Decision Vision

Decision Vision Episode 37: Should I Use an Offshore Software Developer? – An Interview with Dave Bernard, The Intellection Group

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Decision Vision Episode 37:  Should I Use an Offshore Software Developer? – An Interview with Dave Bernard, The Intellection Group

What countries should I consider for offshore software development? How should I manage an offshore software development project? The answer to these questions and much more come in this in-depth, frank interview with Dave Bernard of The Intellection Group. “Decision Vision” is hosted by Mike Blake and is presented by Brady Ware & Company.

Dave Bernard, The Intellection Group

Dave Bernard is the CEO and Co-Founder of The Intellection Group. He is a serial entrepreneur, technologist, investor, inventor.

The Intellection Group specializes in rapidly building sophisticated, high-quality and innovative technology solutions that deliver breakthrough business results.

No matter where you are in the world, if your company or government agency is a market leader in your niche that requires highly-custom systems to maintain your leadership position and invent further marketplace advantages, they can help. The company’s specialty is complex (and often, award-winning) SaaS projects, and they’ve become well-known as the “vendor of last resort” for many of their clients.

The Intellection Group applies their versatile and deep technology and project management skills to solve problems in areas like developing database architectures that ensure effective data mining, integrated disparate information systems through service oriented architectures and loosely-coupled techniques, applying advanced techniques in data presentation, often an important selling point and differentiator, and rescuing complex technology projects that threaten to derail business plans.

The Intellection Group also has special expertise in emerging technologies, including voice recognition, text-to-speech, location services (GPS, RFID), natural language processing and search (supported by their patent portfolio.)

They like nothing better than for you to count on us to bring new and exciting ideas to the table that enable you to succeed in a tough and complex marketplace.

The Intellection Group delivers technology solutions which get results, like

• A comprehensive portfolio management program for a world-leading private equity firm
• A flexible data interchange application for one of the world’s largest vehicle transporters
• A complex human resources system for a European defense ministry
• A sales force productivity management system used by Microsoft, Symantec and Computer Associates
• The most advanced online education delivery platform available.

The Intellection Group’s work has won awards such as the TAG (Technology Association of Georgia) Excalibur Award, the TAG Top 40 Most Innovative Company Award, and the Virginia Governor’s Technology Award.

To contact Dave, you can find him on LinkedIn or you can email him directly.

Michael Blake, Brady Ware & Company

Michael Blake is Host of the “Decision Vision” podcast series and a Director of Brady Ware & Company. Mike specializes in the valuation of intellectual property-driven firms, such as software firms, aerospace firms and professional services firms, most frequently in the capacity as a transaction advisor, helping clients obtain great outcomes from complex transaction opportunities. He is also a specialist in the appraisal of intellectual properties as stand-alone assets, such as software, trade secrets, and patents.

Mike has been a full-time business appraiser for 13 years with public accounting firms, boutique business appraisal firms, and an owner of his own firm. Prior to that, he spent 8 years in venture capital and investment banking, including transactions in the U.S., Israel, Russia, Ukraine, and Belarus.

Brady Ware & Company

Brady Ware & Company is a regional full-service accounting and advisory firm which helps businesses and entrepreneurs make visions a reality. Brady Ware services clients nationally from its offices in Alpharetta, GA; Columbus and Dayton, OH; and Richmond, IN. The firm is growth minded, committed to the regions in which they operate, and most importantly, they make significant investments in their people and service offerings to meet the changing financial needs of those they are privileged to serve. The firm is dedicated to providing results that make a difference for its clients.

Decision Vision Podcast Series

“Decision Vision” is a podcast covering topics and issues facing small business owners and connecting them with solutions from leading experts. This series is presented by Brady Ware & Company. If you are a decision maker for a small business, we’d love to hear from you. Contact us at decisionvision@bradyware.com and make sure to listen to every Thursday to the “Decision Vision” podcast. Past episodes of “Decision Vision” can be found here. “Decision Vision” is produced and broadcast by the North Fulton studio of Business RadioX®.

Visit Brady Ware & Company on social media:

LinkedIn:  https://www.linkedin.com/company/brady-ware/

Facebook: https://www.facebook.com/bradywareCPAs/

Twitter: https://twitter.com/BradyWare

Instagram: https://www.instagram.com/bradywarecompany/

Show Transcript

Intro: [00:00:02] Welcome to Decision Vision, a podcast series focusing on critical business decisions, brought to you by Brady Ware & Company. Brady Ware is a regional, full-service accounting and advisory firm that helps businesses and entrepreneurs make vision a reality.

Michael Blake: [00:00:20] Welcome to Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic. Rather than making recommendations because everyone’s circumstances are different, we talk to subject matter experts about how they would recommend thinking about that decision.

Michael Blake: [00:00:38] My name is Mike Blake, and I’m your host for today’s program. I’m a director at Brady Ware & Company, a full service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia, which is where we are recording today. Brady Ware is sponsoring this podcast. If you like this podcast, please subscribe on your favorite podcast aggregator. And please, also, consider leaving a review of the podcast as well.

Michael Blake: [00:01:02] Our topic today is, should I have software developed offshore? And for those of you who either know me in real life or have follow the podcast, and if you have followed the podcast, thank you very much for doing that. It’s a small but growing club I’m sure. You know that I have a background working with emerging technology companies, even matured technology companies. And in working with such companies, there are a few universal truths that I hear about how somebody is going to grow and scale their company. One, they say, well, we’re gonna have viral marketing and that’s a whole—that’s a different animal that we’ll tackle at some point. But if you know how to reliably produce viral marketing, you don’t need to raise money. Somebody will pay you $10 million a year to do it. But I digress.

Michael Blake: [00:01:59] Second is, all I need is three million dollars and this idea comes to fruition. And the third is we are going to develop software offshore. And we tend to think about this as if it’s something that is just very easily done and very easily executed because we are used to technology now being imported from overseas, whether it’s phones from Korea, whether it’s Macintosh’s or iPhones being made in Taiwan and China, whether it is Facebook memes coming from Volgograd. The fact of the matter is we have a lot of technology that comes from abroad. And of course, everybody is familiar with the meme of Steve from Wichita, who’s actually based over in Mumbai. And so, we’re used to having our technology come from someplace else.

Michael Blake: [00:02:50] And so, at a high level, it’s easy to kind of think about, well, we’ll just have our software developed abroad. These—you know, many of these countries have very strong educational systems and in particular,  very strong in producing engineers, scientists, mathematically oriented people. People are clearly very comfortable with computers. And by the way, you know the story goes that they basically work for peanuts or whatever the Indian equivalent of a peanut is.

Michael Blake: [00:03:20] And that’s fine as far as it goes. But when you sort of dig into it, you know, I’ve discovered that for every success story about well, we’re just going to offshore and outsource our software development, there are few stories that are not as successful. In fact, some of them are just outright tire fires. And so, it’s indicative, I think, of an important notion that software development abroad, really anywhere, but especially offshore doesn’t just happen just because you know that other companies have been able to do it.

Michael Blake: [00:03:55] And so, it’s a decision that needs to be worked through very carefully, because for most companies, getting your software done correctly, getting it done on time and now in a way that makes sure that you’ll have security back doors is not just a financial imperative, it is existential to the firm. And if you get that wrong, you just have no product. Not every firm can just sort of hit the reset button. So, OK, this didn’t work, let’s try it again a second or third time. And so, I think it’s important to kind of understand what exactly is involved in that.

Michael Blake: [00:04:27] And other than what I just told you, this is not a topic I know anything about, but fortunately I have a guy here in front of me who does know a lot about that and he’s going to tell us about it and share that knowledge with us. So, joining us today is Dave Bernard. Dave is a serial entrepreneur, technologist, inventor, and investor living in Atlanta, Georgia, an expert in new and emerging technologies.

Michael Blake: [00:04:48] Dave has co-founded several companies, including the Intellection Group, an innovative technology consulting group that has been recognized as one of Georgia’s most innovative companies. The Intellection Group specializes in building complex award winning-software as a service systems for both commercial and government entities in North America, Europe, and Africa. The Intellection Group specializes in rapidly building sophisticated, high-quality and innovative technology solutions that deliver breakthrough business results. They like nothing better than for you to count on them, to bring new and exciting ideas to the table that enable you to succeed in a tough and complex marketplace.

Michael Blake: [00:05:26] Dave has led and helped create award-winning complex software programs for organizations across many different industries, including healthcare, supply chain, insurance, retail, hospitality. You get the idea, all shapes and sizes from startup to multi-billion dollar enterprises. Dave has also founded a company called BeneVets providing technology solutions to veterans services organizations. Boy, did we ever need that. He’s also led the Intellection Group’s development of a patented technology architecture that unifies web development capabilities with voice recognition, text to speech, natural languages, radio frequency identification, and global positioning system technologies, deliverable to wireless, handheld, and desktop services. And his credentials go on and on but you get the idea. He’s pretty smart. He’s pretty accomplished. Dave, welcome to the program.

Dave Bernard: [00:06:19] Thanks, Mike. That’s quite, quite an intro. I’m really glad to be here, though. Going to have fun with this.

Michael Blake: [00:06:24] We’re going to have fun with this. And I know that we’re going to learn a lot because, you know, do you agree with me that I think you know, I think a lot of people are just sort of take for granted that offshore software development happens, right? And that’s not the case.

Dave Bernard: [00:06:38] They do. And, you know, there’s definitely what I would consider an almost mythology about it. And, you know, I tend to have a bit of a contrarian attitude about a lot of things. I’ve been in this business 40 years. I’ve seen a lot of best thing since sliced bread come and go. And so, I have an increasing skepticism about what that next best thing is.

Dave Bernard: [00:07:03] When we first started our company, our technology company, about 16 years ago, you know, you’re a new company, you want to control costs and make some money coming out of the gate. And I already had a large network of offshore people I have met at conferences over the years. And I just kind of flipped through my Rolodex and started calling some of these people overseas and we actually started establishing a nice little business doing that. And it has been—it has not been a better process. All along we’ve learned a lot through the school of hard knocks. And I’ll tell you, one of the biggest revelations for me in building this up has been that I thought software development is software development, no matter where it’s done, and that meaning that I didn’t think that there were cultural differences that would make a difference. I’ve found that to be diametrically opposite in practice, that cultural differences may matter a lot to how work is done and you have to account for that.

Michael Blake: [00:08:06] Good. So, let’s put a pin in that. So, we are going to get back to that. But speaking about kind of those cultural differences, in your mind and your experiences, you see it sitting here today. What are the countries right now that seem to attract the most interest in terms of being hosts of offshore development exercises?

Dave Bernard: [00:08:24] Yeah, it—I mean, everybody talks about South Asia, India, Pakistan, even Bangladesh. You have the Far East emerging as a very low cost area, Vietnam, Philippines in particular. The Philippines is very attractive because a lot of English speakers there. But there are also an entire half day ahead of you. So, that needs to be—I actually use a virtual assistant of the Philippines. So, I am acutely aware of that.

Dave Bernard: [00:08:52] Other areas that are up and coming, I think of Central America, South America, their values, because there tend to be in about the same time zone we’re in. And you also have to pull in Canada as a nearshore opportunity. But mostly Canada’s been positioning itself as QA technical support type of capability. So, that’s what you hear about. What we have found after going through the school of hard knocks on this is that Eastern Europe for us is the biggest bang for the buck. Best cultural fit. And just—there’s just a lot of stud developers over there.

Michael Blake: [00:09:28] Now, an important sort of nuance. When you say Eastern Europe, do you mean sort of all of the countries east of Germany or do you parse kind of central Europe that has Poland, Czech Republic versus Belarus, Ukraine, Russia? Does that make a difference?

Dave Bernard: [00:09:42] I would say Central and Eastern Europe.

Michael Blake: [00:09:44] OK.

Dave Bernard: [00:09:45] We’ve been—we have a ton of experience with Bulgaria, for example. And I’d like to highlight them because there’s a historical reason why there’s that way, but also a substantial experience in Poland and Belarus. And I know people who work with Serbs, Croats, Romanians, and Hungarians, and Czechs, and they’re all very, very good. It’s a very similar type of approach.

Michael Blake: [00:10:13] You know something about Bulgaria, they produce a ton of academic finance people and economists, for some reason more than any other country. When—you know, in my field, when somebody writes a really new and interesting paper that is super quantitative, like, you know, it takes me an hour and a half to get through the first page basically, Bulgaria seems to produce a lot of people like that. And I think that goes to the culture, right. For whatever reason, their culture, maybe their education system seems to skew towards that way.

Dave Bernard: [00:10:47] Yeah, there’s a very interesting wrinkle in Bulgaria that I did not discover till after I was working there for a few years. And that is that if you recall, the command economy that the Soviet Union ran in the Warsaw Pact, you had countries like Poland that were building aircraft. So, the Soviets would outsource a lot of their aircraft manufacturer to Poland in order for the economy to succeed. So, the Czechs and Hungarians built cars. The Bulgarians built computers. That’s what they did. They built software-

Michael Blake: [00:11:18] That’s right.

Dave Bernard: [00:11:19] … firmware and computers. They’re very well known for that. So, when you do that, your whole education ecosystem is built around that. So, that is still there. That disproportionate focus on the hardware and software side of things is tremendous there. And I think that part of that is informed—you know, a disproportionate amount of their population is in that business. And we just found tremendously talented people there.

Michael Blake: [00:11:48] That’s really interesting. And somewhere in the back of my mind, I was aware of that, but never made that connection until you made it for me. That explains. And I’ll pull the kimono back for just a second. One of my hobbies is retro computers. One of my prized possessions is an Apple IIGS. It actually works, souped up, et cetera, et cetera. But one of the—one thing that I do not have in my collection and I will not because that will be a major fight with my wife that I’m not going to have is a Pravetz computer, which was their knockoff of the Apple II, that their spies basically went into Cupertino, stole the diagram, stole everything, basically, and remade it. And if you look, you can find on eBay once in a while and it looks almost exactly like an Apple IIe, except Apple has been replaced with the Pravetz.

Dave Bernard: [00:12:40] Well, next time, I’ll go see if I dig one up for you.

Michael Blake: [00:12:42] Oh, boy, you do that. You’re my friend forever.

Dave Bernard: [00:12:44] But, you know, there’s one other really interesting thing about this and something that Bulgarians are immensely proud of. And that is the the person who invented the digital computer is widely regarded as a fellow named John Atanasoff out of, I believe, is Iowa State University. Well, at—his name is spelled Atanasoff with two Fs at the end. But I didn’t ever made the connection because I know a lot of Atanasoff in Bulgaria. And sure enough, he’s Bulgarian.

Michael Blake: [00:13:18] Is that right?

Dave Bernard: [00:13:19] And, in fact, when I made that connection, I asked—when I was in Soviet one time, I asked my team, do you know about this? “Oh, yeah. He’s one of our greatest heroes.” And they took me to a large statue in the middle of Soviet that has his figure on it. And I also had a little—another little antidote is that I was actually at a soccer game with my daughter, probably about 12 years ago and standing next to an old friend of mine who also had a daughter in the team. And I had mentioned—so, I must have been talking about going to Bulgaria. And she said, “Oh, my family’s Bulgarian.” Oh, really? No kidding. And she said, “Oh, by the way, my grandfather invented the digital computer.” And I was like, John Atanasoff? “Yeah, that was him.” And actually, a few years later, on his 100th birthday anniversary, they came over, found her, and brought her whole family over for 10 days random around the country and just celebrating his 100th anniversary. It was a big deal there. Big deal.

Michael Blake: [00:14:17] Well, good. So—and by the way, if you’re listening from the Bulgarian Embassy, the commercial attache, feel free to call up and sponsor our program. That’s fascinating. I did not know that. But, you know, getting back to the, you know, the current part of the question is that not all offshore hosts are the same, right? And it’s not just about cost structure but cultural. So, I’m curious. You said that Central and Eastern Europe for, at least for you, seem to have worked the best, maybe for your clients. Why is that?

Dave Bernard: [00:14:49] Yeah, there’s a very definite pattern there. When you’re in a small business like me, you know, I can’t afford to micromanage people. I need to have smart people, knowledge workers you can call them, that could run on their own, take initiative and go solve problems and think for themselves. Otherwise, it doesn’t scale, just doesn’t scale. So, with a lot of countries, there is actually a great cultural barrier to saying no to the boss, you know, or disagreeing with the boss at all. So, you—they’ll just say yes to you all day long, and then you’re just paying them all day long.

Dave Bernard: [00:15:29] With the Bulgarians and with many others in that part of the world, I found a pretty common theme is that they definitely will push back. I mean, it’s great to have those kind of—you know, they’re not tense conversations but they, you know, sharpening the steel. And we’ve had many times, many times when I’ve said for them to do something and they said, “Dave, that’s a really bad idea. And this is why.” And I said, oh, you’re right. Thank you for telling me. And I love that aspect of it with them.

Michael Blake: [00:16:01] And, you know, I’ve found something similar. As you know, I spent a lot of time in Belarus and Ukraine myself. And they are not shy. I mean, they’ve-

Dave Bernard: [00:16:10] They aren’t.

Michael Blake: [00:16:10] And for whatever reason, maybe it’s because for 70 years, they couldn’t say no. Now, they can’t say no fast enough, right. And you’re right, that is a good thing. You’d much rather have that than the passive aggressive, hey, we’ll take your money, right?

Dave Bernard: [00:16:23] Yes.

Michael Blake: [00:16:24] But then you don’t wind up with what you want. I’d much rather be told that I’m not doing the right thing upfront.

Dave Bernard: [00:16:30] And they do appreciate that directness, too. It’s part of their culture. So, if I’m direct with them, they’re direct with me, we all get along great and we get a lot done. So, that’s what—that’s really the big difference for me.

Michael Blake: [00:16:42] Interesting. Okay. So, the obvious driver to move development offshore is cost, at least perceived cost anyway. Are there other things you might want to consider? Is there a reason besides cost to consider offshore development?

Dave Bernard: [00:16:58] Yeah. I mean—and I hope I don’t upset too much of the audience but, you know, I’ve been just underwhelmed by the bang for the buck I get from onshore developers. There’s several problems with onshore developers and I just have chosen not to deal with them. One, I think is they’re grossly overpaid for what they do. And I’ve seen that firsthand with working with developers all over the world. The other thing is I think that even more important—and all these things are kind of tied together. Cost is an issue. Culture is an issue. Work ethic and attitude is an issue. But also there’s this kind of pattern in the U.S. where you job hop. You don’t like your job. You can make 10 bucks an hour or more over there or another 20 grand a year over there. You job hop. That just doesn’t happen. In my world, in Central and Eastern Europe.

Dave Bernard: [00:17:49] We have multiple examples where we’ve had the same small group of developers working on a project for 10, 12, 13 years. And when you have that kind of continuity on a project, all kinds of things happen that you don’t have to worry about. They tend to be a lot better at their work because they can work in the system. They make a lot fewer mistakes. That makes QA and testing a whole different ballgame. Responsiveness goes way through the roof. And I don’t have to have all these processes and plans for when they leave. So, we actually don’t even think about that. Because there’s so much continuity now, we don’t worry about it, you know. And that is so ingrained in the U.S. approach. If you really looked at all the processes and procedures that they put into U.S. based software development, the vast majority of is geared toward that guy walking out the door and screwing us.

Michael Blake: [00:18:46] You know, it’s—you know, actually, you bring up two things that I want to kind of highlight. One is that, yeah, the cost here is higher but it doesn’t sound like that in and of itself is problematic. What’s the value that you get for the cost?

Dave Bernard: [00:18:59] Yeah.

Michael Blake: [00:19:00] Right? You can live with the high cost if the value were there. But-

Dave Bernard: [00:19:03] Yes.

Michael Blake: [00:19:03] … the value was not there.

Dave Bernard: [00:19:05] And I would say too that, you know, we don’t pay the lowest rates that are out there.

Michael Blake: [00:19:09] Right.

Dave Bernard: [00:19:10] And there is a lot of academic work done on programmer productivity. If you look at DeMarco and Lyster and Ed Yordan and some of—and Steve McConnell, you’ll see a lot of academic work. And at the end of it is, is that there’s a wide range of talent in developer community. The difference between a mediocre developer and a top notch stud, it can be 7, 8, 9 10x. So, what we want to do is we want to find the 7 or 8x guy that we can pay 2x, 4. That’s a tremendous bargain. So, a lot of times the $10 and $15 an hour people take four times as long to do something. I could pay somebody $20 or $25 an hour and they do the work of five people. So, there’s a whole different mindset there. It’s economics. It’s math.

Michael Blake: [00:20:01] Yeah.

Dave Bernard: [00:20:01] You know, that’s what it boils down to.

Michael Blake: [00:20:02] And we’ll take a little bit of the finance side tour. As you know, one of the things I do a fair amount of is, is appraising software. Right. Internally developed software. And two of the factors that we consider that plugged directly into the quantitative models we use are how effective are the programmers and what is the turnover. And it’s fascinating because you would think not knowing, and I didn’t know this, not knowing the intricacies of that software development process. The knee jerk reaction would be, oh, turnover is gonna be lower here, especially if they’re kind of in-house people, right. I can pay him. I can keep him.

Michael Blake: [00:20:45] But that’s so not true it sounds like that, in fact, these offshore teams, for whatever reason and maybe that’s cultural, right, tend to stick around for prolonged periods of time. They’re actually more stable than even if you hire people in-house.

Dave Bernard: [00:20:59] They are. And there’s—I think there are some insight that I can add to that. I think software developers in general, having been one for 40 years myself, I think in general they’re a lot like doctors. They’re trained to practice a craft. And that’s what they want to do. They don’t want to run a business. They don’t want to have to deal with insurance companies. They don’t want to have to market themselves. Software developers not that much different. If you could create an environment for them where all they got to do is code and build stuff and be creative, they’re very happy.

Dave Bernard: [00:21:30] So, really our job in the Intellection Group is to find customers and give them work. And when we do that, we make them very happy and they’re not going to go anywhere because they’d be shooting themselves in the foot. I think the other thing we do, because of distance, it’s also very hard to—it’s harder to build relationships with people, even if you get Skype and e-mail and all that. We communicate with our guys constantly. But we also visit them on a regular basis, at least once a year. And we know their kids. We know we—visit their houses. We know their spouses. So, it’s a relationship that’s built on that personal side as well as the commercial side.

Michael Blake: [00:22:14] So you talked about the fact that you’ve found some folks that work really well and you’ve got long-term relationships. Let’s put ourselves in the seat of somebody now as thing on a map, you know, I should think about offshoring. How do you go about making an assessment as to whether or nothing would be a good fit? I mean, it can’t be as simple as finding resumes on Indeed.com or something, you know. And you’ve got the cultural, geographic, distance, how do you do that?

Dave Bernard: [00:22:43] You know, I mean getting introduced to them is probably the hardest part because there’s a lot of them out there to sift through. What I try to do is—and I rarely add new teams, although I did add some new teams the last couple of years in Krakow, in Minsk. And I actually went to visit them before I engaged with them, to see their offices, to see how they run their shops, you know, and look them in the eye. I mean, I—that’s worth the investment because I’m about to bet my company on these guys.

Dave Bernard: [00:23:14] The other thing we’ll do is to test them on some small projects that we don’t pay for. Okay. I learned that a long time ago. Find a 20 or 40 hour project that they’ll do. And almost all them will say, yeah, sure, we’ll be happy to do that. And what you really want to test there is not necessarily their coding ability, but I want to see how well and how they communicate and how responsive they are, because in our business has everything. Our clients want us to be responsive and communicate frequently. They don’t want unknowns. And that’s the same way I want to run my business. So that’s really what I’m looking for. If I see a lag in that, that’s a big red flag for me.

Michael Blake: [00:23:56] And that’s gonna be another differentiator between an offshore market here. I mean you try to get somebody local to take on a project of that scope to test out their capabilities, right.

Dave Bernard: [00:24:08] They’re not going to do it.

Michael Blake: [00:24:09] They’re not going to do it.

Dave Bernard: [00:24:09] Yeah.

Michael Blake: [00:24:10] Right. At best, they will not refuse with extreme prejudice.

Dave Bernard: [00:24:15] Yeah. And that’s part of that whole attitude thing.

Michael Blake: [00:24:18] Yeah.

Dave Bernard: [00:24:18] You know, I actually think there’s a tremendous desire to work with Americans in overseas markets.

Michael Blake: [00:24:25] I think so too.

Dave Bernard: [00:24:26] There’s a cache to that. That’s leverage for you. And if you treat them as equals—you know, the thing I used to hear all the time from some teams—I mean every time I visited, they tell me this. You know, we do work with some other U.S. companies but they don’t let us do cool stuff. You guys let us do stuff that people actually use. They also feel distrusted and disrespected in a lot of ways because oh, well, the Americans know best, but that’s not the case.

Dave Bernard: [00:24:52] And what we try to do, actually, because it’s good for business is to push everything down to the lowest level. We want them to do architecture. We want them to do database design. We want them to do documentation, so that they own the whole thing, and then they learn the business. So, again, that scales. If I get to tell them every little thing to do, that doesn’t scale. So, Mike, I got guys who know—I got guys in Soviet who know more about global private equity than most people in New York. You know, I’ve got people in Minsk who know more about sales, online sales and marketing than most people in California do. That’s because they’ve had to bury themselves in it, in the details and build it and they own it. So, I don’t have to tell them technical specs. I just say the customer wants a report that shows this, this, and this. Four or five sentences, they go build it. They know what to do.

Michael Blake: [00:25:44] So, that brings up another question or two later but the segue works here. It sounds like—and correct me if I’m wrong but it sounds like you’re an advocate of sending entire projects, not necessarily having the offshore developer work on a piece or a part of it and maybe keep it here. Sounds like you think just either you’re going to give them the project or not. Is that fair?

Dave Bernard: [00:26:06] That is fair. I mean the structure we have is we have onshore managers here, but really the delineation is in customer ownership. Who owns relationship? We own the relationship, the Intellection Group, with our customers. The developers rarely talk directly to our customers. We want to be that intermediary who want to own the relationship. And actually, quite frankly, the developers are very happy with that. They don’t wanna talk to customers.

Michael Blake: [00:26:32] I’m sure.

Dave Bernard: [00:26:34] They want to do their thing. So, that works out very, very well. So, we—that model is really important, I think. And that’s actually—I would say it’s our biggest problem is finding good onshore management. That is a—still an Achilles heel for us, because, again, you know, we’re dealing with people who are trying to run by an agile playbook or something like that. And I think if I just put all these processes in place, everything’s going to work. No, you’ve got to get engaged. You’ve got to talk these people everyday. You can’t just e-mail them, you got to get on Skype, look them in the eye. You got to be able to be flexible and move priorities around. These guys are good at that. Make use of it. You know, and I still have a difficulty finding people who will do that.

Michael Blake: [00:27:25] And I think that’s an important point because it’s different to manage an offshore team.

Dave Bernard: [00:27:32] It is.

Michael Blake: [00:27:32] Right. Even if you’ve had 15 years of experience that—pick a company, Cox Communications, right, managing their internal software development processes, it’s just a different skill set, a different animal managing an offshore team, isn’t it?

Dave Bernard: [00:27:48] It is. And we have—I have my own personal philosophy with the hundreds of projects I’ve been involved in in my career. Like agile is not fast enough. Two weeks grumps to me are awful. We drop code every day with our clients. You know, when you do that, you don’t have to give them a status report because the system is the status. It’s always built. It’s always running. It’s always up to date. You want to see where we are? Go look at the system. That’s where we are.

Dave Bernard: [00:28:18] And if you do that every day, mind share is preserved. okay, so that’s where we would hate for a developer to make a change. Wait for two weeks to deploy it. So, the customer tests it. He’s already forgotten after the third day what he did. Customers come back and said, “Oh, there’s something wrong with it.” I don’t know what I did back then. That’s how things really work. We would rather have that very tight velocity and much, much—it’s much better use of mind share for us. And that has worked for me in lots of projects.

Dave Bernard: [00:28:50] So, we call it, for want of a better term, call it super agile. And we’ve gotten that confirmed with some independent third parties who looked over our process and our code. And they—I was actually told by a European firm that just did a large code review, a multi-million line system we’ve been building for 10 or 12 years and they told us they’d never seen a more productive team. And I said, it’s really simple. We just—we deploy a lot and we still do 500 hours of work on that system every month, every single month. It’s never going to end. And so—and they couldn’t—they’ve never seen by with our velocity. But that to me is the only way to build this, to preserve mind share. It’s a knowledge worker business.

Michael Blake: [00:29:36] It’s—even in my field, it’s very hard to start, put down, pick up, down, pick up.

Dave Bernard: [00:29:44] Right.

Michael Blake: [00:29:45] It’s—the creativity gets lost, the time getting up to speed and so forth.

Dave Bernard: [00:29:53] And you know it intuitively, you know.

Michael Blake: [00:29:55] You do. I mean I—you know, I had—not in software, but I was set to be an expert witness in a case that I last touched about four years ago. And I assume the thing had settled. And then, all of a sudden, you know, the attorney e-mails and says, “Hey, this thing looks like it’s going to trial.” Let me see if I can find it. I wish I find can it. But, you know, you’re trying to kind of get back and step back for—you know, thankful it’s settled. So, nobody wanted to be in that case. But the notion of having something that’s sort of still like that, and then try to pick it up and try to do the same quality work that you were doing when you started, boy, that’s the exception rather than the rule, isn’t it?

Dave Bernard: [00:30:39] It is. And, you know, I would—and this discussion is about offshore development, but a lot of things I’m talking about apply to software development in general. And the point I want to make is that the reason we do offshore development is it actually makes some of the other stuff clearer and easier and more predictable to do in a lot of ways. So, that’s—its big advantage.

Michael Blake: [00:31:02] So, talking about kind of where you can get this done and you of all people appreciate this, because I know that there’s something that you’re very involved in studying, is the nature of security, right. There are countries out there that wish the United States ill. And candidly, they realize they cannot defeat us on a conventional battlefield. And so, their battlefield is cyberspace.

Michael Blake: [00:31:28] And there’s concern. And we’ve seen even with the current administration that, you know, we’re not necessarily letting other companies sort of have the run of the place from technology anymore. And I’m curious on, even if it’s not a particularly “sensitive project”, is that something you think about? If you think about, you know, a Russia, if you think about a China being a software developer for us. Maybe they’re not enemies but I’m not sure I’d say they’re friends either. Right. Is that something if you’re in the private sector, should give you pause?

Dave Bernard: [00:31:59] You know, I would say that we let economics drive us and talent. Talent and economics drive us where we’re gonna go. So, I have nothing against working with Russians or Chinese. There may be some other things that give me pause. So, I do pay attention to things like economic sanctions. And that’s a business risk. It’s a business risk if—you know, I was actually working in Bulgaria before the VAT was implemented there, and I had some concern about whether they were going to apply it to services. It turns out they didn’t because that would have changed our business model. That’s a 20 percent tax. So, it’s things like that more that are going to drive me.

Dave Bernard: [00:32:37] I—if you’re talking about intellectual property, I get that asked of me a lot. People will say, well, what if they go and steal our code? And my response to that is a question. What are they going to do with it? I mean, they don’t—by definition, they don’t like marketing or selling. So, they’ve got to have—they would have to package it up and figure out where the market is and go sell and build a business around it. They don’t have time for that. They don’t want to do it. And plus AB, as soon as I found out about it and I would, I’d kill—you know, I’d cut them off.

Michael Blake: [00:33:08] Right.

Dave Bernard: [00:33:08] So, that’s a disincentive. So, I think right now, can you completely bottle that up and make sure it doesn’t happen? No, you can’t. And even if you have NDAs and contracts, they’re worth your ability to defend them, which you want to do.

Michael Blake: [00:33:25] Right.

Dave Bernard: [00:33:26] It’s like a pattern-

Michael Blake: [00:33:26] Which is tough.

Dave Bernard: [00:33:27] So, if you’d not willing to defend it, why go do it? But in our case, we are—we focus on making a relationship very strong and making it a really symbiotic relationship that tends to keep those things at bay. And I’ve never had a problem with that. As far as national security types of aspects of this. Well, that has its own rules. And we have done cleared projects overseas under U.S. Army contract or NATO. And I do some pro bono work on the national security space anyway. So, I have a maybe an extra sensitivity to working with some of those places. And for me, there’s just so much work and so many good people that I can work with. Why risk working with people who are on the fringe? And I might consider right now in the current political climate and economic climate that Russia and China are kind of on the fringe.

Michael Blake: [00:34:20] Got it. So, switching gears a little bit. I’m curious in your experience, are there certain kinds of software applications that are better or worse suited to being developed offshore?

Dave Bernard: [00:34:36] You know, I was giving that some thought because I had your question ahead of time and I just couldn’t think of any pattern one way or the other.

Michael Blake: [00:34:44] Okay.

Dave Bernard: [00:34:44] The thing that I could think of the most was if you had a—an application that was such high availability that you needed to have 24/7 engineering support on it and that time zones might cause your problem with that. But other than that, we’ve already built systems used in tens of countries at a time 24/7 around the world and they were all built by the offshore guys. And you know, a lot of our customers in the beginning, they’ll say, well, you know, they’re not available after like 1:00 p.m. Eastern or something like that. And they actually fall into our pattern of following the sun. They love sending me stuff at 11 p.m. And when they get up in the morning, it’s done. So, actually, they’ve all adapted to our pace and our time zone and they actually understand it. You’re going to have a gap somewhere or by sleeps, right. So, all they do is they understand, hey, I can get stuff today late and it’s going to be done while I’m sleeping.

Michael Blake: [00:35:48] It’s interesting you said that. And sometimes I wonder if they sleep, because for a while, I’ve actually used an Indian contractor for my valuation practice. And, you know, it just astounded me. I would send something at 9:00 at night. That’s when I have a bunk bunch of my sort of technical work done and I’m getting a response in 30 minutes. I’m like, dude, you should—what? You should be asleep.

Dave Bernard: [00:36:11] I’ve had that same experience. I tell them the same thing, go to bed.

Michael Blake: [00:36:16] You know, you’re no use to me if you do it, you know, if you’re—but you’re right. They seem to adapt. They seem to be willing and enthusiastic to adapt their body clocks to match our time zone if necessary.

Dave Bernard: [00:36:27] And your customers adapt too.

Michael Blake: [00:36:30] Yeah.

Dave Bernard: [00:36:30] I mean, it’s all kind of the same thing you’ve got to do with them anyway, set expectations. This is the way it works and it’s very effective for them.

Michael Blake: [00:36:41] So, I’m going to show off a word here that our mutual friend, Scott Burkett, who is on podcast number two or three, I think-

Dave Bernard: [00:36:48] Oh, I know Scott.

Michael Blake: [00:36:48] … shared with me and that was technical debt. So, I did not know what that was until about six months ago. Anyway, it is—and for those who don’t know, as I did not six months ago, technical debt is basically the amount of rework you may have to do with a software package to get it done, so that it actually can be expanded upon as opposed to just getting it done in a rigid way to meet a deadline.

Dave Bernard: [00:37:15] Yes.

Michael Blake: [00:37:16] More or less. Right. Also sort of covering-

Dave Bernard: [00:37:18] That’s a good definition.

Michael Blake: [00:37:18] Also, covering obsolescence to a certain extent. Is there a greater risk or a lesser risk of accumulating technical debt when an offshore project is-

Dave Bernard: [00:37:28] The short answer is no, I don’t think so.

Michael Blake: [00:37:29] Okay.

Dave Bernard: [00:37:30] I mean developers—you know, a good developer knows the best way to implement any given task. Now, given that, I’ll just get on my soapbox a little bit about technical debt and I have a really good example, a counter example-

Michael Blake: [00:37:45] Got it.

Dave Bernard: [00:37:45] … for this. It’s actually a little bit of a surprise when I heard it. Like I said earlier, we had had a large system reviewed by European—it took months for them to do the review. Very thorough job. They looked at every bit of our code. And they came out and said, you know, you have a bunch of technical debt in your reports. And this is a system that had been around for a while. We’ve probably built 200 or 300 reports. We’d even retired like 20 of them. And they said you have a tremendous amount of code duplication among these reports. And I said, really? Because I don’t tell the developers how to write stuff. That’s their job.

Dave Bernard: [00:38:21] And I talked to developers and they had a very interesting story to tell me. They had followed my directive exactly. And what I directive to them was this customer is extremely sensitive to accuracy and risk in the code. They just don’t want bugs. So, they took that to heart. And basically the approach they took is whenever a new report request came, they went and found another report that was battle tested, coded and worked, copied the code and worked from that, the one that was closest to what they had to build. So, immediately, they were reducing the risk tremendously, increasing the likelihood of accuracy and reduce the amount of work they had to do. So, responsiveness went through the roof. Accuracy was still really good and risk was low. Exactly what the customer wanted and they’d been doing that for years. Okay.

Dave Bernard: [00:39:10] And so—but these guys who were reviewing said, oh, this has got to be fixed. I said, really? Okay. So, what’s my pitch to the customer here? I’ve got to go burn a whole bunch of time that you’re gonna pay for and I’m gonna refactor this code. So, now, I’ve just instituted a whole lot of risk and I get cussed. I get developers changing code. That’s risk. And then, at the end of the day, it’s all gonna be tested again, which is the bulk of work in software development. And so, at the end—and after all that’s done, then the customer’s got to verify it, which they’ve already done with the existing reports.

Dave Bernard: [00:39:46] And after all that’s done, they had the same thing they started with. So, how do I pitch that to them? And they said, “Oh, I see your point.” Because they were gonna make it a prominent part of their presentation to clients. I said you can do whatever you want but I know what they’re going to say. And so actually, it’s turned into—it was eye opening for me because I love—it was the genius creativity in my mind because the customer doesn’t care how it’s written. They just want it to work and make their business grow. And this is a customer who’s realize billions of dollars of return on this system.

Dave Bernard: [00:40:21] So that’s why there’s a lot of these little things, object-oriented programming, agile development, technical debt, QA processes, you know, test driven development. All this stuff is really to me, they’re red herrings. They’re distractions from serving the customer in the way that best does that. So, I have a similar contrarian attitude about testing as well based on experience. So, you know, I did tell the customer a little bit about this, said you may hear about it, I’m just telling you, just say no, you know, it doesn’t matter. So, that’s my my little soapbox on that.

Michael Blake: [00:41:02] All right. So, let-

Dave Bernard: [00:41:07] And oh, by the way, I would challenge anyone in the audience to counterpoint that. I would love to hear it.

Michael Blake: [00:41:11] Okay. Well, please do also, because the more you challenge something and write about the podcast, the better SVO it gets. So, light it up, everybody. It’s open season for trolls on offshore software development.

Dave Bernard: [00:41:25] There you go.

Michael Blake: [00:41:26] So, I want to ask this. I mean you’ve mentioned several countries in which you work. I’m curious if you’ve ever had different teams in different countries working on the same project or do you kind of allocate kind of one project per team?

Dave Bernard: [00:41:41] Yeah, as a general rule, it’s one team per project. I think it’s—you know, there was a book 50 more years ago by Fred Brooks, the guy who invented the 360 operating system for IBM called The Mythical Man-Month and is still in print. It’s a fabulous book. Every software developer should read it. Basically, one of his famous quotes in there, adding people to a late project makes it later. But his big thing was that  lines of communication expand exponentially as you add people. So. the Google approach is to keep teams very small because the lines of communication are very—are fewer. If you have three people, then you have—you know, I guess it’s a factorial, three factorial lines of communication. And if you add a fourth one, it goes up a lot.

Dave Bernard: [00:42:35] So, if I have to have multiple teams working in different parts of the system at the same time, I have to not only contend with communication, but I also have to contend with different styles and approaches. I have to contend with different velocities because there’s different talent in different places. It’s a nightmare, quite frankly. It’s really, I think, is uncontrollable. I think there are certain—there could be situations where the system can be built in very parallel pieces where you could probably get away with that. But I prefer actually for the mind share to be in one place and not in multiple places. It’s just—that’s just something I’ve not—I’ve found to work much better. And there’s an ownership issue, too, you know. These developers want to own their work. They want to have—it’s their baby. You know, it’s a creative process. It’s not engineering. It’s a craft. So, if you’ve split the craft up between two groups, who owns it? You know, they’ll bid—you get into finger pointing exercises. It becomes a blame game if something goes wrong.

Michael Blake: [00:43:39] Yeah. Okay. So, you’re obviously a big fan of offshore development. So, let me ask you a contrarian question. Are there cases where you have advised clients that offshore development may be not—may not be a great idea?

Dave Bernard: [00:43:57] I think if there—for—there are clients out there or people I’ve talked to who just can’t wrap their head around it. They don’t—it’s a trust issue when you boil it down. They just don’t trust what they can’t see. They want the person in their office. You know, you just can’t get around that. And I would tell them, then we’re not a good fit for you because we don’t work that way. You know, we can’t give you the economies and the performance and velocity of development in that environment because we’re committing to something when we quote our system. And we’re committing to it based on how we do it. You know, if you want to change that, then you got to get a different group of people. So, I think that’s probably the only real time I tell them it’s not going to work for you.

Michael Blake: [00:44:42] Okay.

Dave Bernard: [00:44:42] Other than that, because we tend to deliver very quickly on stuff, it’s almost like they’re there. You know, it just starts. And then, they forget that the person is not there because they’re seeing results. A lot of it is that trust, because I don’t see what’s happening, I don’t see a guy typing at a keyboard and come in at 8:00, leaving at 5:00. But if you see and results, then it doesn’t matter. They quickly get over that. That’s what I would say to them.

Michael Blake: [00:45:09] Okay. Well, Dave, we could easily go another hour on this but we’re running out of time. So, I think what I’d like to do is invite people if they want to learn more about this, if they’re thinking about this for their own companies, how can they contact you to maybe ask a question or two and follow up?

Dave Bernard: [00:45:24] You know, my e-mail address is, I’m always available, dbernard@intellectiongroup.com. You can easily find me on LinkedIn. I get a lot of people communicating with me on LinkedIn. Happy to do that. So, I’m not gonna give out my phone number over the podcast but I can be called too. Once you e-mail me, then you—I’ll allow you to call me.

Michael Blake: [00:45:48] Yeah, you’re not hard—and I mean phones are so 20th century anyway.

Dave Bernard: [00:45:52] My phone number is probably on several websites out there anyway.

Michael Blake: [00:45:54] Probably is.

Dave Bernard: [00:45:55] If you do a search, you’ll find me.

Michael Blake: [00:45:56] Probably is. Well, that’s going to wrap it up for today’s program. I’d like to thank Dave Bernard so much for joining us and sharing his expertise with us. We’ll be exploring a new topic each week. So, please tune in, so that when you’re faced with making your next business decision, you have clear vision when making it. If you enjoy these podcasts, please consider leaving a review with your favorite podcast aggregator. It helps people find us, so that we can help them. Once again, this is Mike Blake. Our sponsor is Brady Ware & Company. And this has been the Decision Vision podcast.