In this week's episode, Bobby Dewrell, Vice President of Delivery at Accelerance speaks with Hugh Morgan, Managing Director at Accelerance about outsourcing your software development, the business risks associated with outsourcing and the roots of sending your software development to ‘the cradle of outsourcing’ -- India. Hugh is the Accelerance resident expert on India and Southeast Asia as he spent time working and traveling extensively through India, Southeast Asia, and the Middle East.
The Software Outsourcing Show is on a mission to explain best practices for strategies, partner selection and ongoing management of outsourcing your software outsourcing development.
The Software Outsourcing Show is the #1 source for information, lessons learned, and exclusive insights into outsourcing. The show is produced by Accelerance, the leading consulting firm dedicated to helping companies reduce risk with software outsourcing.
Bobby: Welcome to The Software Outsourcing Show. I'm your host, Bobby Dewrell, and I'm really glad that you were able to join us today. If you're just joining us here on the show for the first time, you'll want to download some of our past episodes where we've covered topics on software development outsourcing that range from, what is outsourcing, the history of software development outsourcing. We had a great interview with Steve Mezak and Andy Hilliard, the founders of Accelerance on the current state of software development outsourcing as well as our five-part series that we did on the risk indicators that are associated with software development outsourcing. Now today on the show, we're going to discuss outsourcing to India, and you really can't discuss software development outsourcing without talking about India, is the place where it all began. And joining me in the Virtual Studio is our resident expert on India and Southeast Asia, Hugh Morgan.
Now, Hugh spent a number of years abroad traveling extensively through India, Southeast Asia, and the Middle East. He began working in India in the mid-80s and just fell in love with the country. He spent time in almost every major hub in India, South Asia, and Southeast Asia. And you know what? We aren't even going to talk about his travels to the western hemisphere just for the sake of time. Hugh, welcome to the show, I'm so glad to have you here today.
Hugh: Hey Bobby, thanks for having me.
Bobby: Sure thing, I enjoy you being able to join us and I'm really excited that you wanted to come on and talk a little bit about the outsourcing software development to India. You know, I know early on, we talked about it and really in episode one, we talked about the fact of how software outsourcing is so much more than just India, but really when we get down to it, most people, when you say software outsourcing, I mean, the first place they think of is India.
Hugh: Yeah, and, of course, it's kind of where it got started and so with good reason and huge, you know, big industry there.
Bobby: And really we find that India, I mean, it's a great place to still outsource your software if it's right for you, if you're the right size corporation, if you're willing to work within their established needs. So tell me a little bit, you know, I know I talked a little bit that you've been around since the mid-80s, you know, a lot of travel, but how about from Hugh's perspective, let's talk about, you know, what's your background? How do you know so much about India?
Hugh: So, I had worked a couple of years out of college and I had really wanted to spend some time working, you know, in the developing world and this happens. So I randomly got a chance to work in the south of India as a volunteer teaching and doing construction at a trade school outside of Bangalore. And this is in the mid-80s and Bangalore was not a tech hub, it was a beautiful green kind of mild city. And I spent about a year there and then traveled for about another year and traveled pretty extensively through India. And then, I have gone back, been back many, many, many, many times.
Additionally, also kind of randomly, my parents were immigrants from Scotland to Canada after the war and my grandfather on my father's side, who I never knew he died when I was really young, was a tea planter. He'd gone out to the colonies after World War I to Ceylon now Sri Lanka to learn how to manage tea plantations and so we have kind of a family connection there. I'd been there, I spent a lot of time in Sri Lanka, which was part of the Indian or is part of the Indian subcontinent, separate country now. But that's my connection there.
Bobby: Wow, so actually quite a bit of a connection and really even some heritage within that, right?
Bobby: So when was the last time you were over in the area?
Hugh: I was there two times last year, so I was there last fall, actually, I'd been in Sri Lanka and the business school I went to, here in the US, had a reunion, all India reunion in Chennai, on the east coast, southeast coast that was fantastic, so I showed up for that and met all these amazing Indian grads starting businesses and they're running all manner of companies. And then I was there a little over a year ago, last spring to meet existing and interview new partners, Accelerance partners. Actually, I was in India, Pakistan, and Sri Lanka. That's good, love to get there.
Bobby: So a lot of software travels in the area too, right? And can you talk a little bit about some of the software teams you've met, some of those software travels that you've had over in India?
Hugh: Absolutely. What's interesting in India now or today, you know, India is a great granddaddy of outsourcing and I think we have over maybe 2000 to 3000 companies in our database just in India. What most people think of outsourcing in India is what we call outsourcing 1.0. So that's the, you know, build a massive team, put them in an office building, hiring them incredibly inexpensively and just shove massive amounts of work over to them. And, you know, hey, communication quality maybe will be mixed but you're just saving so much money, you can't say no to it.
Well, that's all changed, there are still massive teams over there, every fortune 500 company, yet if you drive through Pune, Hyderabad, outside of Delhi, Bangalore, you see logos on buildings all over the place you'd recognize. And so that's still going on in these very sort of massive teams and we all know the kind of very large outsourcing providers like Infosys or Wipro and Cap Gemini and Cognizant that have become...you know, some of them are homegrown Indian companies that are really global now. But when I was last there because we focus on the middle market and we focus on folks that develop software.
We're looking for that kind of next generation of teams and that's what's been really interesting for me about India, as you've seen in the last 5, 10 years, a growth of a new type of company. We call it outsourcing 2.0, that's agile, lean, good at product development. Its team may have come from other startups, they're just very kind of American in the way they work. And the folks, we screen for that kind of firm pretty carefully everywhere but specifically in India. That's kind of cool, you know, meet these companies that are like that.
Bobby: You know, I know I've definitely had my time with Indian and Indian firms and I even worked a lot with Mphasis and Tata Consulting, TCS, I think is what they go by right now. And, you know, as well as working with the really big consulting firms out there, the Arthur Andersens, The Accentures, you know, with their days past, you know, a lot of firms over there, and like you said, it's the big massive unit that's running 24 by 7 round the clock. I don't even know when everybody sleeps in some of those cities. You know, they say that New York City is the city that never stops and I think India is the country that never stops or never sleeps.
I know, you know, we've talked about that so many times that really outsourcing and India are almost synonymous and like you said, it's the great granddaddy, it's the 800-pound gorilla of outsourcing. You know, I think I've laughed and I've made this statement before that if we're to call Africa the cradle of humanity, I think we have to call India the cradle of outsourcing.
Hugh: Yeah, no, I think you're right.
Bobby: So let's talk a little bit about that because, you know, when we talk about that, you mentioned outsourcing 1.0 and the building of massive teams and everything and I think, you know, a lot of people have a negative view of India when it comes to outsourcing, the software outsourcing and things like that. I mean, what do you think has driven that? Is it from that past of...?
Hugh: Yeah, I think it's probably two or three fold. One is just cultural differences and I think 15, 20 years ago, very few Americans had spent time in India. And you didn't have...the Indian diaspora here in the US was just kind of getting going in technology particularly. So the, I think, cultural differences were huge and, you know, that made it difficult for Americans to understand how to communicate effectively with Indians and vice versa. And then the second thing, I think back in the day in the sort of first wave, was the fact that the focus was on volume and just this huge leverage. You know, I pay an Indian engineer a sixth of what I'm paying a guy here and let's crank up the volume.
So you're just...you know, if you're not going to get quality. And then I think the third thing and this one, obviously, it hasn't changed, I think time zone is tough. I mean, I think you got to really work with, if you work in an Indian firm, you know, it's pretty much halfway around the world for Americans. So there's no good, you got to be doing calls 6:00 to 8:00 in the morning and at 8:00 to 10:00 at night. And, you know, if your engineering team are interfacing directly with an Indian team, you just got to deal with that and that's hard. That's hard on a technical team over a long period. So I think you put those three things together and, you know, they created a negative sort of...or a potential negative work.
Bobby: Well, there's also the difference in know, right?
Hugh: Yeah, oh yeah, yeah.
Bobby: We expect to be a lot more direct and in India, it seems like...and working with those firms, it's very hierarchical and so that, you know, you've got to talk to the management and the management is not really doing but the guy that's doing it won't tell you because it's not his place because, you know, I know it's understanding that dynamic, right?
Hugh: Yeah, and I think in that culture particularly 20 years ago, it was just hard for either side to understand one another. And I think when I'm working with American or Western clients, I try to encourage them, I mean, with any culture but particularly with India there, to remember that we ourselves have our own ways of saving face. So we tend to think we're just super direct and matter of fact and we just get stuff done, which we do but we've got lots of ways that we take cues from each other that we don't embarrass the boss and things.
So I think being aware of that is super helpful. I think, you know, as I mentioned earlier, with the partners we look for, our partners, we do look for partners that have much younger teams that are very, very western, you know? They're not sitting around waiting for the boss to tell them what to do. They've worked at startups, they may have studied in the US or they may be funded by an Indian who, you know, did really well here in Silicon Valley. So that's really changed in the last 20 years.
Bobby: Well, and, you know, that kind of leads me to what my next question was going to be is that, that all kind of stereotypical view of Indian software outsourcing, is that accurate in 2018? And I think the answer is yes or no.
Bobby: I mean, maybe for some older firms but there are firms out that it's just not for everyone.
Hugh: Yeah, I think you're right, yes or no. I mean, you've got a...yeah. You'll see fragments of it, you got to manage it
Bobby: Well, and so you hit on it a little bit and that was another thing that I really wanted us to talk about. And, you know, when you mentioned that Accelerance with the database of...I think it's what? It's a worldwide total of something over 8,000 software outsourcing firms now, and again, a good quarter of those, 2000, right there on the Indian subcontinent. And I know that's probably not even identifying everybody in India. So how do you find a great company in India? How do you get that signal to noise ratio down?
Hugh: Yeah, that's actually where it's a challenge. You know, if you go to most...oh, sorry, to markets, if you go to Bolivia or Poland, you can do some research, talk to a few people, you can probably identify the big players, it'll be a little harder to find some of the smaller boutiques that we deal with. But India is a place where I think we especially can add value because I think spending time there and having been on the ground there for years and having built relationships is really important.
I like to say every market is a small market once you get to know it but probably in India, you got to get to know Mumbai and you've got to get to know Delhi and you've got to get to know Chennai and you've got to get to know Hyderabad because they're all pretty significant markets. The other thing I'd say or related to that, I think South Asia...one of the things I tell clients when I'm working with them here is it's good to remember every other culture in the world is more relational than US business culture. US business culture is incredibly transactional.
Well, I think it's especially true in India or South Asia that relationships really matter. And having someone like us that spent time, that's visited family, had meals, spent days with people really helps because you hear stuff and you learn stuff and you know what's going on.
Bobby: Yes and, you know, just for fun, I generally like to do this and just talking about that software outsourcing in India, and feel free to do your filtered result on Google, and I think it's something over 27 million-ish. You know, the proverbial go to the phone book and start calling is not going to happen, not in a lifetime. You'd have to hire an outsourcing firm to find the outsourcing firm, right?
Hugh: Yeah, exactly right.
Bobby: What are some of those characteristics? Like, let's talk a little bit about that and I know we hit on it a little bit because we are seeing a lot more western culture, a lot more of people that have gone back home after coming and going to school. Can we talk a little bit about that? What are some characteristics we look for? What are some examples of things that we'd like to see?
Hugh: I think, you know, when we're looking for a good partner, we've got a number of screens that we use. So, you know, number one is great technical skills and that's pretty straightforward. Second is really good English, top to bottom in the organization. And that's actually, you know, obviously, India is the second language for most people there. Accents can be pretty heavy but, you know, you're obviously screening for that. Third is company culture and I think of that two ways, they're related. One is a culture that's adapted to working with American firms. So it's all the stuff we've been talking about, about not being as hierarchical and being more team-oriented and using agile and things.
It's also, how do they take care of their people? So how do they source onboard routine, their engineers or anyone on their org because they've got all the challenges we do in terms of making people feel accepted, then belonging and having a career path. That's especially true in India today for two reasons, one is there's been an explosion in sort of startups in technology, there's some amazing stuff going on there, it's a little bit like China that way. So that means any engineer that's working with you is obviously looking around and seeing all like happening just like an engineer here and, you know, you gotta manage that.
Secondly, I would say 20 years ago, what an Indian engineer wanted to be able to tell his mother-in-law was that he worked for a big stable company like Standard Charter Bank or Tata or Infosys or Wipro or Accenture. Well, now the whole startup thing is mad, he's like he'd rather tell his mother-in-law he's got equity in this amazing startup that he's working in. So, the culture thing is, I think what's interesting is if you assume English and technical skills are a given, then those sort of two pieces of the business culture become really important.
Bobby: And basically, I mean, really what I'm hearing you explain is it's a lot like Silicon Valley, right? I mean, it's really closing in the growth that we saw 20 years ago in the States. It's moved on from that wanting to be in a big firm with a pension and planning on driving up. It's really started kind of taking the mold.
Bobby: Let's talk a little bit about rates these days. What do Indian rates look like?
Hugh: I think that's the other different screening obviously now and 20 years ago, is rates are going up, you know, significantly, or you don't get the six to one leverage on an engineer that you would have 20 years ago. I mean, they're still great and they're increasing. So I think the thing to keep in mind is that if you hire a team in India, if you're getting low numbers day, you're going to have to increase them over the next couple of years pretty steadily and you should be aware of that, you know. It's interesting, in just the last couple of months, I've talked to two or three VPs of engineering here in Silicon Valley, Indian, you know, from South Asia, running captive teams in Bangalore or Chennai. And they've all told me, "Yeah, man, I've got to keep upping my pay to take care of these guys and they've got to feel loved and it's just part of what the expectation is there." So that's it.
I think, you know, we do an annual rates survey every year and I'm just quoting these numbers from memory but I want to say we like to quote up the rate for a kind of blended rate for a scrum team. So think of a mid-level engineer, full stack, three to four to six years' experience. You know, India is $30 to $40 an hour in our US all in, that's pretty good. Don't hold me to that but the facts.
Bobby: Like you said, it's not the six to one purchase but it's maybe like a one and a half two is what we got now. There's still definitely some cost savings. Let's talk a little bit about technologies, there's a lot of technology coming out of India. What do you see as the biggest and the brightest trending there these days?
Hugh: India picks up new technologies pretty darn quickly. I think you...so you've got a pretty full spectrum of needs there of abilities and even some obscure ones, so if you've got some peculiar framework that you're using that is unusual, you can probably find someone in India that's working on it. Really good, what we've seen in the last year or two really, really good data science people because of the educational system there and related to that or similar areas of machine learning and artificial intelligence. We're seeing a lot of work in that.
A little bit like Eastern Europe that way in that you get these people that are just super theoretical and really well trained and, you know, India has got a great network of very high-quality engineers called in Indian Institute of Technology with campuses all over the country generate some really good people. But, you know, you can find IOT, you can find firmware you needed, you know.
Bobby: Well, and I know in the data science space, I think the last few projects I worked on with outsourcing to India when we were working on really doing some stuff around big data, data warehousing and all of that, you know, I think I learned that almost everyone on the team had a Ph.D. so to say. And the couple that didn't were...because they hadn't finished their dissertation yet. I mean, it was simply amazing, the brilliance that we really dealt with and it was still all within that blended rate card.
And, you know, I always think of, you know, we've talked about this a lot and not actually in the show yet but just on the side, you know, talking with some of the other guests, you know, a lot of people think of outsourcing as really a cost player, a cost savings but it's really more than that. I mean, there is truly to some degree a skills gap in North America. I mean, that's really what we have to look for and yes, there is some cost savings but even if we tried to do it all in the states, I don't think we could. I don't think...
Hugh: It's funny, I've got a client in Chicago that is moving a product from a monolithic on-prem in sort of private cloud architecture to micro-services in the cloud. And we're specifically running a consulting, we're doing a consulting gig around how you do that and we're leveraging a partner who has got a couple of senior architects that have done this half a dozen times. So that's not about...I mean, by the way, they're also a lot less expensive than an architect here would be, a senior architect. But the bigger thing is they've done it a bunch of times so they know where the bodies are buried, they know the process. So it's a real luck addition to...a value add.
Bobby: Well, it's like I always say, you know, when I go in and the doctor has got to do a procedure on me, who do you want? You want the doctor that does it, you know, five times a week or the guy that's writing a book on it, you know?
Hugh: No, it's really true.
Bobby: I'm not saying either, you know, one's better than the other, I just...
Hugh: No, I know who I would take.
Bobby: What should American companies keep in mind when outsourcing to India? What's some of those gotchas? And I know we've kind of hit on it so far but, you know, let's kind of grab down into it. What do you think are some of the moments?
Hugh: I think I'd actually probably think first about the time difference and think about how you're going to manage that. And by the way, a number of our partners will have and we can provide onshore project managers or managers and sometimes that's a great way to take the edge off those, you know, 6:00 a.m. and 10:00 p.m. calls. I think that's probably one of the biggest ones. You know, if you're going to just set up a small team, probably not worth it, it's just too much work to set it up. Second, I'd say, understand the culture, you know, that the sort of horric [SP] goal, wanting to please, you know, so yes to the boss, still pretty important in the country, it's good to understand that.
Thirdly, I'd say build a relationship. And this is something to take in mind. Go there and I know it's a long way, it's difficult, if you don't like Indian food, start figuring it out, it's an amazing cuisine. By the way, I love it, it's very regional, you know, it's an amazing thing. Food is obviously a great way to connect with folks and getting to know your team. If you go and spend a week with your team or two weeks with your team in Hyderabad, they will love you because you shown you care and, you know, that's important. So I'm gonna say those are probably the three most important for firms.
Bobby: And you touched on that a little earlier is the relationship and, you know, it took me probably a couple of years into working with Indian teams to realize how important it was. And as a matter of fact, I think it's funny that you bring up Indian food, I was an...I did not like Indian food because I didn't understand how to eat it. And I remember making a comment sitting in a war room one day, working with my counterparts, they were here in the states and we were working through on something and I realized that, you know, we had been ordering lunch in and I hadn't been very thoughtful about making sure that we had vegetarian options and it kind of hit on me and everybody asked, "Hey, you know, can we have some Indian food?"
And I just made the comment, I said, "Sure, you know, I'll find something else for me, I don't really care for it." The next day, you know, when we had the food come in, they were bringing stuff from home and, you know, I hear you've got to try this and eat this this way and this is how you do. And I really gained a love for it and, you know, I think as a team in that moment, we probably bonded more in that one aspect than, you know, we have been working together for six or eight months prior to that. It was a very unique experience for me and probably, you know, one of those first real aha moments I had on how much you need to be a student of culture and how much you need to really just know where everybody is coming from. So, great love for Indian food and I do, it is very regional, just, you know, not a lot of steaks on the menu.
Hugh: No, not a lot of steaks, no. Well, you can get it in the south, so yap.
Bobby: You can but it's just not as prevalent.
Bobby: You know, I think in the short run or really, you know, India, yes, it is the big great granddaddy, I think you said that, that kind of cradle of software outsourcing where it all began but it's still a very viable option. It's just so big, you got to weed through and you've got to find the right people.
Hugh: That's true.
Bobby: And, you know, for those that are listening, that are wondering, you know, I've got to give a content plug, I got to tell you that we do have a guide to software outsourcing in South Asia that'll give you more detailed information. It will be up along with the show notes from today. It will be out there on the softwareoutsourcingshow.com. So, you know, please feel free to check that out, you know, come back, ask us any questions, we'll be happy to answer and help any more. Hugh, I want to thank you greatly for taking some time out and joining me in the Virtual Studio today and hope to have you back soon when we can talk about some more adventures and more of your travels because I know every time I talk to you, you're somewhere different, right?
Hugh: Great note, we're here. We just got back late last night from Montreal, so where we spent a month.
Bobby: Where are you back to now from Montreal?
Hugh: Ye, from Montreal, now I'm back in Silicon Valley. So we'll be here for a few months and then we'll be down in Mexico. So, hey Bobby, thanks so much.
Bobby: Sure thing, thanks a lot, Hugh. Everyone else, thanks for listening to The Software Outsourcing Show. Like I said, you can always find the latest episodes and show notes on iTunes and SoundCloud or at softwareoutsourcingshow.com and we hope to see you in a future episode. Thanks everyone.