I came across this post by no other than Kent Beck. It's no wonder how he has developed the status he has in the industry today: he is a very good communicator. What could take me half a book to describe, Beck can do in three paragraphs. This style of communication is a perfect fit for the eternally busy business people that cannot take away his eyes off the BlackBerry for more than fifteen minutes. And at the end of the article, I was amazed at both how simply and accurately he describes the business model of many service companies I know about.
Beck is puzzled as to why absolutely no software services company was interested in his idea. He then goes on to explain and prove that, in he general case, service companies don't see increasing the skills of their workforce as a good investment. Note that I'm not passing any judgement on whether his “Responsible Design” idea actually makes sense or not. The relevant information here is that he could not find anyone interested in his idea among software services companies, but software product companies were interested in it.
This is strange. The same service companies that are ready to push the next set of industry buzzwords lead by the next wave of luminaries are not interested in Beck's ideas.
Perhaps he does not want to raise hard feelings against him in the software services community. Perhaps he is somewhat blinded into thinking that the problem lies in his proposition. Perhaps he just wants the reader to extract his or her own conclusions. Since Beck is both an intelligent person and obviously not ignorant of the evolution and state of the software industry, I'm taking that as an invitation to extract my own conclusions. Here they are.
In my view, his model depicts exactly the core business model of any large service company, and the reason all of them are in demise. That is, investing in skills is simply not as profitable as increasing the quantity of cheaper resources they provide to the customers. They know and assume a high turnover rate at the bottom (or "burn rate" as they call it) and keep senior staff at the minimum level to prevent disasters.
Many years ago, software services companies reached market saturation in their big accounts. There was simply no more room to employ more staff in big accounts. To further expand and grew, they started to look for smaller accounts, using the reputation acquired in the biggest ones for commitment, delivery and responsiveness. They were competing in that market with the smaller, possibly local, software services companies, Their value proposition basically said “yes, we're a bit more expensive, but you are getting quality and experience beyond the local players” And many smaller accounts bought that argument.
But that has not turned out to be true. You know that if you've experienced it. You hired a global services company because you were sold on the idea that they could access a level of knowledge and experience way beyond you could on your own. You were sold on the idea that their resources were skilled and experienced beyond anything you could have in your own organization. But you did not got any of that.
This is because the number of senior level people now is so small that they have started to decrease their quality of service to their "lower valued" customers. It is very frustrating for someone who is not in their "big fish" pond to know that they have the right people for the job at hand, yet you'll never see them as they are allocated to accounts bigger than yours or even idle, but not able to work on your project because its budget is not big enough to reach the profit levels that these senior resources are supposed to generate.
The irony is that those smaller customers have been their source of growth for a long time. Instead of looking of ways to increase their business with existing customers (pretty hard in current economic environment) or expand their market (much harder than the previous one) they start reducing overheads. The next logical step in order to keep profit levels is getting rid of more senior people. If you do this enough times, and many of those companies have done it at least once per year in the last three years, you introduce the same quality problem in their highest valued customers.
All the above is already happening. The ratio of senior vs. junior resources is approaching zero. This is creating an opportunity for smaller size operations where quality and customer satisfaction is actually in their core values, as opposed to short term profit. For them, any investment in skills has a payback in the long run, either in increased volume with existing customers or expanded market share and increased employee retention. Whether they will buy into Beck's ideas is anotter matter, but at least they will hear him.