Why Nothing Great Ever Came From Outsourced Teams

I am just going to quote Xs’ mail here verbatim, there is nothing that I could possibly add.

From: XX

This is all ancient history at this point, but just to offer some insight on AOL, which may have relevance to the AT&T/Apple issues (and also as a clarification to Brock’s post).

Like many large organizations, AOL (circa 1993) left up to other firms how to build out their own networks to support our needs.   We did all the marketing research, capacity planning, and internal network engineering then supplied requirements to several firms who were actually building modems in the field.  AOL then took aggregated calls on dedicated backhauls into our data centers.  We knew where we going to send disks or CDs in bulk and on what schedule, so could predict with some certainty where modems would be needed and when.  But it was up to someone else to do the heavy lifting and build racks of gear in central offices around the country based on our direction.

When the company was growing at breakneck speed, our people were often working around the clock building internal systems…. lots of 2 AM pizza deliveries, and sometimes sleeping on the floor in the office.  We were ready internally, since we essentially ran the company like a startup.  And we were motivated not just by the thrill of it all but a looming financial incentive in terms of stock options to get it right.

Our contracted modem builders (certainly at 2 of the 3 companies we partnered with) didn’t operate the same way.   Try telling the guys putting together modem banks in Iowa City or Plano that they have to pull a 16 hour shift, and oh by the way, don’t expect a weekend off for the next few months.   It’s a different world when you’re dealing with large bureaucracies, union contracts, and folks that certainly don’t have stock or other financial incentives.

So who knows what happened with the AT&T sign-up fiasco.   But there’s a cultural difference between these two companies, and just because folks at Apple are able to pull months of all-nighters to ship the new phone, doesn’t mean their technical counterparts at AT&T are equally motivated.  There probably aren’t lots of AT&T database programmers who are counting the days until their stock vests and they can retire.

And there’s no telling if Verizon had the exclusive contract that this situation would have been any better.   Of all the big mobile carriers, T-Mobile probably most closely matches Apple in terms of culture.   Perhaps no mobile network would have been able to deal with the dramatic amount of data growth when the original iPhone shipped.  In hindsight, maybe the iPhone should have been available from day one in two variants e.g. both GSM (AT&T/T-Mobile) and CDMA (Verizon).   At the minimum Apple would have had two companies to work with, and hopefully one of them was able to keep up.

You’d expect large companies to handle this kind of growth efficiently, but building these systems can be major engineering challenges.  It doesn’t take much to have the logistics get off track and suddenly you’re behind the power curve trying to catch a moving target.   AT&T management may already be cutting resources if they know full well that Apple is taking their business elsewhere in a year or two.   There’s plenty of blame to go around, but differences in culture, motivation, and economics all probably played a factor in how this whole situation came to be.

(AOL’s network guy, ’93-98)


2 Responses to Why Nothing Great Ever Came From Outsourced Teams

  1. Gaurab U says:

    Can’t Agree more .. something i wrote few months ago, for a paper.

    India is an example of what I think is a systemic failure of ‘outsourcing’ in telecommunications sector (not to be confused with the general understanding of ‘outsourcing to India). Most engineers agree with me, most economists disagree.

    To give some perspective, in India, Airtel pioneered the business model of outsourcing all engineering and physical work to third party vendors (Martinez-Jerez, F. et al 2006), contracted to be paid by the number of users in the system, rather then the capital investment or cost. This made it quick and easy to expand, as the capital cost was all borne by the Vendors, but since no one owned the final product, it created service problems as the network grew. Engineers don’t like it, but accounting likes it. “

  2. Alex says:

    So AOL eventually did more in-source networking with its own fiber,modems,etc. Was that enough to save AOL, was underinvestment a contributer to the dot com bubble, if say 50 million as opposed to 5 million folks had broadband, I couldn’t see why netflix couldn’t do streaming in 1999.

    ATT and Verizon have the networks, AOL had its network but not the end point, cable companies had their own networks cutting out AOL, telco companies and AOL’s relationship were a bit lackluster especially with CLECs, and home networking as opposed to the usual AOL login-in for one user was different.

    Of course AOL merged with TWC giving it a network but more of a regional one, and most TWC folks didn’t use AOL, AOL’s problem was more that it had more of a declining walled garden of content vs. the internet that folks use directly.

    As far as GSM/CDMA, it seems Sprint is stuck on its old network for a while, adding HD voice, I don’t understand why Sprint is sticking with CDMA, 10 years ago a similar technology similar to LTE was being trialed by nextel, flash ofdm, WIMAX is superior to CDMA, yet Sprint is turning off the better networks, and still using CDMA alongside LTE.

    With everybody moving to LTE, perhaps the makers don’t need a CDMA phone, with GSM more prevalant, it make more sense for a TDMA/WCDMA/LTE phone, though the first two networks may be shutdown, who knows when, t-mobile still has it running.

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