We all know how hard it is to hire and retain talents in the Silicon Valley. The Bay Area is home of software powerhouses like Google, Yahoo!, Ebay, HP, now Facebook, and of many, many more; since there is not enough software developers here, most companies are looking beyond the Bay Area for their staffing needs, sometimes in the US, more often abroad, mainly in India so far.

In the past couple of years, employee retention has become a challenge from a much greater magnitude in Bangalore than it is in the Silicon Valley. It is not uncommon to observe turnover rates over 50%, especially within tier-2 and tier-3 providers. I know several US companies that have lost their entire Indian team within a 12-month period!

With average turnover in the low 10%, destinations like China or Vietnam were seen as a safe harbor compared to India. However, it might be changing fast.

In the professional services sector, cities like Beijing, Shanghai, Dalian or even Hanoi are experiencing turnover rates approaching the 20% and growing. In Beijing for instance, retaining talents is becoming a challenge for software companies, something that was not the case only 2 years ago.

The major driving forces that are causing China’s software industry to change so rapidly are:

• First, US companies are rushing into the country. China is gaining the reputation of being a better destination than India, not only for price for also for quality, and therefore giants like Google, IBM, HP, etc. are investing massively here, hiring talented engineers by the hundreds, when mot the thousands
• The second factor is … India. Large Indian companies are expanding very rapidly in China. In addition to finding cheaper talents, there is another attraction to Indian companies: China is the gateway to the Japanese market
• And China has a third factor, which a country like Vietnam have not developed yet: its domestic market is growing insanely rapidly; companies like Huawei, Alibaba, or Baidu have earned International recognition now, and have become magnets to many engineering talents.

Does it mean China is facing a shortage of talents similar to the Bay Area’s?

Not really. China produces over 600,000 engineering graduates every year. India follows with over 450,000 engineering graduates. The United States produces only 70,000 engineering graduates every year. All of Western Europe produces just over 100,000.

In fact China is likely to produce enough graduate engineers to satisfy the market needs for any foreseeable future.

So why is turnover growing?

The usual explanations apply here: the economic growth creates a wealth of opportunities, causing salaries to increase at a much faster pace than the inflation. Talented developers are often presented with new offers to increase their salary, or to fast track up the ladder.

However, a closer look at the Chinese software companies show that the companies with high turnover rates are either the ones that have not developed any HR strategy, and the ones that are still using the old-fashioned rules, inherited from the previous economic regime.

Turnover remains low for the companies that have already implemented a well-thought HR strategy that includes employee “responsibilization”, career path definition, regular career reviews, training, financial incentives, the right mix between more senior and younger developers, and proper management of the “natural” turnover.

Turnover is inherent to this industry. The challenge is not to eliminate it, but rather to keep it under control. An 8-10% turnover rate is just healthy (for outsourcing companies).

It is certainly a very good time for US companies to outsource to China. However, when selecting a local partner, inquiring about their employee retention program is a must, and should be one of the first items on every checklist.

Business, China | 6 Comments »

TCS have a white paper available on their WEB site called Evolving IT from ‘Running the Business’ to ‘Changing the Business’.

The first part of the document is loaded with some very interesting facts on software development success and failures.

I found amazing to see that the overall quality and reliability of the end-result software has not really improved while the tooling (computers, networks, development environments, etc.) has improved so dramatically. In fact, the actual percentages are only slightly better than they were 10 years ago!

Here is an excerpt of their paper.

For a number of reasons, business-critical software and services projects, whether done in house or outsourced, fail far too often. They take too long. They cost too much. They are riddled with defects and don’t accomplish the business goals for which they were designed. An August 2007 study by Dynamic Markets Limited of 800 IT managers across eight countries shows that:

• 62 percent of organizations experienced IT projects that failed to meet their schedules
• 49 percent suffered budget overruns
• 47 percent had higher-than-expected maintenance costs, and
• 41 percent failed to deliver the expected business value and ROI

Moreover, broad industry consensus indicates that more than one-quarter of all software and services projects are canceled before completion, and of those that are completed, up to 80 percent of budgets are consumed fixing self-inflicted problems. According to Gartner Research, “The lack of testing and QA standards, as well as a lack of consistency, often lead to business disruption, which can be costly.” Gartner also reports that “testing consumes 25% to 50% of the average application life cycle and often is viewed as adding no business value.”

Failure of software and services projects is so widespread and so commonplace that 43 percent of IT managers say their business managers and Boards of Directors. Quite understandably, only 11 percent of business organizations consider technology a “strategic weapon,” according to a recent study by Info-Tech Research Group.

I think we should really ask ourselves why these figures have not improved over the years while computing power and development environments have progressed tremendously.

There are many reasons for failure. However, and from the many discussions I have with our project managers and clients, I believe that estimates for the coding times are now relatively accurate, something that was not necessarily true 10 years ago. The purpose of this post is to highlight 2 areas that are still underestimated, causing projects to fall behind schedule:

1. When doing estimates, project managers rarely account any extra time between design and development, an omission that costs dear. Transferring know-how between designers and developers should not be underestimated.

   When using traditional methods like waterfall, this transition time enables to account for the many adjustments required between design and development, a significant time overhead.

   Agile-like methods, because of their empirical nature, require extra-time too, to compensate for the (many) requirements churn that happens during sprint time.

2. The second reason is that QA is still not understood properly, and too often reduced to bare testing. When we provide our clients with our estimates, they usually try to have the time allocated to QA reduced significantly; and the less technical background the people negotiating possess, the higher time reduction they want.

Writing an application can be done relatively rapidly, when seasoned developers are involved. However, making the application fit corporate quality standards can sometimes be a much bigger challenge than the writing of the application itself. If no time has been accounted between design and coding, and if QA times are significantly lower than coding times, expect bad surprises!

Business, Technical | No Comments »

Netcipia® is a WEB 2.0 startup that specializes in participative Web technologies (www.netcipia.com).

The two co- founders have been working together in the field of online collaboration for over a decade. During that time, they have gathered the feedback of hundreds of thousands of users worldwide and acquired a unique expertise and vision. The Netcipia participative platform is built upon this expertise and vision.

In addition, Netcipia’s CTO Miguel Membrado had previous offshore experience and therefore knew about the dos and doesn’t of offshoring; so when he approached us, he had a clear plan on how to allocate the money he raised from angel investors.

First, Netcipia was looking for a partner willing to share their financial risks. In fact, during the fund raising process, Netcipia committed to their investors to bring their product to a given level for a given price. So we, as an outsourcing supplier had to endorse this commitment.

That’s about sharing financial risk.

Their technical requirements to Venus were to provide with:

• Developers expert in J2EE, open source solutions, and Agile (SCRUM) methodology
• With existing knowledge on WEB 2.0 platforms since Netcipia was to be built on an open-source wiki solution
• Flexible enough to cope with fast evolving specifications
• Capable of interfacing with a software analyst and a GUI design team located in the USA.

Venus benefited from Miguel’s expertise in advanced collaboration tools. A solution based on wikis and blogs was implemented to optimize the ongoing communications between the parties, located in Palo Alto and Shanghai.

Venus assigned to this project a team of 5 senior developers and an administrator working under the supervision of a senior project manager.

Netcipia successfully went live early March 2008.

Venus is now working on the next version of Netcipia, which will provide a tighter integration with some popular WEB 2.0 platforms.

With engineering expenses under full control, the Netcipia management team can focus his efforts on expanding Netcipia’s business, en route toward becoming a global leader of monetization platforms.

Business, China, Technical | 1 Comment »