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Outsourcing: Peter Harrison, CEO Of GlobalLogic (Part 3)

Posted on Wednesday, Sep 22nd 2010

By guest author Tony Scott

Tony: It would it would seem to me that there’s a huge value proposition in someone being able to say: “We’ve got this kind of talent and we could apply it when you need it. And then when you don’t need the world’s most brilliant expert on RF antenna design, he can go work on something else.”

Peter: Innovation on demand [Laughter].

Tony: Exactly! If I remember correctly, this is what happened when Nintendo tried to do all the designs in-house for the second version of the Nintendo game console – the Nintendo 64. It had very complicated graphics and functionality compared to the first game console, and it required very specialized talent to work on the design. Nintendo did not have that level of cutting-edge talent in house. Why would they have? Before that product, they weren’t very technologically advanced, so why would an engineer who wanted to work on cutting-edge issues want to work at Nintendo? But because they tried to go it alone with their existing internal team, they missed their launch date, which meant they missed the Christmas season that year, which meant they lost maybe a billion dollars or more of shareholder value.

It was all because they didn’t have the resources in-house and couldn’t build those resources and capabilities fast enough. That’s a constant issue across products with a technological underpinning. I would think this is applicable today to almost everything other than maybe brick-making.

Peter: Right. [Laughter.]

Tony: Could you give me an idea of the span of the products that you are working on?

Peter: We work across a lot of different spans. For example, we have a consumer business that works with Amazon and Yahoo!, and the social networks.

Tony: I’m guessing you are working with those companies on their Web interface, the back-end software, and the interactions between the front-end and the back-end?

Peter: Right. We also have a group that does enterprise software with clients like Microsoft, BMC, CA, and IBM. We have another group that focuses on the various types of software that are sold to most of the large telecom carriers today: infrastructure, OSS, BSS, and Voice over IP, along with a lot of mobile components. We have extensive experience on mobile devices. We’ve got a group that focuses on embedded, and they do lot of work with firms like TI and Samsung and LG.

Then we have a group that works with medical equipment manufacturers, so that also is embedded, but it’s much more specialized. For instance, working on infusion pumps, setting up messages when your kid’s insulin level is low, alerting the doctor or alerting the parents, and actually controlling the amount of insulin that is going into a pump . . . checking the levels and those kinds of things. If you look across the work we do, the applications are pretty diverse.

Tony: So, today anything that has a chip in it or software running on it – basically any product like that – could use your services. For example, when you think about an automobile today, this is a huge issue. Something like 50% of the value of a high-end car today is probably actually in the electronics.

Peter: Well, because of your background you’d appreciate this. I think the software industry has been a bit of a laggard in this respect. The hardware industry has embraced more of a supply chain, vertical disintegration approach more rapidly than software has. Software companies tried to do it all themselves for a long time.

Tony: Yes, many of them thought everything was core.

Peter: Sometimes they did it all themselves simply because they could. But I think we’re getting to a stage now where more companies are realizing that they don’t have to control every zero and one in every product, as long as they control the product management and they own the end IP. That may be enough.

They really don’t have to be responsible for writing every last one and zero. So, actually the embracing of open source, the embracing of SaaS, and the embracing of outsourcing actually is the same thing. I mean if you think about it, SaaS is outsourcing, open sourcing is outsourcing. They are all part of the same track.

Tony: This all goes back to the entire concept of what is core to what you’re delivering as a company, versus what is the context in which you need to be able to deliver it.

Peter: Right.

Tony: Software companies have historically taken the position of we’ve got to build everything ourselves, we’ll make our own drivers. Why? What’s the point?

Peter: You know, I think early on in the industry a lot of it was because they had to optimize everything to make things work faster. Maybe there were compression algorithms, and it was a little about speed and sorting and searching. But more and more, as the business has matured, it’s become about solving business problems. It’s not about the technology any longer; it’s about the business problems. It’s about having a new and innovative way of solving a business problem, and the zeroes and ones are kind of incidental to that.

This segment is part 3 in the series : Outsourcing: Peter Harrison, CEO Of GlobalLogic
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