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by Michael Cote.
Original Post: Licensing Model for Oursourcing:
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With software development, some experts have estimated that development represents only 30 percent of the lifetime cost of an application. If you build an application and the cost of development is $1,000,000, plan on adding another $2,000,000 or more on top of that over the lifetime of the application.
That is, once you're done coding up a product, there's still quite a bit of time and money needed to support it and fix bugs. This leaves penny-pinching execs thinking, "how can I shift that $2 million out of the company?" ('Cause Lord knows that tech-companies should be doing as little actual tech work as possible, just like the Romans and their military before the fall of Rome, right? More women and wine, less computers and compilers. Whao! Pardon the major side-sneer, dear readers.)
Instead of a company outsourcing just the production of a product, we get the idea of outsourcing the entire life of the product to another company: the outsourcing company builds the product, supports the product, and then fixes bugs found in the product. These tasks are licensed out the outsourcing company. Pretty smart, on the face of it: the company no longer has to get it's hands dirty with anything except signing contracts and checks.
For the outsourcers, this is great: it's how Microsoft made piles of cash, and established itself, by licensed out DOS to IBM in the 80's, and then being able to license out DOS to the PC clones. Despite the on-the-face-of-it wins above, I'm not really sure what the long-term benefit to companies hiring the outsources is, however. More than likely, the licenses would be exclusive (avoiding the mistake, some would say, that IBM made), limiting the ability of the outsourcing company to make money off the software by selling it to other companies.
However, even though the IP may be legally owned, via the exclusive licenses, by the company, it seems that in the long-term, the outsourcing company gains the edge: they gain the experience of not only creating, but supporting, and maintaining software. Essentially this means that the skills and know how of software development moves out of the original company. When those skills are lacking in a company whose bottom line depends on the successful application of those skills, a high-chance of "clueless" leadership can sneak in.
That's a lot of wild, coffee fueled speculation, not unlike most outsourcing yammer. I've gotten pretty irritated with the whole outsourcing conversation going on in the tech-world now-a-days (either I'm super obssesed with it, which I am, and/or there's more articles being written about it) because of the lack of comparisons to other industries' history with oursourcing. For example, the apparel industry outsourcing just about all it's manufacturing. Indeed, just about anything that's manufactured is made in China or ather Asian country.
Now, I'm not saying that the way that outsourcing, as it exists today, in these other industries is what I'm interested in: though I often find the arguments awfully ad hominem, I can agree that outsourcing sneaker manufacturing is quite different than outsourcing computer application development. Rather, I'm interested the arguments and discussions that were going on in these other industries when outsourcing was first being planned for and applied. I'm sure many of the same arguments were being made -- off-shore workers will produce lower quality work, it will be too difficult to work with people in other timezones and cultures, etc. on the American side, and the exact opposite on the outsourcing side -- and I'd like to see how those arguments and theories panned out into the out-sourcing world of today.
I have a feeling that, as with most reactionary thinking, things aren't as exactly as we think they are: most people can't resist reacting to their fear that the future is going to fuck them over, instead of focusing on how to plan for and make their future successful.
That said, to clear up any ambigiousness of mine on the topic, I sure as hell don't like off-shore development (which I equate to "outsourcing"): as an American coder, off-shoring means me getting fired from a job that I love doing. Thus, as I was commenting a few days ago, I see out-sources as people who want to destroy me, and there's nothing for me to like about that. Maybe some day I'll have to suck it up and do the old "if you can't beat 'em, join 'em" thing. If -- well, maybe it's more "when" -- that day comes, I'll bring my own fork and knife for all the crow eatin': a little vermin eatin' never hurt no one, 'specially a fine Southern Gent like myself.
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