Yes, “What is wrong with Andela?”, as TC daily put it this morning. I tried to answer that question many years ago when I wrote – The Andela Problem. It was a very bold article considering that Andela was evidently and universally pioneering in the African software development ecosystem. The problem with then Andela, despite being an amazing company, is the same problem with doctors: your marginal cost does not improve with scale and because of that, you become constrained and bounded.
Think about it this way: a doctor has 24 hours in a day and largely meets one patient at a time. That protocol does not change if there are 10 patients or 2,000 patients available. Simply, medicine is not a great business even though they are the closest biological high priests to the altar of our Creator. Because they have the schematic and survey maps of human systems, they do miracles in great ways. We admire doctors!
But that does not mean a doctor practicing medicine can be a wealthy person. He or she will be fine but due to the marginal cost where he cannot increase supply to deal with expanding demand, he hits a ceiling. Yes, hiring more doctors in a clinic to deal with more patients does not improve the marginal cost.
For Andela, that is the same issue. While you can get clients for these developers, you are bound by the capacity to produce the developers; training them requires a finite time-frame. Yes, if IBM wants 20 developers, you cannot send them immediately as you need may be six months to get them ready.
There is good news though: Andela updated its playbook, becoming a recruitment firm by hiring anyone available with the required skills for its partners. I then called it amazing.because it has solved the marginal cost problem as it can advertise and hire experienced developers overnight with no restrictions of first training the developers, as it originally imposed on itself.
Yet, that old business model continues to be hovering on the business. The middle-skilled developers, not the experienced-get-them-anywhere-you-can-find-them, are at risks and they are carry-risks to Andela, TC Daily explains brilliantly.
Is Andela going to fire more developers?
Last year, Andela tweaked its business modelin a significant way. The company was originally founded and marketed as one that trains people into software developers then outsources their talents to companies in need of the developers; keyword “in need”. But in 2019, it laid off over 400 junior developers and stopped its developer training programme. Andela’s CEO, Jeremy Johnson, said there was “a shift in demand” in the company’s primary market. Placement companies were less “in need” of junior level developers. Andela decided it was going to focus on mid- and senior-level developers as “majority of the demand is for more experienced talent”, Johnson said.
But according to this report by WeeTracker, Andela is still struggling to find placements for its mid-level engineers. There’s a growing worry that these developers “are at risk of being frozen out.” Sources at the company say this risk continues to grow as the company continues to hire more experienced developers. One source said Andela is “constantly hiring in an effort to meet client’s demands with certain skill sets that the current pool of developers might not have.” That’s puzzling, and it puts question marks on the skillsets and the future of the company’s current developer pool.
The question now is: is the market for developers getting saturated or is Andela having a unique problem placing developers? This Quora question tries to answer the former. (TC Daily newsletter)
What is the difference between Usain Bolt and me? He is hardly twice faster than me. What is the difference between the best developer I know and a typical one – the former is easily 10 times more productive. Is he paid a 10x higher salary – definitely not. Strong developers are quite rare, while the weak ones literally bring a negative value to the business (due to costs of training, management attention, support, etc). From these basic assumptions you can derive the current state of affairs in the software industry: hiring managers select only a tiny portion of the candidates and discard all the rest. The result is the corresponding layering in saturation: the market is indeed saturated with low-grade developers while a huge unsatisfied demand exists for above-the-average ones. (Quora)
Andela is one of the companies we are studying this week in our Tekedia Mini-MBA (you can still join).
Ndubuisi Ekekwe thanks for this insight prof. The doctor you portray here looks like the stand-alone medical doctor in private practice, and not the one who goes out to build a business around medical services like having a hospital or clinic.
My Response: Yes. A doctor on mechanics of human systems, and not one on the business of healthcare and medicine. The doctor that does miracles in operating rooms, meets patients, etc is my focus here, not the one that may not have met a patient in years but works with MBAs and strategists to create leverageable value in the healthcare sector. Nothing is wrong in either: I was just explaining what drives the alpha.
Register for next edition of Tekedia Mini-MBA (June 22 - Oct 22, 2020) here. Four months, online, and costs $140 or N50,000 naira .