offshoring and outsourcing

Retention Matters: Choosing the Right Software Development Partner

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U.S. software startups desperately need development talent. Many are increasingly turning to international software engineering services partners to help scale their development and testing capacity. Unfortunately, some choose the wrong partner. Why? They don’t ask the right questions — particularly questions about engineer retention. If your new software development partner doesn’t have an intelligent, proven retention program in place and doesn’t proactively take the time to explain it, complete with relevant metrics, your risk is high. Too high.

After all, it’s hard enough to grow a successful startup that comes complete with worries about funding, revenue, profits, location, traffic and competition. Add a critically important software engineering services partner with high, recurring, yet unrevealed — at least initially — developer turnover, and the startup’s risk just ballooned.

First, let’s take a look at the actual marketplace problem itself: the lack of development talent. A few anecdotes from around the Web covering U.S. tech hubs:

  • DNAnexus, a Silicon Valley firm, offered a $20,000 referral bonus for successful referrals for the job of software engineer
  • Another Silicon Valley startup, Hipster, offered new hires $10,000 and a lifetime supply of Pabst Blue Ribbon (why not Anchor Steam, you’re wondering … me, too)
  • In Manhattan, a band of startups came together to entice top talent through a campaign inviting talented software engineers from across the country to be part of the technical revolution that’s happening in New York. Each startup is offering a $5,000 bonus plus relocation help to attract great talent to join their team
  • Austin software development salaries rose 30 percent in 2011 over the previous yea
  • In Boston, demand for high-tech talent is so great that workers are turning down six-figure salaries and companies are offering five-figure cash bounties for successful referrals

Five anecdotes that add up to a geographically distributed desperation for talented software developers in the United States. Or, as an Inc. magazine article (“The 5 Hardest Jobs to Fill in 2012,” Dec. 19, 2011) says:

“The demand for top-tier engineering talent sharply outweighs the supply in almost every market, especially in San Francisco, New York, and Boston. This is a major, major pain point and problem that almost every company is facing, regardless of the technology “stack” their engineers are working on.”

Those responsible for doing their company’s recruiting are often overheard shouting in exasperation: “I need some rock star developers and I need them now!”

So, your startup is about to enter into a critically important partnership with a software engineering services company located in India/China/Eastern Europe/Latin America. Pick one. A partnership that will enable you to quickly and economically scale your software development and testing capacity. You may have gotten your first round of venture funding. Or, even a second round. You’re going to use a large part of that money to move your software product or app forward.

Surprisingly, many startups don’t ask any detailed questions about their partner’s engineer retention program. Why not? If you can live with 20-30 percent annual turnover of your engineering team, that may be the answer. But most VPs of Engineering can’t. That type of turnover will cause problems with release schedules, quality and costs. Big problems.

When reviewing potential software engineering services partnerships, the attrition rate is not the factor to consider. Look instead at whether the company has an internal program designed to limit attrition and incent their engineering talent to stick around and work on your project. That’s what matters.

What are the specific right questions to ask? First, ask your potential partner what merit-based program they use for promoting their software developers and testers. Is the program based on an engineer’s years of experience, specific technology skill, or customer satisfaction based on quality and on-time code delivered successfully (or all of the above). Done right, an intelligent, well-executed effort will guarantee loyalty and above-average engineer “stickiness.”

Some software engineering services specialists use a skills-level model based on years of post-university experience and certification attainment to communicate a clear promotion, and career path to their software developers and testers. Here is one example:

Engineers typically get promoted on a two-year cycle. Promotion levels are:

  • Software Engineer I = 0-2 years’ experience
  • Software Engineer II = 2-4 years’ experience
  • Software Engineer III = 4-6 years’ experience
  • Senior Software Engineer = more than 6 years’ experience

Each promotion to the level above it comes with an increase in compensation and responsibility. The career path from one level to the next comes with an evaluation of candidates that includes several tests and interviews from peers to ensure the appropriate skills are in evidence. Completion and/or certification of formal courses is also required.

The best international software engineering services companies also employ an internal education “platform” that offers their engineers access to a wide array of classes from Agile to English language, and Rails to HTML5 training. Subjects should cover both hard and soft skills. Ideally they are offered through either commercial or open source e-learning tools such as Moodle, Articulate or Captivate.

Is the merit-based promotion program example shown unique? No, not at all. However, it is not as widespread as you’d imagine. That’s why it will help your analysis to ask the software development firm if they have such a program.

As Tom Johnson, founder of engineeringi LLC, and a long-time software engineering manager at Ariba (acquired by SAP), HP and other technology companies explains, “Software engineers need to be challenged, and they need to feel that they’re learning. If your software engineering services partner doesn’t have a good internal education capability that engineers can access at any time, you should probably look for a different partner.”

John Hitchcock has over 20 years of experience in the software industry. Currently a director at Avantica Technologies, one of Latin America’s largest Nearshore software engineering services companies, for the past decade he’s managed teams in India, China and Eastern Europe. Earlier, John was head of U.S. and Central Europe field marketing for Cambridge Technology Partners, later acquired by Novell. He’s held leadership positions both at fast growing startups funded by Sequoia Capital and Austin Ventures, and the technology group of GE.

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