Can AI Make Our $2.5m Outsourcing Business Irrelevant?

#8 - Our Centers of Excellence, back then and in the future.

Welcome to issue #8 of Odoo Trailblazer, our journey to become the #1 Odoo partner.

TL;DR:

• We built Centers of Excellence (CoE) out of necessity to provide Odoo analysts and engineers on-demand to our ten offices across the globe.

• We’ll build an independent business by offering the services to other Odoo partners & consulting firms.

• Artificial intelligence will not make it irrelevant but will help our consultants to do their job faster.

You wonder how am I doing? Well, very tired. We visited our offices in Jakarta and Semarang. And I took the opportunity to see my in-law in Bogor and to run in the jungle with my hash-friends in Semarang.

I try to send my newsletter every Monday at 6 pm, Tokyo time. Sorry for being a bit late this week.

Before we begin, if you haven’t subscribed already, please do so now so you don’t miss future issues.

Read previous issues ⤵️

• #2 Backstory in Indonesia & profitability

• #5 Full-remote work is neither our priority nor our objective

• #7 How we’ll create a $100m business in Odoo ecosystem

Agenda

1. Introduction: what is a Center of Excellence in IT Consulting?

2. Port Cities’ Journey to Building Centers of Excellence

3. Benefits of Centers of Excellence

4. The impact of GPT4 and AI in general

5. Conclusion & Go-to-market

1. What is a Center of Excellence in IT consulting?

A Center of Excellence is an office where we train and manage “experts” to support other business units or clients.

Most large IT firms like Accenture and Capgemini have many Centers of Excellence (most famously in India) to provide developers for their consulting offices across the globe.

Is it only for software engineers? Large IT firms and their large business outsourcing departments have all types of profiles, including business analysts.

What are the services of Centers of Excellence for Odoo consulting firms? Software development, functional consulting, support, and infrastructure management.

How does it work?

Usually, a consulting firm will request to book resources for a specific project and period. They may book 120 person-days of developers and 80 person-days of functional consultants for three months. It means they need one or several developers and functional consultants to work for 200 work days in total.

2. Port Cities’ Journey to Building Centers of Excellence

At Port Cities, we initially built a large team of software engineers and functional consultants in Indonesia for our customers in Indonesia.

To prepare for our business expansion in Malaysia and Vietnam, we decided to split our Indonesian business into two:

a. Port Cities Indonesia will provide consulting services to our customers and source Odoo engineers and functional consultants for our Center of Excellence

b. Center of Excellence Indonesia will provide resources on-demand to our three consulting offices in Indonesia, Vietnam, and Malaysia.

When we did the split in 2018, our Center of Excellence in Indonesia (CEI) was generating $25k/month. Today, our CEI revenue is ~$140k per month, and we have also developed the same business in Vietnam, Slovakia, and Mexico.

In practice, our Centers of Excellence run as separate businesses and send monthly invoices to all other entities they work with. We mostly provide services to our entities but recently started selling to other Odoo partners.

In my opinion, having Centers for Excellence is one of the reasons why we grew faster than any other Odoo partner in the world.

Let’s review why in the next section.

3. Benefits of Centers of Excellence

Most people think that IT firms have Centers of Excellence to reduce costs. I won’t consider the cost a game-changer.

At least for Port Cities, it helped each of our new branches in 3 main ways:

1. To deliver large projects with on-demand resources.

2. To get end-to-end expertise required by mid-market clients.

3. To control our financial risks.

Let’s review one-by-one.

1. To deliver large projects with on-demand resources

We signed a large project with the Singapore Discovery Center in the first few months we opened in Singapore. It was a complex and mid-size project that a small Odoo partner could not deliver independently.

Thanks to our Center of Excellence in Indonesia, Port Cities Singapore was able to instantly onboard several remote engineers and consultants with years of experience.

2. End-to-end expertise required by mid-market clients

When we implement Odoo for a small client, our main tasks are business consulting, training, configuration, and a bit of project management. The larger the projects, the more skills are required.

You may also need Odoo back-end developers, infrastructure experts, data engineers, and specific industry experience for a mid-market implementation.

Some of these skills are not needed on many projects, and it is not justified for small IT firms to have all resources in-house. This is why we centralized many of our experts in our Centers of Excellence.

3. Control your financial risks.

One of the main business challenges in consulting is that we have variable revenue (typically, a customer engages for 2-6 months) with fixed costs (mostly salaries). Two main consequences:

• Developing a team of consultants takes months or years, but the demand is hard to predict.

• In the short term, the revenue is variable, so we often have unused resources.

By outsourcing some of the work to a vendor or some freelancers, consulting firms reduce their financial risks and are more agile when they need to grow quickly.

Usually, using freelancers is a lower-cost alternative, but it is less stable, and the pool of resources is generally limited, especially in Odoo.

We built the Centers of Excellence for many reasons, but those are the significant benefits we have enjoyed thus far.

4. The impact of GPT4 and AI in general

There are two ways to analyze how artificial intelligence, especially large language models like the one used in Chat-GPT, could transform our business:

1. Our experts will become irrelevant because AI can do the tasks automatically.

2. The productivity of our experts will drastically increase, and we will become more relevant and profitable as a result.

To say that the truth lies in between is probably true, but a dangerous statement. Some jobs and businesses will become irrelevant because of AI, and some professions will become more important.

We can classify the professions into three categories when analyzing how AI will impact them:

1. Irrelevant: some professions will become irrelevant because a machine will do the job better for a lower cost in a consistent way. That is probably the case for Uber and Taxi drivers once self-driving is reliable.

2. A few survivors: for some jobs, AI will drastically improve the productivity of each worker, but even if the unit price drastically decreases, the demand for the product or services won’t increase. That is probably the case for call center operators. With AI’s help, an operator can handle many more clients, but we will need fewer call operators than before.

3. Many with superpowers: for some professions, AI will also drastically improve the productivity of each individual, improving the quality and reducing the costs. But in some sectors, it will generate much more demand than before. This is probably the case in software development and enterprise software, as there are unlimited ways to improve a business with software.

My conclusions for outsourcing businesses:

1. It is critical to understand how to properly use AI to leverage the productivity of our consultants to stay competitive.

2. The demand for software development will continue to rise while the cost decreases, so even if developers are 5-10x more productive, the demand for developers will still increase.

5. Conclusion & go-to-market

So we reviewed that;

1. A Center of Excellence supports IT consulting firms by offering access to skilled professionals as needed.

2. At Port Cities, our Centers of Excellence have been critical to our success, but we use them mostly internally.

3. This business could be leveraged by AI, e.g. disrupted in a good way.

As a result, here are our strategies going forward at Port Cities

1. Go-to-market: we have the opportunities to grow our Center of Excellence business and serve other Odoo partners. This is a business model used by many Odoo partners, especially in India. We believe we could be more competitive in the mid-market segment as we have a unique experience.

2. Leverage AI: we already standardized our processes across all our offices, so using AI would, in theory, make it faster. We will continue our strategy to standardize our methodology, training, and documents and see where AI could be used.

If you are an Odoo partner interested in learning more about our Center of Excellence, please get in touch with us on our website.

We value your insights on utilizing LLM (e.g. GPT4) in our Center of Excellence. Please share your suggestions in the comments.