How outsourcing is killing Cluj

Some people might say that I’m a hypocrite for writing this article and some might say that I’m wrong, or that I exaggerate things. The focus of this article is to raise awareness about potential problems that we are facing as a community, so I am sorry in advance if I offend anyone or if anyone feels that my opinion is dead wrong. It is still my side of the story and I’m sure that I will find enough people who support my ideas.

The IT industry in Cluj is built around the business of outsourcing. Almost all major companies are outsourcing companies and most of the fast emerging companies in the last 2–3 years are also outsourcing companies. There are some companies that are branded as “product companies” because the employees work directly on the products that those companies sell, but in 100% of the cases, the “product company” is a foreign company who decided to invest into a development centre in Cluj, well because it’s cheaper… so how is that fundamentally different than outsourcing? I’m not here to criticise only the business of outsourcing itself. Whenever I talk about people working in outsourcing I am referring to 99% of the market share in Cluj, including pure outsourcing companies, nearshore companies, product companies or freelancers. Basically all the IT people that offer their services to some company outside Cluj.

I am born and raised in Cluj and I’ve seen this IT ecosystem basically spin off and grow in the last 5–10 years. This is clearly visible in our city and I’m proud to say that the industry that I’m working in helped revive the economy of a city that had a very bad reputation before 2004. So obviously I don’t deny the huge benefits that we’ve had in the past 10 years. The problem is that the same industry, which raised the economy and created a lot of job opportunities for young people, is unable to adapt to change and is unable to think on the long term. I don’t want to get into stereotypes, but we do live in a bubble.

The two signs of the apocalypse

There are two major problems with the current IT scene in Cluj. And they are deeply related, which is why we have this vicious circle that forms the “bubble”. In a previous article, I wrote about this illusion of comparing Cluj with Silicon Valley. Like I mentioned before, there is a big gap in the mindset of the IT professionals in Cluj. And this is the first problem I am referring to. Most of the people are oriented towards execution and process, but they lack the product development mindset. So when facing this, companies that sadly are only interested in their immediate profits see outsourcing as the better option. And in outsourcing, the only profitable business model is to grow.

These are not the developers you are looking for

Here comes the second problem, which is the ratio between senior developers and junior developers. Now you might say this will be fixed as time goes by because the vast majority of juniors from today will be seniors in 5–10 years. That’s just wrong, because a senior level has nothing to do with the years of experience and the ratio I’m talking about is actually between quality vs average professionals. And I truly believe that the ratio is going down, because the talent pool is simply not big enough for the growth of the outsourcing companies.

Of course there are more seniors today than let’s say 5 years ago, but on the other hand there are maybe 10 times as many average professionals that were driven into this industry mainly by the money benefits and by the fact that the industry itself needs to be oriented towards multiple and different talent pools. And I’m not even going to focus on the education problem, because I plan on writing a full article on that. The bottom line is that while the industry needs a few thousand new people each year, the universities produce much less than that, even if we’re omitting the fact that a good chunk of the students coming out of universities today are just not talented enough, and the companies are constantly looking to bring people from other industries, teach them to write a few lines of code and sell them to their customers as “seasoned developers”.

Who is driving your business?

Let’s get back to the main point of this article. Why do I consider that outsourcing is killing Cluj? Because on the long run, you will see this process accelerate. More companies will start growing out of control, more people will be driven in this field and the quality people, the talented developers will remain constant, or best case scenario, their number will grow at a slow and steady pace. So as companies get bigger, the difference between success and failure will dramatically be affected by how many good people you have that can lead your teams towards success. While you may think that 1 good developer is enough for a 5 people team, or if you’re mad enough and think that the ratio should be 1/10, I think the ratio should be without exception over 50%. If you have one good developer mentoring a beginner / junior, you have the odds on your side. Mentoring more people is simply not sustainable.

Think a bit about who are actually the key players in your company? Are they maybe exactly those quality people that very often the company fails to attain? Have you ever wondered why quality people leave your company?

Choking the few

You would imagine that if these people are important for the companies, the companies will go to extra lengths to keep them. Sometimes they do, but the extra length usually only involves adding some numbers to the pay check. On the other hand, people that are passionate about their job usually care more about the projects they work on, the career path that a company offers, the possibilities of attending conferences and other events, etc.

Surprisingly enough, the companies seem to be very ignorant of this problem. Most of the focus of trainings is usually in the junior/internship areas, very few companies get involved in organizing events for the community, they don’t support meetups or any other activities that are usually of interest for the passionate developers.

I really wonder how many company managers actually think about why people are leaving their companies. Do they always blame the fact that the person leaving got more money from another company? I think that quality people can be loyal to companies and most of the times they are. But the companies are choking them with responsibilities they don’t want, like training juniors, managing teams, checking reports, writing documentation, working extra hours and so on. On the other hand, they don’t focus on the personal development of these senior level employees, like I mentioned before. This is how you kill passionate people, quality people, people that are loyal to your company. And with the ratio between seniors and juniors going down, you can expect the companies trying to squeeze even more out of their quality people in the next years.

Future Prospects

This sounds very grim and I did mention at the beginning that I may be tagged as a hypocrite for this. Yes, we do work in an industry which pays in average 5 times better than any other industry, but does this mean that we need to ignore these facts that I mentioned and just continue working like we did before hoping that things will get better? How much longer do you think it will take until companies will start losing projects because of the low quality work that they deliver? When the employees are just average developers, how do you differentiate yourself from the other outsourcing markets?

I once met a guy that worked at a big company in Cluj and he was bragging about the fact that he got hired, got a big pay check and pretty much rubs the mint all day and waits for his money. And this case is not singular. Whenever I hear about guys like these, I am mad, because I know that the companies that are hiring them can do much better things with that money, but they just insist on growing and getting more and more contracts.

The truth is that the average employees (and I’m talking about the vast majority now) are lethargic and care mostly about the money or the other benefits that a company offers. I had several discussions with HR Managers from Cluj and they all basically confirmed my theory that the average developer is more interested in the fact that the company has a pool table in their office than in the projects on which he will work.

If you think I’m just full of shit, feel free to read Frederic Lasnier’s (CEO of Pentalog) opinion on the Romanian engineering market, from a different perspective, but underlining the same problems.

What can we do?

Sadly, there aren’t many things we can do as individuals. This problem needs to be solved at a community / industry level. One good start is for companies to understand that growth is not sustainable in this context. In Orchestrated Knowledge, Peter Leeson says that his standard answer to companies that are talking about the lack of resources is:

You have enough resources, the problem is that you have too much work.

Like he says, there comes a time when companies need to learn to say NO to their customers. Another thing that companies need to start doing is caring more about employee engagement and retention. And I’m not talking about all the employees, I’m talking about the key people in the organization, the quality people, based on what I wrote before. My simple answer to why the quality people are leaving a company is that they are interested in making software, companies on the other hand are interested in making money. When the companies in Cluj will start understanding that they should at least partially be involved in making software and not money, then we will be able to start fixing the problems that we have today. Then we will be able to shift a bit more towards the product development mindset and only then we can slow down this growth process and focus more on quality as opposed to quantity.