When outsourcing goes bad, part 1 of 16
But what do these glib little bullet points mean?
This is a true story about a big American company that got itself into trouble by outsourcing work to India and managing that transition in an incorrect way. I've written elsewhere about successful outsourcing efforts, so nothing here should be taken as criticism of the overall concept of outsourcing. However, there are some mistakes that can burn you when you outsource software development, and this particular story is an especially vivid example of those mistakes.
If you love bullet points, then I can summarize this whole story for you with a few glib little bullets:
* when outsourcing, negotiate a contract carefully
* be sure to include formal mechanisms of accountability
* demand control over staffing decisions, ensure you have the power to remove people from the team
* whatever metrics you define to track progress, be wary of the ways those metrics can be gamed and manipulated. At a minimum, rely on a broad set of metrics so that no one metric is the target of manipulation.
There you go, that is the summary, so you can stop reading right now.
But if outsourcing is as simple as these bullet points, then why does outsourcing often go bad?
What follows is extremely long, but it is a faithful portrait of outsourcing gone bad.
In some ways, this is a story of a genuine American tragedy, about an unusually talented and brilliant team of engineers, their breakthrough product, and how it was ruined.
For legal reasons, all names and dates and places have been changed.
There are 3 companies to be aware of:
1.) Luganesk was an old, small, regional insurance underwriting firm, but it internally funded a tech startup that launched in 2008. The software engineers at this company were brilliant and they built sophisticated software. They were among the first to bring commercial insurance companies onto the Internet. Unlike car insurance or home insurance, commercial insurance can involve billions of dollars and can be extremely complex, so typically each deal is manually negotiated. This was one of the last industries to embrace the Internet. Luganesk was based in Boston, Massachusetts. In 2008, Luganesk only had 2 software engineers: Emory Azin and Lucy Corbin. Both are still with the company. Emory is considered the most senior engineer, whereas Lucy has been promoted several times so she now oversees multiple tech teams inside of AndersonRiskAssessment. At its peak, Luganesk eventually grew to have 30 software engineers.
2.) AndersonRiskAssessment was an old insurance firm, based in Atlanta. In 2023 they had $5 billion in gross revenue. They have been pursuing a strategy of growth-by-acquisition. In 2018 they acquired Luganesk. They left it alone for some years, allowing it to still operate as an independent company. Then in 2022 they began to manage it directly. They also laid off most of the software engineers (25 of the 30 engineers were let go) and they outsourced the work to DevModeMax.
3.) DevModeMax is a huge company in India. Worldwide, they have over 100,000 employees. They do software development for other companies.
Read the whole series:
1. But what do these glib little bullet points mean?
2. When the CTO does not trust their own team
3. Everyone is under pressure, everyone is too busy to help
4. They lie. They lie flagrantly. They lie all of the time, about everything.
5. That place is a total sweatshop!
7. I am very, very proud of you. The work you are doing is amazing.
8. I blame you. You suck. You are the problem.
9. We just got $10,000 dollars!!!!
10. The Taj Mahal was built with blood
12. Where are my story points, Gujurat?
13. We are the best people to help him, so why doesn't he want our help?
14. Should a toilet be listed as an amenity?
15. I am simply telling you how things work in India
16. Too big to fail: when you've no option but to brazen it out
Or if you want to read this all in one place, read it on Google Docs.