Wednesday, April 18, 2007

Why do we have so many jobs in Bangalore?

I want to provide a different perspective to this topic. I touched upon it earlier at ‘How many people report into you?’ Here, I want to linger on a little longer.

Software-services companies and MNC offshore units inherently introduce inefficiencies that are supposedly alleviated by increasing the headcount, which while benefiting the group does the damage of killing the individual. What do I mean by this? Let me explain.

A division or group in a software-services company makes more money when it has more number of people in it. Therefore, the division head, the project manager, and the project leader will all collude to ensure that headcount keeps increasing. This attitude is set in early on and at every stage. Those who resist will either have to conform eventually (so that they can succeed) or they will be weeded out. Over a period of time, what you have is set of successful individuals who have mastered the art of inflating the number of resources to do a project. Say, a manager X says he needs 8 people to do a certain job, while another manager Y says he needs 12 people to the same job. Invariably, the manager Y is selected for the job. Give this process few years- what you have is a set of managers who are all set to outdo the other in inflating the numbers. Only those who inflate the numbers with panache and flair succeed.

Now, what happens at the vendor who is outsourcing to these software-services companies? There is a competition within the vendor company too, between different outsourcing managers, to outsource more. Say, there are two outsourcing managers (OMs) outsourcing to two different companies. There are two factors that come into play here. First, the OM who outsources more work will prove that he has saved more for the company, setting a trend to outsource even more. This outsourcing comes at a price though. There is a homegrown antipathy towards such outsourcing since each job outsourced means one less job for the local guy. But the senior management looks at it from a cost-saving perspective and goes ahead to reward the guy who saves more (who would eventually become the senior management). More outsourcing means more headcount at the software-services company. Second, the OM becomes the champion of the software-services company. He develops a giver-relationship with the company he outsources to. Being the outsourcing manager, he is treated like a king at the software-services company. He is the messiah, the giver and friend, all combined. The software-services company people look upon him to increase their share of revenues from the vendor. He in turn likes the attention he receives and takes it upon himself to do better to earn their respects and obeisance. Also, their success is his success. He becomes their savior and protector, and in turn helps himself. There is a bond that is established between the OM and software-services manager which in turn helps in increasing the headcount at the software-services company.

As a result, you will end up with divisions of 400 people to service a vendor in US/Europe when the same work can actually be done by 100.

Now, let me also look at MNC offshore units in Bangalore. Though they are an integral unit of the parent R&D, these offshore units are usually given the step-daughter treatment. The best work is not given to these offshore units – only the non-critical portions and other support, maintenance portions are assigned to these units. (Only few MNC have actually started to treat their Indian counterparts as mainstream R&D centers). The decision power is not shared either – the heads at these offshore units are mostly paper tigers, with great titles but little influence. Those who work at MNCs share a sense of frustration for not being able to get the best work and for not being able to influence. That leaves most of them to inherit and borrow the practices of other software-services companies of India where they worked before- the usual routine of political maneuvering and one-upmanship. This one-upmanship usually involves having more people ‘under you’. The more people report into you the more powerful you are.

Added to this, the influence or the contribution of a group, including its IP, is measured by the headcount rather than the actual value it produces. So, in effect, a group of 3 producing a superior IP is valued lower than a group of 20 producing an inferior IP. Therefore, you are not rewarding those who produce a superior IP with less number of people, but instead, you introduce a mechanism to reward the mediocrity. The head of offshore unit, bereft of any key decision making power on the overall strategy and business of the MNC, cannot show progress either in terms of revenues nor profits. In absence of these parameters, he resorts to showing progress in increase of headcount. Hence, the tendency to learn and perpetuate the art of inflating the numbers!

[Please note that the inflation of numbers in these offshore MNCs is not as high as in software-services companies since there are more checks and balances.]

I refer to such inflating-the-headcount practices as ‘mediocrity-breeding’ mechanisms. These practices do not award the star performers. They do not allow good performers to feel proud of their achievements. Star performers get disenchanted. They tend to award those who deliberately and smartly inflate the headcount requirements which actually increase inefficiencies. These practices tend to become virtues in both software services companies and MNC offshore units. Such environment does not take care of two fundamental things an organization should do- challenge the employee, and take care of the employee. Higher salary turns out to be the only incentive, which can always be used by a competing company to lure any engineer. This also leads to unprecedented levels of attrition. Solution to every lagging project or bad quality product or inefficient program seem to be addition of more people, as if, adding more people is suddenly going to alleviate the situation. Most often, such addition compounds the problem it is trying to solve. However, a suggestion to increase the headcount is more acceptable than a realistic toning down of the size.

Over a period of time, you have Bangalore, with hundreds of thousands of jobs, which benefits the group as a whole but has already killed the individual spirit.


Rams said...

Brilliant. You have de-constructed the entire industry with your series of articles. After spending 10 years, I have come to a similar conclusion based on my own experience and reading folk lore - Fred Brooks, Paul Graham etc.

The whole thing is a scam - the relationship between the OM and the local manager is, unless you believe in fairy tales, based on other considerations - read corruption! Hope you write about that some day.

I was reading Steve Wozniak's biography 'IWoz' a bit - the one advice he has and one that he can't emphasize enough is "Work Alone". It's almost certainly established by now that great software is written by a very small group of people.

To be fair to the industry folks the government is sure to remove sops, if it's not seen as an employment generator. Besides the average IT worker doesn't like working in small quite (but very efficient) startup companies - Indians feel at home in crowded places and enjoy frequent festivities - celebration of birthdays, off-site meetings, meaningless milestones etc. They like working in shiny buildings and flaunt their coolie badges, and frequent foreign jaunts. Helps them get a bride/bridegroom in some cases.

Ramjee said...

Excellent, It is hearting to read someone who can see the pitfalls of the all the so called progress in IT. I feel the work ethic of has taken a severe beating in this race to upheld mediocrity.

Samir said...

Very well said, and I fully agree.

The point however is to change things here in India. The solution is
to start a high-tech product company and
code the product oneself and with a small team.


Darpan said...

I like it -

"Over a period of time, you have Bangalore, with hundreds of thousands of jobs, which benefits the group as a whole but has already killed the individual spirit. "

Arvind Padmanabhan said...

What you say may be true but I find it difficult to believe it because you have not given reasons. You have made a number of statements which are no doubt based on your real world observations. But someone who has not seen it happen (I have not worked in India or in similar out-sourcing situations) I need reasons to believe.

Why would the OM pay for a team of 400 when it can be done by a team of 100? Because competition in this industry is intense, the OM will want to outsource more at better value for money. The service company on the other hand would like to do the job with just 100 rather than 400 people to maximise on the profit margin.

I do not agree that bigger teams are rewarded better even when their perfomance is worse. The company will not last. It is against business economics.

Your question "Why do we have so many jobs in Bangalore?" is valid. But your article is misleading.