Outsource Bulgaria

The Economist had an interview with Steve Keil, CEO of Sciant (Bulgaria’s leading IT outsourcing company) about an year ago. Here’s some of the key points raised when they discussed outsourcing in Bulgaria vs. Vietnam.

Mr Keil maintains that costs are crucial. And Bulgaria, despite being one of the poorest post-communist countries of eastern Europe, is losing ground. Outsourcing is close to being a commodity, Mr Keil explains, and Sciant is losing out to Asian competitors, including nominally communist Vietnam, where taxes are low or negligible, officialdom actually helps, and qualified and willing labour is plentiful.

In many respects, Vietnam does look like the promised land when it comes to IT outsourcing. The problem with promised lands is usually twofold: the promise is too good to be true, or it remains just that – a promise.

Although a small country by any standard (except maybe Luxumburgs), Bulgaria has a very strong tradition in IT. This might be a bold and arrogant statement to westerners but ask anyone whose been part of the Soviet bloc and they’ll tell you Bulgaria was “selected” to be the bloc’s Silicon Valley. Apple clones were manufactured as early as 1982 and although these facilities were dismantled with the fall of communism, they helped build an elitist geek culture that at one time produced over HALF the viruses, some of the most malicious ones.

With the fall of communism, some of these geeks have gone west but the culture of uber geeks with top mathematics skills continues. Recently, Bulgaria took four (4!) of the top prizes at the International Olympiad in Informatics in Seoul. Vietnam’s team wasn’t even there.

Keil is right about there being a cost difference for hiring programmers in Ho Chi Min city. There’s no arguing with that. Yet, the focus on quantity could be misleading.

In his essay, Great Hackers, Paul Graham states the obvious (to anyone who’s worked in IT) that one great programmer cannot be substituted by 100 recent graduates:

The variation between programmers is so great that it becomes a difference in kind. In every field, technology magnifies differences in productivity. I think what’s happening in programming is just that we have a lot of technological leverage… you reach the point where 90% of a group’s output is created by 1% of its members.

As you can see, this all ties to the recommendations for improving outsourcing results - getting the top people to work on a challenging project will yield the best results.

Projects involving data entry or payroll should go to the low-cost provider but would you trust your long-term competitive advantage to a bunch of college kids in Vietnam? When shopping for an IT company to work on your outsourcing project, shop for expertise and experience. The cost for doing it right the first time is always lower.