[Firegarden]

You know as a programmer myself for the last 15 years I can see how the market has changed and everything is becoming part of the global economy which means the rates are a lot lower which means Ukraine and India are playing a bigger and bigger role I could see private Equity trying to lower costs by outsourcing.

I think there's a fundamental flaw in the idea that you can just pay for cheaper labor- as Steve Jobs has said before the difference in a good programmer and an outstanding programmer can be 50 to 1 or 100 to 1 you can't capture that by trying to cut your cost from $100 an hour to $20 an hour.

Software inherently is one of the most scalable business models in the world the cost of manufacturing is almost zero all of the cost is in the design they should be able to make money. The mindset of being a consulting firm has to be changed.

[tyingq]

Thoughtworks isn't cheap though. They sell the idea that outsourcing your work to them is outsourcing to an elite team. They do have teams in Brazil, China, etc, that are cheaper than their US based devs. But, those teams have rates much higher to end clients than a typical outsourcing shop.

That's what has me curious here. A PE firm usually buys when they think they see cost cutting opportunity. That may be hard to do with TW, since they pitch and price themselves as "premium".

[CoffeeDregs]

    A PE firm usually buys when they think they see cost cutting opportunity.

The PE firm buys things in which it sees opportunity. Often-times, the opportunity is to cut: the management team's adventurist streak in markets; weak products; bloated staff.

Other times, they might recognize that a company needs capital to get bigger faster in order to address an expanding market. In this case, I think the thesis might be: cloud deployments and migrations are exploding; ThoughtWorks has the thought leaders; "roll up" other consulting firms into ThoughtWorks; dominate the market. A friend's consulting firm was just bought for this exact reason. Something very similar happened to Pivotal.

[mbesto]

This. I work with PE firms every day and this is essentially how they operate.

Consulting has notoriously low multiples and so if you couple a consulting business with a "computing/services" business you increase the multiple over night.

I expect this page to expand drastically over the years:

https://www.thoughtworks.com/products

[CoffeeDregs]

That's exactly what happened to Pivotal. Boutique consulting shop turned into a consulting/services behemoth by strategic investments and business flow.

[jacques_chester]

> That's exactly what happened to Pivotal.

Disclosure: I work for Pivotal.

The original Pivotal Labs was founded in 1989. Rob Mee sold to EMC in 2012.

A little later (circa 2013), EMC and VMWare took a number of teams and assets (notably Labs, Cloud Foundry, Greenplum, Gemfire and Spring) and spun them out into a new company, which was called Pivotal.

Pivotal is basically three divisions: Labs, Cloud R&D, Data.

Pivotal Labs is the consulting wing, there is a lot of cultural and conceptual overlap with ThoughtWorks. The Labs division is the most recognisably direct descendant of the original company Rob Mee founded. Its offerings and work have broadened over time.

Cloud R&D is responsible for Cloud Foundry (including our commercial distribution PivotalCF), KuBo, Spring, Pivotal Tracker and I always forget something or someone.

Data is responsible for Greenplum and Gemfire and a number of related technologies (eg HAWQ).

It's a complicated history, because nearly every part of Pivotal has a history that predates Pivotal.

[tyingq]

Behemoth might be a little strong. I don't know how many of the employees are consulting/services vs product, but the total is 2300. They are also somewhat niche in their consulting. They won't do gigs that use stacks that compete with PCF for example, and have a very fixed model (your employees sit with them at the Pivotal shop)

I agree they've been successful.

[tyingq]

Ford, EMC, and Microsoft are not what I meant by a typical PE firm...that's who invested in Pivotal.

I meant firms like TPG, Blackstone, Silverlake, etc. I suppose they do sometimes stray from the model, but the rabid cost cutting is pretty typical.

[CoffeeDregs]

My point about Pivotal was not about the investor; it was about the similar investment thesis.

    the rabid cost cutting is pretty typical.

True, if the thesis is around bloat, mal-investment, adventurism, etc. If the theory is something like "tech talent roll-up in the face of an industry-wide cloud migration", then cabid cost-cutting would be disastrous (modulo all of the SG&A position eliminating)...

[madeofpalk]

Very similar thing is happening with 'digital agencies' being bought by larger advertising agencies and big international consultancies, like Accenture.

[charlesdm]

Cost cutting / financial engineering / tax reductions / resource optimisation. It won't be a fun place to work in the next 3-5 years. That raise you think you'll be getting? Don't think so.

[njarboe]

Many companies or brands have a reputation for quality built up by decades of producing a high quality product. Then the company hits hard times and the brand name or the whole company is bought by a PE firm. The firm tries to capture the purchase price and some profit by producing cheap, low quality goods under the "premium" brand name. Huge margins until people realize they have been duped. Not cool. See: Craftsman, Kodak, Polaroid, etc.

[lonelydreamer]

We are not an elite team...believe me.

[Firegarden]

Well I wonder who the PE team is because perhaps they see value that exists intrinsically in quality programmers that know how to design software both quickly and at a high quality level and engineer it in a way that it can be built-in iterations and refined into a maintainable system.

For example someone like Joel Spolsky could probably find a way to drive profits from the TW team and so maybe its a programmer that knows business behind the PE money.

[toyg]

Someone like Joel Spolsky would likely stay the hell away from the dirty game that is large-scale consultancy.

[mschaef]

He's said as much:

https://www.joelonsoftware.com/2001/01/18/big-macs-vs-the-na...

[nunez]

TW wastes a lot of money; there are definitely cost cutting opportunities

[vram22]

> They do have teams in Brazil, China, etc, that are cheaper than their US based devs.

They have an office in Bangalore, India too. Or had until a while ago - not checked recently.

[plinkplonk]

They still do.

[lonelydreamer]

What is your opinion about the "premium" label?

[tyingq]

I have met plenty of very skilled Thoughtworkers. However the consulting model doesn't reward doing things right. It rewards things like selling the "A team", then swapping them out as you sell the next big client. And shortcuts that enable payment milestones, etc. They have zero incentive for what code does, how maintainable it is, etc, after they leave.

TW can deliver well, but you have to manage them closely.

[gaius]

TW can deliver well, but you have to manage them closely.

So closely you might as well just have hired a bunch of contractors and run the project yourself for a fraction of the price?

[tyingq]

Not really. The TW devs are mostly guaranteed to be competent without interviews. They also already know how to work together, have a shared idea of tools, methodology, lingo, etc. The "manage closely" part is around watching for people swapouts, architecture shortcuts, etc. That's managing their managers/architects vs the entire team.

[Firegarden]

From my experience in the last year-and-a-half I would say that the Consulting model is changing to one where the developer team is an outsourced arm from the business yet it's an invaluable part of the business. For example there's a company called clear measure who I believe are looking at driving the bottom line and creating a long-term relationship where growth in the client results in higher profits for the Consulting company through either raising their rates or some other agreement. I know personally as an independent contractor my Approach is to look at how I can affect driving business growth and not so much understanding what the client is asking for as a programming task

[toyg]

> looking at driving the bottom line and creating a long-term relationship

That's always been the case for large-scale consultancy: land a gig and keep it forever, or as long as it will last. It's the small ones who have an incentive to leave quickly, because they don't have the manpower to keep shackled to a single assignment for too long; but the big ones are body-shops, they have a virtually-infinite supply of fresh graduates to place - they will pull all the stops to keep the gig running as long possible.

[richmarr]

> I think there's a fundamental flaw in the idea that you can just pay for cheaper labor- as Steve Jobs has said before the difference in a good programmer and an outstanding programmer can be 50 to 1 or 100 to 1 you can't capture that by trying to cut your cost from $100 an hour to $20 an hour.

Perhaps you left something out, but the argument that high quality programmers have to be expensive might be interpreted as assuming that high quality programmers only exist within high-salary countries like the USA. I assume you didn't mean it that way.

[sheepmullet]

1) High end developers get paid a lot. Even in India and Russia.

2) As a rule of thumb consulting companies charge out at 3x wages.

It usually is more expensive to outsource to the top end than it is to do it in house even in Seattle or SF.

[richmarr]

> 1) High end developers get paid a lot. Even in India and Russia.

> 2) As a rule of thumb consulting companies charge out at 3x wages.

This is backwards.

1) Consulting companies charge what they can get, which depends on what markets they've managed to penetrate, reputation, contract flow, etc as some markets are far better lubricated than others.

2) High end developers get paid a function of company budget and supply of talent, so in locations where budgets are more constrained, salaries will also be constrained. Your implication that "paid a lot" is a constant or near-constant is questionable.

There are lots of different datasets on this, no doubt none of them high enough quality, but they all indicate huge discrepancies, both on average and when stratified.

https://www.daxx.com/article/it-salaries-software-developer-...

Is it possible to make a 100:20 saving as the parent comment questioned? I don't know. Perhaps not. On the other hand US average programmer salary is over 4x the average programmer salary in China, so under the right circumstances it's not as ludicrous as perhaps presented.

I guess my point is that your premise that "high-end" developer salaries are near-constant around the globe is likely only true if you constrain yourseld to developers who are employed at agencies that compete globally against companies like Thoughtworks and have employed there long enough to have established seniority (remember experience is not synonymous with quality). That's quite a tight definition of "high end" in my opinion.

[sheepmullet]

> That's quite a tight definition of "high end" in my opinion.

High end always has to be in context. The current context is wage competition against US developers.

The open source dev working for free isn't in this market even if they are the best developer in the world.

My friends in India working for Microsoft and the ones working remote for $30/hr are in the same market.

> Consulting companies charge what they can get

3x is a rule of thumb. Charge much less than 3x and you aren't making money unless you have a much lower than average cost structure.

> On the other hand US average programmer salary is over 4x the average programmer salary in China, so under the right circumstances it's not as ludicrous as perhaps presented.

You are comparing apples and oranges.

Remember average in the US is average after a couple of decades of outsourcing.

[UK-AL]

The Thoughtworks brand is based on being high end.

I doubt they're going to turn it into a cheap outsourcing thing.

There's lots of companies you could buy for that.

[lonelydreamer]

You've said correctly, the Brand is...