Thursday, December 13, 2007

Nearshoring on the rise?

I've been seeing a lot of articles lately about how IT and technology companies are pulling back outsourced projects from India and are looking nearshore, to places like the midwest, Canada, or even local providers in the same town. People point to the rising wages in India as the main driver - as salaries, especially for senior talent, get closer to US salaries, and it becomes harder and harder to retain talent in India, some companies are starting to feel like it's no longer worth the overhead of managing a team halfway around the world.

What I find interesting is that, for the past 5-10 years, in the software industry, outsourcing = offshoring = India. The three were (and still are in some circles) synonymous. What's happening is the industy is maturing, and realizing that India isn't the answer to everything. What I see, at least anecdotally, is software companies taking a closer look at their outsourcing mix, and asking themselves questions like - could some of this work be done better somewhere else in the world? How do I structure my teams and processes to be able to have a truly distributed team, with team members in 5 or 6 different sites wherever I can find the right talent? What additional value can I gain from outsourcing? What is truly core in my business?

The software industry, which is relatively new compared to other industries, lags behind in outsourcing maturity. Generally speaking, other industries like Pharma, Electronics, and Automotive, have more mature outsourcing strategies. They use a best-of-breed approach, where they deal with a portfolio of partners, each with their own specialty, to deliver parts of the product or perform R&D. They have a world-view, rather than a focus on one particular region. They depend on their partners to innovate - bring new ideas and new efficiencies, rather than simply "do X, Y, and Z" for a lower cost.

Nearshoring is on the rise, but we're going to see a rise in outsourcing to other locales as well - Eastern Europe, Vietnam, non-hotspot US cities, and Latin America are places my customers are talking about more and more. Overall, in the next few years we will see software companies use a more diverse outsourcing mix.

And if you don't beleive me, chew on this: last year Branham did a study on outsourcing that looked at outsourcing trends across industries in the US. The primary destination for outsourcing for US companies was... (drumroll please)... the US.

Wednesday, December 12, 2007

Facebook, innovation, and short feedback loops

I attended a very interesting event last night. BayCHI put on a great program called Learning to Create Engaging Apps for Facebook: What Works and What Does Not. This was my first time going to a BayCHI event, but apparently the audience was 2x the normal attendance, which tells you a bit about the Facebook phenomenon.

The speakers were the profs and students of the Facebook class at Stanford. What they accomplished and what they learned was remarkable. The students teamed up in small groups to create Facebook apps - some created several in the semester. Through iteration and experimentation, they found which practices and concepts worked and what doesn't.

Here's the astonishing part - some of the apps grew to 5 million users (and are still growing) in a matter of weeks, and were generating thousands in ad revenue.

A couple of examples:

Hugs: an app created by the teaching assistants using the best practices learned by the class. When I checked out Hugs, I found several of my friends in Canada have already installed it. The app was developed and launched merely weeks ago, so that tells you the reach of Facebook Coincidentally, this app had the biggest adoption in Canada, but they weren't sure why. I guess we're a nation of lovers, not fighters.

Send Hotness: An app that lets you indicate to your friends that they are hot. This app has over 100,000 daily users.

Love Child: My favorite among the lightweight fun apps - it lets you pair up with friends to create a virtual child, which grows and takes on characteristics depending on how you interact with it (dicipline it, hug it, buy it stuff, etc)

Not all of the examples were, ummm, totally inane:

Save the Rain Forest: A fun little vocabulary game that donates the ad money it generates to buying plots of Amazon rain forest.

College, The Numbers: I think this is one that has the most legs long term. This group teamed up with Kaplan to create an app that anonymously compares your SAT scores to other students applying to the same college.

So what did they learn? What were the best practices? What was really cool to me is that this experiment highlighted the best practices we preach at Macadamian to the extreme. The viral nature of Facebook greatly amplified "normal" adoption rates, and cause and effect, so the groups were able to see the results of their actions in a matter of days or weeks.

  • Keep it simple. The simplest concepts caught on like wildfire. On the other hand, when a group put a lot of thinking and upfront design into their app, the app generally had very low adoption rates.
  • Keep it simple #2: Simplifying the UI had huge effects on adoption. When a group made a revision to the user interface of their UI that made it easier to use and understand, their adoption rates shot through the roof.
  • Measure: The class set up very comprehensive tracking systems using Google Analytics, so they could measure results of their changes in real-time.
  • Iterate: Fail quickly and keep a very tight feedback loop. All of the teams were iterating and experimenting daily - finding out what works and what doesn't. Many of the groups that initially had low adoption rates released new versions of their applications that were growing into the millions by the end of the class.

I can't think of another pre-Facebook scenario where you could learn so much about design, social networking, and viral marketing in 16 weeks. With most products or applications it takes months to see the real-world effects of your design decisions. What a cool class! I have a feeling enrollment rates for this course will be through the roof next semester.