Glass ceiling of IT companies

Well, here we are in 2019. How are we all here? So-so, huh? Would you like better as in 2010? It’s not the first year that we have been struggling with sales, endlessly customizing processes and messing with a lack of understanding. What to do next? It is not easy for all of us, there is no IT company that could boast with sales and a clear strategy for a couple of years, good staff on the ground and such a market offer that all competitors are left behind.

Over the past three years, there has been a full-scale restructuring of the outsourcing from working farms to chicken paw houses. Sales suffer due to the lack of a clear offer from companies and fierce competition in the market for the loaded startup, offering them everything the same as the rest (web / app custom development). Almost 15 years of outsourcing, we have been learning to sell it to everyone, built companies, developed expertise, and only 100 out of 2000 companies feel themselves ok, the rest are struggling behind.

When planning this article, I was already tormented by the thought that our outsourcing is outdated, the model is rusty and many are no longer interested, and the founders of IT companies are throwing fishing rods with messages, what else can be done to sell more, faster? Sales reps are looking for truth in a routine, and I have fewer and fewer answers, and there is nothing to help those who are trying to hit the jackpot fast.

So the cult of sales has progressed over the past three years and a large number of consulting, schools, courses have appeared, because selling, as before, it’s not so easy to come and sculpt the “image” of a trusted IT vendor in a different way. Companies also continue to race for their “that” client, who is hidden in a closet or behind a screen, they cannot establish simple sales, everyone is trying to complicate and immediately multiply results by 100 without understanding of the distance of natural growth.

And what, in fact, happened during these 10 years of outsourcing? Nothing special. Companies until 2012 were developing at an active pace, if you look at the statistics per year on DOU.ua – 1 thousand people per year, but, starting in 2014, the recession has begun, and so it continues until today. In the big picture, with the same active demand, as in 2010-2012, we would have seen by now companies comprising 20,000 developers or more, and greater amount of  medium-sized companies in the range of 5,000, but there are none, and why? Because outsourcing rested on its glass ceiling and outlived itself as a business model. Cheap offshore labor is attractive, but what is it like in 2019? Already not as cheap, and not as ambitious as before.

The client in the outsourcing has also changed, and he no longer needs the totally custom development on which we are making a profit. He now has a bunch of advisers who quickly double-check the proposal for adequacy and meaning.

The client no longer wants to train at his expense the juniors who are trying to grow, and does not want to pay for additional promises “everything will be fine, we will do it” on the part of the developers. During the formation of our outsourcing business in Ukraine, a client from the abroad suffered in most of his attempts to work with our “body shops” and “forges of successful solutions”. More and more often I hear the anti-advertising of our technical solutions and skillful work in projects, but still the price of such solutions is still not as high as in Poland or the Czech Republic. So the client gives us, as always, a discount on this, but no longer recommends or returns for the service. Companies that have at least once done an outsourcing project no longer return to it and look for resources in the country and organize “in-house” development, as the remote model for managing fast projects is difficult and endless; outsourcing providers do not fulfill and do not give the client everything they need. Basically, large companies take our resources to their offices permanently.

Sales have also changed: a new generation of Sales reps grows under very different conditions (more artificially mild) and focuses more on team building than on “deer hunting”. Now you will not surprise anyone with the fact that the office is clean, the salary is on time, there are cookies and there is water in the cooler. 10 years ago for this you could stand at the door and say: “Please, I will sell, give me the job.” Now, the sales force is attached by what the company can offer strategically: what speed, what challenges are there, who is working in the team, what is the main competence. This is because everything is the same for everyone, and if the company does not provide the necessary craft, why should Sales sit in the office with someone who is already going to the bottom? Everyone already understands that you can’t build a company on just one sale, and the salary is not held by the bulk of people, those who are quick-witted, who are assertive, who shine, will knock out all the nonsense from the leadership and twist their hands, and have the right to do so, because less and less talented sellers remain in Ukraine, unfortunately. The market has opened, and now there is no more prejudice that “somewhere abroad it will be bad”, basically, everything is in the opposite direction, the sales flee abroad, because there they have more opportunities and resources (they are not poisoned in the office for that you need to go to the client’s office in Paris), but the developers still suffer and go back, because they have a limited salary and there are no special increases (stability).

About the quick boost of companies – this is generally a separate book, maybe I will write it, since there are a lot of cases (unsuccessful), as planned at the beginning, and what was the “success” in the end. One big part in planning has always failed, and this is taught in all MBA schools in the world – finance. Unfortunately, not everyone knows how to handle money, and when the first project is successful, the founder does not generally reinvest in the business, but runs to Ikea to buy missing tiles in the kitchen. We are hungry, the fear of profit is turning the heads of young entrepreneurs, and everything is going downhill. With big business, things are different: what you see now is all that we can, i.e. our mental and entrepreneurial capital in the country is just enough to create a company of 7000 and that’s it. Where would this capital come from if very few have worked abroad and were at the helm in major transactions, project development? Mostly local experience prevails, which we retell and resell to each other. And every year it becomes obsolete faster and faster. We do not have a good sense in business development. Yes, all kinds of hubs, innovations, chambers of commerce, IT partnerships are organized, but who manages them? That’s right, basically not us. We do not have international corporations with offices in 30-40 countries and a total of 50-70K employees. We have not yet learned how to manage this and, most likely, will not learn in the next 10 years.

From my practice, only a few from the CIS are able to competently manage international companies, expats here on the ground and set clear and transparent tasks for them, and basically they are taken for prestige, showing off to friends, they say I have a couple of expats and I’m very international now. And they don’t know how to implement and use them correctly, but, in fact, the result is then evident to the founder. That is a question for quality management and the foundation of business management. We are just starting to approach international education, we are just starting to touch it and our business is run by those who have a sharp ear – self-taught with quick experience (got it abroad and brought back quickly), which is also good, but they are quickly grabbed from the market and they fix their experience in the last company they work for, no longer bringing benefits to others. The stages of development of IT companies also consist of anti-successful cases. Show me at least 10-20 of our Ukrainian companies run by CEOs from Berlin, London? We don’t want to build them with someone further than Ukraine, but why? Yes, because we do not know how to manage (there is no time to learn) and do not give control to those who know (roadblocks because of fear and misunderstanding). Fear and distrust of strangers will float in our DNA for a long time.

Only now we began to climb out of our caves and communicate with people from Europe and the USA (in most cases visa-free travel was beneficial); began to go on business trips to others and communicate (imagine in the 21st century!), actually look at someone else’s business from the outside, evaluate your losses, surprise with your resourcefulness, talents on the ground and embellish events (to sell). Adapt our E-Recruitment process to a modern standard and learn to find our talented employees faster than usual.

The positioning of our IT companies has also not changed over 10 years, everything is in the same format as before. The whole world is changing quickly, and the speed is very high, and we are all dragging our chest with messaging that we are doing everything and nothing concrete. In 2019, everyone went into the sales field of full-stack operation services, when an idea came to you as a client, you addressed it and got a plan immediately broken into pieces and went to realize your dream. The era of direct sales has ended, the era of high-quality consulting has begun. When you, as a client, want to get a real squeeze of facts, pay for a consultation and make a decision based on honest figures and facts, and direct sales, which used to carry the “sides” part, do not work as they did before – everyone has already adapted to the digital revolution.

The standards of IT development have leveled off, understanding how to do the project is there (millions of articles have been written), the outlines of costs are also available through consultations, it remains only to find money: ours, others, and investors. But this is not so simple now. The era of cheap money is also ending, and young startups are more and more denied investment, everyone wants a proven business case, an idea and no longer believes in miracles. It is also more difficult for large companies to technologically dump their problems on other heads, because they all struggle with the turnover of their personnel. More and more employees want to work remotely, partly for themselves and do what they like. Therefore, the implementation of company ideas on the ground is decreasing as well as taking responsibility for revolutionary changes (they can be counted on the fingers).

So where to live, and where are all our sales going now? Growth globally slowed by 8% and large players lose from it, while we remain almost in the lowest part of this food chain. We will not hear these echoes in our pockets and wallets yet. All sales are being rebuilt into a physical presence in developing countries (yes, it is in developing countries) and are turning into centers of competence. If in Frankfurt they have finances, they send Java devs there, if in London they insure business, they send Java devs there, well, you understand? No special and trendy programming languages, all the old way, but in a different quantity. Online sales give us only a quick set of experience and knowledge on how to do this and partly buy your experience due to the arising receivables (because something urgently needs to be changed), with online sales, the business is capped at around 100+ people, all other games are about the distribution of the funnel in different countries and locations. By absorbing a customer in your service business, you guarantee him trouble-free operation, quality, and planned scale (project growth).

We are moving from the outdated “all by 5” model to the model of fundamental and quality work in our offices and we will totally transform into medium-sized companies with a certain expertise. This will appeal to developers (they will choose according to taste and color), to the client (because they will know who to contact pointwise), sales (as they will be pumped, and not all to the top), marketers (it’s clear what to highlight and what to design, make the desired image, life cycle). Large companies will continue to sit on their donors and worry that they are not abandoned in favor of cheaper outsourcers (Vietnam, Thailand, South Africa, India), who also actively create and invest money in IT training.