Strategic Inflection Point

Andy Grove, in his bestselling book, Only the Paranoid Survive, describes the nightmare moment every leader dreads--when massive change occurs and a company must, virtually overnight, adapt or fall by the wayside-- a “Strategic Inflection Point.” The arrival of the Internet was one such Strategic Inflection Point in the tech industry. I think that we are at another.

The Strategic Inflection Point is for consulting firms today and the issue is outsourcing off shore. Large companies are outsourcing almost their entire development work offshore. JPMorgan Chase just announced 50% of its IT will now be offshore (that is oh about 4,000 development jobs). I am not going to make the case for or against outsourcing, since it is happening anyway, apparently if you have a convincing argument against is, nobody is listening to it. So why fight it, it is happening and the jobs are not coming back (at least not to New York). This is why I left consulting in July 1999.

But wait, there is still money to be made in the contractor role. First let’s say that you are running a consulting shop today and are feeling the pinch of outsourcing. Let’s look at the notion that it takes 30% of the development effort to design the application, 30% to code, 30% to test and 10% to physically implement.

I always say that the strategic advantage you bring to the table in the 30/30/30/10 universe is the design. That is the MOST important phase of any project-period.  (Don’t make me go Steve McConnell on you!) What if you set up shop to do the 30% design and 10% physically implement?  You can make the case to do the design locally and then work with the outsourcers offshore to code and test. Set up a strategic partnership with several off shore players. Or better yet set up a JV. You can then take on a project management, relationship management and architecture guidance role. I have worked with overseas outsourcing and they tend to follow specs to the letter, so if your potential customer has made the decision to outsource overseas, they will be more inclined to do the design work very seriously.

Just an idea…