issues should be minor. Even people in the US should only be in the office 1/3 of the day. You need to rethink your whole management style, prioritization-wise if you run into problems like commonly needing stuff during off peak times. (Or, just hire a rotating shift so you have a 24 hr staff in Asia).
  - nthj 12y ago
    > Even people in the US should only be in the office 1/3 of the day. A Silicon Valley startup /generally/ has most of their customers in the US. Both US businesses and US consumers have a cultural expectation that issues be resolved quickly within business hours, but are usually more forgiving at 9 PM at night. (For example, if I call my bank at 3 PM, I expect a resolution darn near immediately; if I called at 11 PM I would expect to leave a voicemail. In both scenarios I am equally satisfied, even though in the first I received an immediate solution and in the second I did not.) It's not a matter of having developers on call 24/7, but in having the 8 hours they are online overlap the 8 hours that the customer base expects prompt service.
notahacker 12y ago
(3) is also a significant problem for competent technical teams located in a single city with a substantially lower cost-of-living than SV, possibly even within the US, of course. Locating themselves in SV isn't especially likely to make the core team any better at writing software or generating revenue (unless writing the software depends on making new hires with unusual skillsets or the revenue model depends on developing partnerships with SV companies) but for business models that will rely on multiple rounds of investment regardless of how frugal they are on salaries, conformity to VCs' selection heuristics is far more of a prerequisite for success than effective cashflow management.
thyrsus 12y ago
BPO: Business Process Outsourcing (since I didn't know)
matt_s 12y ago
Even though some of patio11's post seems like opinion, he is correct on all points. Regarding item 3, another perspective is that a lot of the outsourcing/off-shoring happens because it is something that is not a core competency of the company. Think any ERP system (SAP, Oracle, etc.) which is basically a CRUD app on steroids. If your company doesn't make ERP systems then you want the lowest skilled bidder doing the work. Is that the case for a tech startup? It also requires almost the same count of people to offshore the work as it does to do it yourself. You need someone who can interface with the offshore team, answer questions about requirements (if they are even asked), etc. And deal with turnover. You might be asking why any sane company would do this then? Simply cost but also accounting rules. When a company buys a service from another vendor (like buying bandwidth) I think it shows up differently on the books than when they have an entire department of people doing that work. That entire department needs to have retirement plans, benefits, vacation time, etc. and they show up in the employee count reported to shareholders. This nuance is probably why the counter-intuitive stock price increase happens after a massive layoff.

by patio11 12y ago

tuyguntn 12y ago

Yes, remote working maybe not an option, but founders can visit and open their development office. I have worked for 3 companies so far and all of them are selling product in overseas and doing development here, by putting someone experienced as a CTO in development office. Ratio between salary ($150K vs $12K ) are too high comparing to ratio of skillset, 10x low salary doesnt mean 10x low skillset, thats just financial state in countries. A lot of guys are working at Amazon, Google, Microsoft and other big corps who took experience here, developers are not bad, they might not have enough experience. ~$300K is avg. spending for 10 developers with office and perks included annually. Compare it to $750K spending for 5developers where each of them has 2x skillset of outsorced developer just for salary and other spendings annually, which I guess will be around $1M/annually.

hawkice 12y ago
It's tricky. Being 2x better means 1/2 time to delivery, 1/2 maintenance burden, 2x more flexible software, and 1/2 the management burden, and very often all at the same time. It's also much harder to find cream of the crop workers in cultures you are less familiar with, so the average case (where some people are quite bad at it) is, from what I've seen, a little larger than 2x. Maybe 3-4x, sometimes more? And compounding across all those disadvantages (2x more work to make a change due to worse design, 2x times slower because of lower skill, with every week needing 2x as much management, slowed down by the extra daily operations and keeping-things-going, can be... a lot), it can actually work out to be a worse deal unless you're pretty careful. Personal experience shows that this involves both careful hiring and on the job training.
eropple 12y ago
> I have worked for 3 companies so far and all of them are selling product in overseas and doing development here, by putting someone experienced as a CTO in development office. That's great (no snark intended) if you have a CTO who wants to move to Central Asia. Most startups probably don't.

xentronium 12y ago

Also, HR practices of startups leave much to be desired. I've sent 20 emails more than a month ago to companies who had remote positions for developers (stackoverflow, github and wfh.io). Only two bothered with reply (one interview, one "sorry, no non-us developers").

mfisher87 12y ago
I think this is common across the board. The exceptions are the HR departments that keep applicants and interested parties updated and answer your questions quickly.

PaulHoule 12y ago

I know of some social media startups in LA that are doing OK that outsource their development to a particular shop in India that specializes in that kind of work. As for the quality of developers, you will find everything across the board. The best shops in India are process driven and serious about continuous improvement and can be a joy to work with. The dirty little secret of IBM Watson and other commercial NLP systems is that it takes a small army to code those kind of things and you can get the manpower there. I think the #1 fear about a tech company outsourcing is that you don't really control the intellectual property. This might not matter so much if you are running a two-sided market (Uber could outsource development because anybody who wants to rip them off has to go fight city hall in thousands of places) but if you really are a "tech" company you want to keep your knowledge close.

joesmo 12y ago
Why wouldn't you control the IP with outsourced development? Obviously, any competent company would make the outsourced developers / development house hand over all rights to anything they produce under contract so this would be a non-issue.
- notahacker 12y ago
  Legal threats against ex-employees based in your home country carry an awful lot more weight than legal threats against a subcontractor based in India, Russia or China.
- eropple 12y ago
  YM, of course, MV, but I've worked with outsourced teams (plural) before and the decisions I've observed have suggested to me that, regardless of whatever IP agreements you've made, some will obviously be trying to build stuff they can reuse elsewhere. It's hard to enforce an IP agreement when you're in Boston and they're a couple continents away.
- logfromblammo 12y ago
  And, surely, they will honor their contracts to the letter. Your employees might take home your entire code base in the US, while working on-site on an air-gapped network. They can certainly do it when you're set up for remote work, almost by definition. In the US, the payoff for stealing your employer's code is low, and the risk of punishment high, but it still happens. I can't speak for non-US countries, but I would guess that most have a bit more relaxed attitude toward enforcement, especially when it would be on behalf of a US company. If you think your IP is secure from the software developers who wrote it, you do not understand how they work. If you do not hold the loyalty of your developers, you do not control the IP, regardless of what the contracts say.

nthj 12y ago

A large piece of delivering value to a business as a developer is, in the words of PG, "knowing what to build, not just how to build." Day-to-day, an on-site developer might be expected to sift through customers' feedback, join in on customer meetings, visit a customer to watch their product being used, and have the opportunity to overhear what issues the customer service team seems to be dealing with over and over again. He or she may well end up writing fewer lines of code than a remote developer because of these interruptions, but when those fewer lines of code have a greater financial impact on the business, the business is happy to continue to pay 10x salaries. Also, many startups strive for amazing customer service, which usually means fixing issues on the spot when a customer calls in, American business hours. (I realize many remote developers are in similar time zones, but it is worth noting.)

conductr 12y ago
Seems like the optimal mix of skills and location is; find someone local that is good at doing what you're talking about and teach/force them to get good at #4 on patio11's list. This one person (or small local team) can then 1) drive the product 2) act as a project manager with a big workforce and 3) stop coding, start reviewing code written by the minions and 4) get them where they need to be on new tech stack etc. Timezone issues should be minor. Even people in the US should only be in the office 1/3 of the day. You need to rethink your whole management style, prioritization-wise if you run into problems like commonly needing stuff during off peak times. (Or, just hire a rotating shift so you have a 24 hr staff in Asia).
- nthj 12y ago
  > Even people in the US should only be in the office 1/3 of the day. A Silicon Valley startup /generally/ has most of their customers in the US. Both US businesses and US consumers have a cultural expectation that issues be resolved quickly within business hours, but are usually more forgiving at 9 PM at night. (For example, if I call my bank at 3 PM, I expect a resolution darn near immediately; if I called at 11 PM I would expect to leave a voicemail. In both scenarios I am equally satisfied, even though in the first I received an immediate solution and in the second I did not.) It's not a matter of having developers on call 24/7, but in having the 8 hours they are online overlap the 8 hours that the customer base expects prompt service.

notahacker 12y ago

(3) is also a significant problem for competent technical teams located in a single city with a substantially lower cost-of-living than SV, possibly even within the US, of course. Locating themselves in SV isn't especially likely to make the core team any better at writing software or generating revenue (unless writing the software depends on making new hires with unusual skillsets or the revenue model depends on developing partnerships with SV companies) but for business models that will rely on multiple rounds of investment regardless of how frugal they are on salaries, conformity to VCs' selection heuristics is far more of a prerequisite for success than effective cashflow management.

thyrsus 12y ago

BPO: Business Process Outsourcing (since I didn't know)

matt_s 12y ago

Even though some of patio11's post seems like opinion, he is correct on all points. Regarding item 3, another perspective is that a lot of the outsourcing/off-shoring happens because it is something that is not a core competency of the company. Think any ERP system (SAP, Oracle, etc.) which is basically a CRUD app on steroids. If your company doesn't make ERP systems then you want the lowest skilled bidder doing the work. Is that the case for a tech startup? It also requires almost the same count of people to offshore the work as it does to do it yourself. You need someone who can interface with the offshore team, answer questions about requirements (if they are even asked), etc. And deal with turnover. You might be asking why any sane company would do this then? Simply cost but also accounting rules. When a company buys a service from another vendor (like buying bandwidth) I think it shows up differently on the books than when they have an entire department of people doing that work. That entire department needs to have retirement plans, benefits, vacation time, etc. and they show up in the employee count reported to shareholders. This nuance is probably why the counter-intuitive stock price increase happens after a massive layoff.