Andela's layoffs were inevitable – what's next?

Lucrezia Biteete

This week, Andela announced that they would be cutting 400 junior engineers across Kenya, Uganda and Nigeria. This was inevitable, and we predicted this move two years ago. So, what will happen next?

About three years ago, Andela made its entry into Uganda. By then we had already been following the company for a while, as we were intrigued by their high ambitions for our shared sector. But we were also worried.

At that point, Laboremus had been running as a software company in Uganda for three years. Our business model, however, is slightly different from Andela's. Whereas Andela mainly tries to connect developers in Africa with clients abroad, Laboremus also works with local clients in Uganda and East Africa.

When I met Jeremy Johnson on his visit to Kampala back in 2016, I was dazzled by his Silicon Valley pitch and his grand visions. But I was also very interested in how Andela was going to solve one of the biggest puzzles in our line of business: how to train young African developers fast, and at scale.

The expensive truth: Existing education doesn't work

We saw the signs already back then and started wondering how many years they would be able to burn cash before reality caught up with them.

Not because we wanted them to fail, but because we had been there ourselves.

At Laboremus, after a short-lived experiment of hiring developers straight out of university, we realised it doesn't work. Not because the market demands mid-level and senior developers (let's be honest, no client really wants you to use junior developer on a project they are paying for), but because of a wide-ranging problem on the African continent: the quality of the education system.

This is a difficult truth to tell, both to parents who break their backs to pay for a university degree and to the government that is still stuck in the time when Makerere was the leading university in Africa.

For businesses operating locally, it is a very expensive truth that has serious impacts on your business model. When it takes over two years to train a (very talented) developer from university to be able to deliver on billable projects, it becomes very expensive and risky to operate in this market.

Client standards in developed markets are high, and the skills gap is simply too large.

On top of that, which Andela also recognises in its training program, there is a huge deficit of soft skills.This is due to the fact that educational systems, and society, still favour obedience and respect for authority over critical thinking, problem-solving and teamwork.

Soft skills are as important as technical skills: Read why here.

Laboremus has had to develop internal training programs in order to ensure that staff learn (or un-learn) soft skills.

So, if we follow Laboremus' story, what will be next for Andela?

After laying off the junior developers, Andela plans to hire 700 mid-level and senior developers. This begs the question: where are these going to come from?

Since the education system is not doing its part, the only way the juniors can become seniors is through experience. However, a limited ICT sector in the region doesn't leave much room for the massive transformation needed.

The region has plenty of low-skilled, cheap developers. However, for every year they work at an advanced ICT company, their salary almost doubles. Developers with only two years of experience, who in Europe would be considered juniors, have been headhunted from Laboremus and given senior titles in other companies.

The cause is, of course, a shortage of seasoned developers that can actually add value to a client.

So what will happen when Andela enters the hiring race in a space which is already crowded by other actors with deep pockets such as international NGOs and the UN?

My bet: It will get worse.

Demand will not create supply

Developers with only a few years of experience will all of the sudden cost a lot more than what anyone can afford to pay.

Not only will it become difficult to keep the hourly rate at a competitive level, but it will seriously affect all other players in the sector and probably drive some out of business.

One could argue that demand will create a supply. But since education takes time, there is likely to be a time-lag of up to five years during which it will be almost impossible to run a company in Uganda that requires experienced developers, since they are all taken by Andela. How does this fit in with the company's great visions for Africa's tech sector?

One of Andela’s strongest selling points has always been their focus on training. This is exactly what the continent needs. It is sad to see that they are now abandoning this path and moving on to take advantage of the training that local companies have invested in.

Instead of cutting their focus on training juniors, Andela should be doing the opposite. As one of the most prominent tech companies in the region, it would be highly interesting to see Andela use its knowledge, experience and funding to nourish instead of outcompete the local markets they operate in. With their intelligence and SiliconValley connections, I am sure they could find a business model that accommodates this and at the same time pleases their investors.

Going the last mile

That is what Laboremus has done by starting the tech program Refactory, and we welcome more companies to join us: both as partners and funders. Together with Clarke International University and Fontes Foundation, we have designed a highly effective training program that brings university graduates up to a level where they can successfully be employed as juniors. We are able to do this with the help from Norad, the Norwegian development agency, which is encouraging a close partnership with the private sector.

Following Andela's announcement, we are now seeking to expand the Last Mile Program (LMP), a part of Refactory that supports the training necessary to transform a junior into a mid-level developer.

The program is based on the experience from Laboremus, which provides a mix of work on real projects, close follow-up, and mentoring by senior developers as well as online courses and workshops.

The junior works full-time at a company, with her salary paid for by Refactory. The company also receives a subsidy to help pay for time spent by senior developers on the training. This reduces the risk and cost of taking on a junior developer.

The Last Mile Program (LMP) is the final leg of Refactory's three-step program, which consists of a 3-month intensive course, followed by a 6-month Bootcamp, and then the 12-month LMP.

How long did Andela estimate that it would take for the juniors to become mid-level developers? Probably more than 12 months, hence the decision to let them go.

How do we change the system?

Working and hiring in Africa is still very much of a work in progress. The continent is still struggling to get basic public services, such as education, right. Some countries are more responsive than others, but generally, the formal education system is slow to reform. That doesn't mean that the Andela and Laboremus' outsourcing models cannot work.They just need different investment and a different way of thinking.

The deep pockets of NGOs and donors should be spent on closing the gap and building competence, not subsidizing the hourly rate of senior developers in Africa to compete on the European and North-American markets.

Otherwise, along with high costs for Internet, premises, taxes and managers, the deficit of mid-level and senior developers will quickly make the market too costly for most companies.

At Laboremus, we have already realised this and taken steps to prepare. We have diversified revenue to the local market where high-level providers are scarce and there is a willingness to pay. We are also launching our own revenue-generating fintech company. In addition, Refactory is our attempt to fill our and the industry's need for competent software developers.

Want to help? Join Refactory as a partner or donor

What will it take for Andela to help grow the industry instead of just reaping the benefits?

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Thursday, September 19, 2019