AI in SDLC = the End of Outsourcing?

Is outsourcing development business at risk? By AI agents? Does it replace the reasons people outsource?

Why outsource?

Companies outsource projects, teams or whole departments for several reasons.

What are the benefits?

Capacity

Ability to run more projects in parallel than they have to employ and train staff for.

Ability

Some projects may require skills the company does not have or want to have.

Flexibility

The ability start and cancel projects without retaining permanent employees. Or change requirements and skills required on a whim.

No-one sheds tears for a consultant if a project gets canned.

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Cost

Local consultants costs more per hour but you do not pay for them all the time. Nor any of the benefits etc. If the project is not started, is paused or when it is finished that costs is 0.

Risk

• Reducing the risk of enlarged employee salary budget.
• Risk of shortage of staff means running out of time to launch project.
• Risk of the company falling behind by not keeping up with features.

Why outsource to cheaper countries?

And more importantly many outsourced projects is outsourced to much cheaper countries, where maybe a whole team cost less than one permanent employee.

That means either

• the scale and capacity of the companies projects can be much larger
• Or that the budget can be much smaller.

In theory.

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Fallacies of outsourcing

There are many downsides to outsourcing: (Though that is really out of scope for this article.)

Company culture and harmony:

Often the companies employees feel marginalised by the focus the new teams and the influx of the new co-workers. Or the outsourcing company and consultants have completely different norms and behaviour of the original staff.

Productivity

Bottle-necks and communication overheads may mean the company actually ship less. Timezone differences, culture misunderstandings, etc makes communication harder and thus productivity lower.

Hidden costs

Especially with more remote teams there will be the need to hire more intermediate people to communicate and portray to the team and the hiring company with the requirements, questions and statuses.

Knowledge Churn

With consultancies the time to train and retrain is considerable as there normally is a big turnover of staff on the project and outsourced company.

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Comparable use of AI

Now what if an in house development team uses AI agents in their SDLC - how does that compare?

Like junior devs

Like I discussed in Pairing AI Agents, AI in SDLC is like working with junior developers.

Developers become architects and managers

And since it is like delegating to a junior, every developer transforms into their own manager/architect with responsibility to create the requirements and delegate it to the AI agent(s).

Horizontal scaled up AI use

With every developer using AI in such manner is the outcome similar to outsourcing?

SDLC with AI benefits

Lets compare the pros and cons of outsourcing discussed briefly above.

AI Capacity

If the team goes all in with AI agents the theory and current data indicate they can now scale the horizontally bandwidth by quite a bit. A team can be less developers, so they can have more teams with the same amount of developers.

AI Flexibility

Whilst the number of engineers does not change, the skills of the AI agents can make the developers much more flexible in terms of programming languages and frameworks.

AI Cost

AI agents do cost a lot especially if you go all in. But so does outsourcing. It becomes a calculation of gains v cost.

AI Risk

• The employee salaries does not increase.
• The AI agent cost increases but on a whim can be dialled to 0.
• Falling behind risk is low as the AI skills are up to date.
• One risk is not keeping up the developer skills in line with the AI’s skills.

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AI fallacies

And the negatives of using AI agents in SDLC versus outsourcing:

AI Productivity

The productivity gains could be huge. If managed well on the individual level.

YAGNI is vital as with great power comes great responsibility… to not bloat the requirements and features by including everything, and never really finish/deliver.

AI Hidden costs

The AI agent cost is visible. There are no more salary costs.

AI Knowledge churn

The skills of the AI is permanent, though undoubtely which AI agent is used will constantly be changing in a AI ability race.

The skill in using the AI is worth training and focussing on.

As well as making sure the skills of the developers don’t wither. They need to supervise and work in conjunction with the AI to avoid AI slop and rotting code.

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Outsource or AI?

As you can see above many of the benefits of outsourcing is also prevalent with using AI in SDLC. And many of the negatives are irrelevant or reduced.

So should companies just use AI instead? It is not quite as black and white.

It depends…

As with all things each scenario/company will have different requirements that may make it more desirable or less desirable to use AI over outsourcing.

For many, yes use AI instead

For a lot of companies however they should just let the developers go all in with AI and not outsource. Or not outsource their core business skills instead just their fringe/maintenance projects.

For some, still outsource

Some companies they just do not want many developers or have the ability to train theirs, so for them they still need to outsource most of their IT projects.

Best of both worlds: The consultancies use AI as well

Of course all the consultancies that offer outsourcing will also use AI agents.

Their own consultants will learn the skills to delegate to AI agents as well.

That means it should require less consultants to fulfil the requirements from the hiring company. So in theory their cost / price should be less…

What about outsourcing to cheaper countries?

An area that I think will be hit is outsourcing to remote cheaper countries.

The need for them will decrease as more companies will be able to either do more internally or hire local consultancies but fewer headcounts so the need to save money will be less of a priority.

Time will tell.

Disclosure

I, the author, Ivar Abrahamsen, have worked as a consultant for a huge multinational consultancy that offered outsourcing, I have been hired in on many projects to a smaller consultancy that do both local mixed with remote outsourcing. As well as a permanent employee of companies that outsourced parts of their projects. Some of the outsourcing have been to India, some near-shore like Czechia, some in the similar timezones in South-Africa and Argentina.

I am an independent consultant and available to help your company’s AI journey: eray.uk