[GregQuinn]

Although his comments are accurate there's nothing terrible profound about them.

For quite a while everybody has realized that out sourcing was never anything more than labour cost arbitrage, dressed up with fairly empty "sales" rhetoric.

However he misses a more fundamental way in which clients and outsourcers interest are misaligned. Because outsourcers are essentially selling bodies they have no incentive to become more efficient through labour cost reduction.

I suspect this failure is the real reason for the current "in sourcing" vogue. As software development and delivery becomes increasingly automated the labour cost component will drop, along with the pressure to outsource.

The outsourcers business model is fundamentally broken and it's only a matter of time before this shows up in the bottom line.

[quonn]

> As software development and delivery becomes increasingly automated

How? Software is by definition like _manufacturing_ a single item. Production (copying) is already free and maximally automated.

In two centuries we have made very little progress in automating development. I don't see that changing soon, especially not for software.

[adrianN]

We did simplify software development _a lot_ since the dawn of computers. Compilers, IDEs, standard libraries... it's not really automation yet, but a programmer today is much more productive than a programmer forty years ago.

[nmrm2]

Right, but the definition of a minimum viable product is also fanstastically more complicated today than it was forty years ago...

[kuschku]

90% of what startups recently provide is not complicated technically, but only from legal or business standpoints.

Dropbox and Uber, just to name a few, are technically very simply implemented, and had many competitors before and after them.

Especially in the startup scene no hard theoretical issues are solved anymore.

You don’t see a startup develop mpeg-5

[polskibus]

Outsourcing doesn't have to be based on pure time&material model. Software houses have huge incentives to become more efficient - using scale to their advantage, becoming experts in technology, etc. - all that to compete with other software houses.

[GregQuinn]

I've dealt with many outsourcers (TCS, Infosys, Accenture, IBM etc.) and WITHOUT EXCEPTION their business model is time and materials.

[chkuendig]

I know from first-hand experience that this isn't the case.

Obviously T&M is the preferred contract structure for the service provider, but many projects get done on different metrics (fix-price, result-based, T&M with upper/lower bound etc.). It's quite a competitive industry, so a big client can negotiate for a different contract structure if the project allows it (obv. not for bodylease stuff).

Also, your assumption about labour-cost arbitrage isn't completely true. Many external consultants (incl. developers) make better salaries than internal staff.