podcast • 36MIN READ

OutSystems: the journey to a $9.5B valuation

Paulo Rosado founded OutSystems in 2001 with a vision to give every company the power to build software fast, right, and for the future. Today, 20 years later, Paulo remains CEO and OutSystems is valued at more than $9.5 billion.

Paulo's incredible journey is the topic of this week's episode of the Dev Interrupted podcast. Listen to Paulo as he tells the origin story of OutSystems, how he avoided bankruptcy on three separate occasions, his advice for becoming a successful leader, and why technical debt is a growing threat that will cost companies $5 trillion over the next 10 years.

OutSystems' Technical Debt Report: https://www.outsystems.com/stop-tech-debt/

Episode Highlights Include:

  • Founding story of OutSystems
  • How to be a successful leader by creating context
  • Key drivers of technical debt
  • Budget costs associated with technical debt
  • The importance of building cloud ready products

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Transcription:

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Dan Lines: Host

Paulo Rosado: CEO and founder of OutSystems

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Dan: [0:00] Paulo, you founded OutSystems in 2001, and have led it since then as the CEO bringing the company to $9.5billion valuation.

Paulo: [0:11] I was at the verge of bankruptcy about three times.

Dan: [0:14] Three times? But not anymore!

Paulo: [0:15] No, no [Laughing] It’s good now!

[Music plays]

Producer: [0:18] This episode is sponsored by Linear B. Accelerate your development pipeline with data driven engineering metrics, continuous improvement automation, and project visibility while cutting your software development cycle time in half. Sign up for your free demo at LinearB.io and mention the dev interrupted podcast discount for one month free when you sign up for an annual pro membership. Have you heard about Interact yet? Our first Dev Interrupted conference is built by engineering leaders, for engineering leaders. It takes place on September 30. Learn more at devinterrupted.com/interact.

[Music fades out]

Dan: [0:52] Hey, everyone, welcome to Dev Interrupted. I'm your host, Dan lines, and today I'm joined by Paulo Rosado, CEO of OutSystems! Paulo, thanks so much for coming on the pod today.

Paulo: [1:04] It’s a pleasure.

Dan: [1:05] Great to have you here. You founded OutSystems in 2001, and have led it since then as the CEO, bringing the company to unicorn status more than a $9.5billion valuation in February, amazing! But before we dig into that long journey, I want to give our audience a chance to know you a little bit better and about your background. So could you take us through your career path leading up to OutSystems?

Paulo: [1:35] My background is in computer science. I have a degree from a top university in Lisbon, Portugal, then I went to the United States for a PhD/grad-program, and I ended up by getting a master's then entering Silicon Valley work life. And I worked there for four years, then I started my first company, my first startup in 97, I sold it 99. [crosstalk] [1:56] then I worked as an executive for a logic company. And then I decided to start OutSystems in 2001.

Dan: [1:56] Wow!

Dan: [2:03] [Sarcastically] Just a few minor accomplishments, you got your degrees, you sold a company really quick, so a few questions for you there. You come from a technical background, but it seems like you were early on an entrepreneur like how did that happen for you? Did you always know you wanted to be an entrepreneur?

Paulo: [2:20] Definitely not. When I was working in the valley, I was lucky enough to be in the gigantic project that took about eight into a lot of people, we were a very large engineering team. And this was when I fundamentally realized the issues of actually releasing code, and maintaining code, and getting specs, getting to change software in a way that was actually workable. And so the problem was so big, in my opinion at the time that Java was coming out.

Dan: [2:45] Yeah, what year are we talking? This is 90’s?

Paulo: [2:47] We’re talking-Yeah in the 90s. We're talking 95 was when I saw Gosling presenting Java for the first time. And man, we did this huge project using the Java language, and it was just hard. And looking into the anatomy-then I started my company deploying-building and deploying some of the largest intranet and extranet systems like the first generation of cloud software. [crosstalk] [3:09] That type of software also has a lot of changes, because the-it's impossible to get the requirements right up front. And so joining all of those experiences, the lack of productivity in the old software development process, was just appalling. And so that was the motivation, really, for our systems.

Dan: [3:09] That’s cool.

Dan: [3:24] What was the company that you were working at? You were saying you were working in the valley, right?

Paulo: [3:28] Yeah Oracle.

Dan: [3:29] So we're going to get into how you founded OutSystems, but I really wanted to ask you, since you're coming from a technical background, what were some of the experiences that led you to say, “oh, there's a problem here”? Is there anything that happened to you or anything that was like shocking that you knew, okay, something is wrong?

Paulo: [3:51] It's actually interesting, because they all go back to the anatomy of technical debt, and the difficulty of changing software. One of the realizations, for instance, in my career was the explosion of different languages and paradigms and frameworks to be able to achieve one solution, and those things, those languages, were all dispersed with no connection between them, so only very sophisticated companies could actually track all the dependencies. And the problem was that very early on, and this problem today is like huge, but at the time it was already very big, is that the moment you lose developers, the knowledge goes with them, because what they leave behind is such a high complex situation in terms of code and in terms of different frameworks that all of those dependency tracking the intent that was there typically goes away. A lot of it was-my experience is that during these three phases of my life, I lost team members fundamentally. They took away like 20% 30% of the knowledge of the systems and reverse engineering what they have done required the supporting structure to have to do what a lot of sophisticated companies do today. They invest a lot on coding standards on very high level of constraints. So that can be transmitted even in developer erosion, and that didn’t happen at the time.

Dan: [5:09] What is the founding, you know, story of OutSystems?

Paulo: [5:12] It's exactly what I was telling you about this. When I-when we started this previous company of mine that was doing this very large internet and intranet project, we kept on failing, we kept on not delivering on time and on budget. We used to, at the time, I still remember, we used to go back “man, we are smart, we actually not bad. How is this possible?”, So we would go back to the requirements and say we've missed the requirements, we've missed-the scope is incorrect. And then we will try to announce the scope and whatever, but the thing is that during those projects, we would realize that the business wanted to change, the environment was changing as we were developing, and the issue was that we're constantly accumulating debt during the project. When we reach first production, we realized that it was not what the users wanted, and then we had to go back and redo a bunch of stuff. And this-when we start realizing this is the-this was at the time, fundamentally, more than 90% of all IT projects in the enterprise had this type of phenomena. [crosstalk] [6:16] They were always late and always over-budget.

Dan: [6:16] Definitely, definitely, yeah. You always hear that, right? No, it always feels like it's late, whatever the date that engineering says [crosstalk] [6:25] you can add on time to it. Yeah.

Paulo: [6:25] Yeah, absolutely. Absolutely. And what was interesting is that we started examining, looking at the anatomy of that failure. Why is it failing? And we came up with this realization that the problem was not that the requirements up front were wrong. The problem was that the cost of changing wrong requirements, which are a fact of life, [crosstalk] [6:48] it's very high. And so…

Dan: [6:48] Yeah. Yeah, you can’t predict the future, you're always gonna have requirements that need to be adapted or are inherently wrong. But that's just a natural building process, right? Everybody…

Paulo: [7:00] Now, today-today you- today the Agile is mainstream CICD’s mainstream, DevOps are mainstream but at the time, you have to realize that we're talking about building software the way you build a bridge, right?

Dan: [7:12] Yeah this is 98, or something like that?

Paulo: [7:15] Yeah exactly. Like the end of the nineties, when the internet exploded.

Dan: [7:19] This is at your previous startup company, is that [crosstalk] [7:23] when you’re realizing all this?

Paulo: [7:23] Correct. Yeah.

Dan: [7:24] What was that company’s name?

Paulo: [7:26] It was named Intraventu, it was a small company.

Dan: [7:28] So this is when you're realizing okay, there's a problem here. What happened to that company?

Paulo: [7:34] Oh, I sold it. I sold it. That was-I was-someone wanted to buy it. We're talking about the bubble. And so we were [crosstalk] [7:39] very pumped about the asset because we had all these guys that understood the internet, and it was very insane, so we got acquired by another company.

Dan: [7:39] Yeah. Good for you. So then after that acquisition, I don't know, did you stay-stayed- like how did then you say, okay, it's time to leave, or what's the story post acquisition, then coming into OutSystem?

Paulo: I joined the choir for 18 months. And at the time, I joined the executive team and I met a lot of investors. This is when I started creating my network with-with venture capital and investor crowd. And I had enough time to look back into the experiences of the past and realizing, “My God as a this is huge”. And so I-we also, me and my colleagues, -we also saw a trend-a couple of trends accelerating. One was the software, the business changes, the cycles of change, were compressing at an exponential rate. And developers were-that already were difficult to hire were increasingly more difficult to acquire and hire. And so we saw that as a trend that was going to accelerate into the future.

Dan: [8:47] Yeah, still happening now.

Paulo: [8:49] So I didn't predict was that-I actually didn't foresee that was that the amount of software produced was going to increase by a couple of orders of magnitude. I didn't realize that I-but if you look into GitHub repos, you can detect more repos than you had. And the fact is, that shows that the amount of acceleration and the amount of software that's built today is huge. Still, the amount of software that's a lost opportunity is even bigger than that, and so there's this demand point, that's gigantic, with a huge problem of output and production.

Dan: [9:25] When you founded OutSystems-so you had a successful business previous to OutSystems. You were acquired. You stayed at the acquire, who acquired you?

Paulo: [9:37] A company called Altitude Software. [crosstalk] [9:39] They do call centers. Yeah.

Dan: [9:39] Altitude. Okay, you stayed there for a little bit of time and then did-you resigned or something hey, it's time to move on.

Paulo: [9:46] Yeah. Yeah, I resigned.

Dan: [9:47] Okay, you resigned, that happens-happens often for founders and then when you realize that there's this problem okay, that you want to go attack. Did you, when you founded OutSystems you called your buddies up, you did it alone, you use your own money, you got decent… [crosstalk] [10:03] How does it work?

Paulo: [10:03] Now I was-I had some people that worked in my previous company and we kept on talking about the failure rate, and why is it-it was so hard to build these portals. And to see why, in this user experience driven system, why was it so high? So we kept on talking about that, and we came up with the anatomy of what a completely new platform would be to facilitate that process. And that's how the OutSystems idea came about. We did a couple of prototypes, I had some top level developers in the team, and very quickly, we’d build a prototype and we then we went searching, and we actually closed one million euro at the time, one million euro funding in October 2001, so in ten eleven.

Dan: [10:49] Did you have any customers when you closed that one million?

Paulo: [10:52] No, I didn’t. I didn’t. [crosstalk] [10:53] I was very frustrated.

Dan: [10:53] Nothing, you just had an idea?

Paulo: [10:56] I just had an idea. We had some-three customers that were willing to try it out, they really had this issue, and they were willing to bet if had shipping product.

Dan: [11:06] You know what I've learned because I have founded Linear B, my company, it's actually a similar story. At one point that I found out, it's like, if you build something, you build a great prototype or create something, and you can pitch the vision, but you actually build something, there's going to be people out there that say, “Hey, I want to be a part of this. Here's a million euros, here's a million dollars, I believe in you.” and I think most engineers sometimes think “oh, no, it's actually like this huge process, and you have to have a thousand customers, and then you have to do pitching.” And it's actually not the [case]. Go build something and good things happen.

Paulo: [11:44] Especially today, right? Then you have to have trust in-either you have to have trust in the market, trust in-or you have to have a lot of money. [Laughs]

Dan: [11:51] Or you have to have a lot of money.

Paulo: [11:52] Because you have to be able to sprinkle around.

Dan: [11:53] Don't have a lot of money, but the developers what you have is you can create something. You can-you can have a vision, you can build something, that's the advantage of having a computer science degree or being a programmer, you can actually go and build.

Paulo: [12:07] Yep, correct.

Dan: [12:08] So you know, question for you. You do not have a business degree, right? I didn't see that you have a business- you have a computer engineering and computer science degree, right?

Paulo: [12:18] Yeah, correct. Correct.

Dan: [12:19] Do you think it matters? Would you-if you could have changed, would you have gotten an MBA? Or do you [crosstalk [12:24] think you’d be like a business…

Paulo: [12:24] No, no I wouldn’t. I actually took a lot of courses over the years. But that's a mixture of reading, listening, learning from advisors, and after a while, you start getting the knack for the-the things that you need to do from a leadership point-of-view, and from a culture building point-of-view, all those important aspects, because the financial aspects of a company are pretty easy. So I think what computer science, in a way, and the technology acumen gives you and gives every intrapreneur, and every leader, is the capacity to predict the impact of the technology changes into market opportunities, or business disruptions. And so when you see something and “AI is going to take over the world”, then you go and examine the process of AI you realize, Okay, does what is the trade off, because there's no free lunches here. And so- and you realize that you-you can apply, okay, here we can go fast, here we need to develop a little bit more. So it gives you a little bit more insight to make good decisions.

Dan: [13:22] So you just do that, and now you have a $9 billion company. That's all it takes, right, just [chuckles]. So after-so you received one million euros at the time. So that's 2001, if I'm doing like some extrapolating, that's a good amount of money, [crosstalk] [13:39] That was nice.

Paulo: [13:39] Yeah, it was. Yeah.

Dan: [13:41] And you didn't have any customers, but you had a prototype So what happens next after that, okay, you receive some money?

Paulo: [13:49] What happened is, remember that in 2001, that's when the bubble burst, right? So we were one of the last venture investments in-in technology in Europe [crosstalk] [13:59] at that time. Yeah.

Dan: [13:59] Really? Oh my God. You sold your other business during the-the bubble. And now you started a new business right at the end, right? -the burst. Wow.

Paulo: [14:08] Yeah, and so you can imagine that our business plan, we wanted to build up, get three to ten customers in with the first million, and then get another round of funding of about five to expand and that all had to be cancelled, because the-there was not enough money. There were no five million available. And so we actually took the company to breakeven in the next few-three years, it was really tough.

Dan: [14:32] Wow!

Paulo: [14:33] But it created- Yeah, it created a very frugal and very pragmatic orientation towards the market and building something that customers really wanted. And then we had a lot of innovations that- with the company, for instance, the name OutSystems comes up with the realization that we believe that in about five to seven years, all systems would migrate out of the data center. And the word cloud didn't exist, the word DevOps didn't exist, where the-Agile was something like only for crazy people. And we predicted all these-all these trends at the time, and so we built for it and sell the product if not by being very weird. [Laughs] Now it’s- now, everyone copies and it's becoming a mainstream category, but at the time, it was very unique.

Dan: [15:19] How does it feel to be in that position? You described it as weird, right?

Paulo: [15:23] We did, because for instance, one of our first customer, we were selling, one of the things about these platforms is that you trade off speed and productivity for the domain, the scope of the domain. So you-there's no free lunches in this world. So we were targeting like portals, portals that integrated with systems, Ss a particular type of use case for the enterprise that was very common, today and at the time, and one of the companies that bought our product was an SAP. So they had the ERP was SAP and they build everything.

Dan: [15:55] I mean they’re huge! SAP you’re saying the huge company?

Paulo: [15:59] Yeah exactly, so the ERP, huge company and whatever, and these guys, it was a toll road company. They actually had the billing system, everything built on SAP, and they acquired the platform that were integrated with SAP, and they built a bunch of apps in very, very short amount of time, and they were like, “Oh, my God, this is really cool.” and then they came to us about five months later and said, “Listen, we have a big project here, which is a billing system, can you guys build the billing system with this thing?”. We didn't really build a platform for that, but let's try it. And so with that customer, we didn't believe it was possible, but at the end of five months they had a billing system! Just the customization of the billing system, in a telco, or in the-it will take about two years at the time, so rebuilding something from scratch in five months was huge. And so that's when we really had the validation that we had fundamentally compressed time to market by about, in this particular case, by eight times.

Dan: [16:57] Wow, that's incredible. In that situation, so you have a big customer coming to you essentially saying, “Hey, I need your help.” or “I want to try this with you.” And you're saying, “Yeah, I don't know if it's possible,” probably to yourself, “but I need to try.”. Do you just go to your engineering team and say, “Hey, we need to try this and get this”, was it like a technical achievement?

Paulo: [17:19] I guess, if I wasn't so desperate for money at the time, I would probably steer the way and concentrated on our smaller number of use case, because that would have simplified the product. But the fact of the matter is the product took off in very mission critical situations-corners. And that's what made OutSystems as it is today, which is a local platform for mission critical applications, and not for quick, and they're in the corner of the department. So that's why we developed all these realizations about what it means to build a very large system and then evolve it over eighteen years and taking over-addressing the technical debt issues of maintaining this type of systems.

Dan: [17:59] So people that are using OutSystems, you're saying SAP used it for their billing platform, right?

Paulo: [18:05] No, what I was saying is that this was another company that had SAP as part of as part of their-their digital platform and then they required OutSystems as a compliment to SAP

Dan: [18:17] Gotcha. For most companies that are using OutSystems, is it for internal apps that they're building it for inside the organization? Or is it external, like I want to create a consumer app?

Paulo: [18:33] Both cases. Both cases.

Dan: [18:35] What did you start with? Early on was at both still?

Paulo: [18:38] we started with external portals, typically portals and mobile apps at the time. So we started with touch points-with UI based touch points, and then we-later on we introduced workflows, for instance, and we start getting more and more internal use case, the moment you solve the problem of delivering applications that have a high standard of UX and UI, You really can-you can use them internally. Now just-you just-you-internal apps have a little bit more leeway in terms of UX demands, but if you already built for the external world.

Dan: [19:14] I know that you've been CEO now, it's a 20 year journey, right? 2001-2021, so I know, there's probably been a lot of challenges. But if you had to think what comes to mind, what are the major challenges that you've had as being the CEO of OutSystems over the period of time?

Paulo: [19:37] Yeah, maybe the biggest one was the fact that our timing was wrong.

Dan: [19:41] Timing was wrong?

Paulo: [19:42] Yeah, it was wrong.

Dan: [19:43] Because of the bubble you’re saying-the bubble bursting?

Paulo: [19:45] No, no we were way too early, in terms of the category. It took us about twelve years until agile became mainstream, and Agile is a fundamental practice. We had DevOps in 2002 in the platform. No one recognized that connection between Dev and Operations was…

Dan: [20:02] Yeah, DevOps, I'm thinking like 2010 through 2020 [crosstalk] [20:06] is a DevOps craze, right? So you were early, early.

Paulo: [20:06] Correct, correct. Correct. Right. We were completely early. And the Cloud-mobile, which was-mobile was the catalyzer, for a lot of the demand for very fast change, and fast delivery into everywhere in all companies not only Google, or Netflix or whatever, but the rest of the companies. And then that was about twelve years after 2001. And we were way too early, and-and we had to hold on doing a lot of missionary selling. We acquired a huge number, a huge install base, but it was very hard, and it was spread all over the world at the time. This was before the category actually became mainstream.

Dan: [20:46] Did you ever think to yourself, as a founder, hey, my company might not make it, like OutSystems might go under? Were you ever in that situation?

Paulo: [20:57] In the past?

Dan: [20:58] Yeah, [crosstalk] [20:59] early on.

Paulo: [20:59] Yeah, of course. Yeah, yeah of course. I was at the verge of bankruptcy about three times

Dan: [21:04] Three times? But not anymore!

Paulo: [21:06] No, no [Laughing] It’s good now! But at the time it was…

Dan: [21:09] What did you do in that situation? When you're on the verge of bankruptcy, that would be for some people that could cause a panic attack.

Paulo: [21:16] Well I’d say the stress-the stress level was not very low. It's never been low. What happened right after is, our business plan had a particular market and the market collapsed, which were telcos-telco companies, at the time, we had decided to go vertical, and that market collapsed. We had to change to the enterprise, and this is typical, right, of startups, you-about two thirds have to flip the business [crosstalk] [21:38] in the first eighteen months.

Dan: [21:38] You got to pivot, evolve right?

Paulo: [21:40] Yeah, yeah you have to pivot. Correct. There was no option of not succeeding.

Dan: [21:44] You have no choice!

Paulo: [21:46] We have no choice. We just have to go forward.

Dan: [21:48] What do you think makes you a successful leader? Obviously, you're highly successful now, what do you think makes you successful?

Paulo: [21:54] I think a little bit of vision, maybe, and drive, and a fundamental notion of fairness and respect for the intelligence for the minds of everyone, I think. The culture of OutSystems has a lot of depth, which is it's a collective vibe of intelligence, where we try to harness as much as possible. And that's why, for instance, in our culture group, our top rule is ask why, which is your-you need to understand why you're doing something which provides processing the organization across the leadership levels to pull, “why are we doing this?” and so that creates motivation, that creates context. But that's also a respectful thing that you do with intelligent people, right? You need to give them the context so that they can make decisions autonomously. And I think part of the success of OutSystems comes out of the culture, curiosity and respect for everyone.

Dan: [22:39] Why is the ultimate motive. If you're a smart person, and you don't know why you're doing something, I would-I'd probably quit that company. Like, it's boring, I don't know why I'm doing this. But employee retention is also a very important thing. We're going to get to that in a moment. What is going on with-so we talked about the founding story of OutSystems, and I'm sure there's been an evolution over twenty years of what OutSystems does, but what is OutSystems doing now, how have things changed over a period of time?

Paulo: [23:11] So, the OutSystems-OutSystems sells a local platform. And fundamentally, what these platforms do is they have a combination of a visual development abstraction concept code language, that allows development to be done very quickly with very low learning curve, together with the application lifecycle management. And so, in that sense, with CICD type of concepts all integrated, so that you can build something from idea to production very quickly, and it can change very quickly. What has changed is that the-the requirements, especially with COVID, we got the-we saw a huge acceleration of-in digital transformation. And so every enterprise now has become a cloud software company, fundamentally, and you have to build a cloud software company, you have to build cloud ready products in a way. So portal services, integrations, leveraging SAS, leveraging systems that already exist, and you have to do that in a very short amount of time, and with very limited amount of people and skill sets. And so, it's a huge problem for-for a lot of companies. And so, innovation comes out of building their own software that’s unique, not buying something that everyone has. So, the fact that you cannot build these things, or you have to-everyone that you have is now worried about managing technical debt fundamentally stifles innovation.

Dan: [24:34] Absolutely. If I were to ask you, companies that use OutSystems or a company that might be interested in using OutSystems, would I be thinking speed like I want to develop fast is that-because you mentioned that earlier, it was like “Oh, I was able to build this system in six months as opposed to two or three years. Is speed still the primary?

Paulo: [25:00] Speed is always the first attribute, it’s immediate gratification, that's what everyone wants. But there is a trade-off to that, which whenever you build something with a platform like this that has a lot of automation into it, the trade-off that you take is “Do I have enough power to build what is needed?” and so that's the thing about these platforms. And the second one is “Do I have the non-functional requirements of security, scalability, performance, response time, and whatever”, does the platform add those requirements in all applications that are built. The final pillar, I would say, that's-that people care about has actually to do with this notion that with a tool that allows you to build so fast, the cycles of change are going to be compressed, you can basically build a change in OutSystems, you can do changes in every one hour, which basically, after one month, you have hundreds of changes, right? The moment you have-you increase the frequency of changes, you increase the frequency of the probability of debt being created, each change is an opportunity for creating debt. And so, with platforms that are compressing time, you get-you get an accelerated problem with that. And so, one of the things we do is we look into the anatomy of debt and try to curb it. We don't remove it completely, but we try to curb it as much as possible.

Dam: [26:16] We know that's happening in the industry is moving fast is better in general, everyone wants to move fast. We talk about cycle time, how quickly can I make a change? If I'm making a change in one hour, I would think in general, that's a very good thing, or most companies want to be able to do that. Now what you're saying is that will also incur a technical debt. I know that you've brought it up a few times technical debt, it's an important topic, you recently published a report titled The Growing Threat of Technical Debt. So what-what is going on in technical debt right now?

Paulo: [26:52] It’s-what's happening is that because most companies now realize that they have-they have to build things they have-they cannot only buy stuff, they can buy services from the cloud, but they need to cobble them together, they need to create compound services and unique-unique APIs and unique UIs, unique portals, unique mobile apps. So there's a fair amount of code and software that you need to build. Because today, there's a lot of capabilities to start very quickly, but as changes accumulate very quickly, also, you start creating legacy. And because technical-the paradigm-the attributes of technical debt start kicking in. And in this survey, we actually asked-we asked about five hundred companies, what was-what were in their opinion was the fundamental reasons for technical debt. And they talked about too many development frameworks. Second one is developer erosion, so developer leaving attrition. And third one is compromises in quality of architecture and the code to be able to meet a deadline. And so you it's a heck, right? What we call, they did a heck to just release the software quickly, and those “hecks” compounds into technical debt. But if you look into these three things, those are fundamentally the issues that we saw with the OutSystems platform. It's a problem that as you build things, and technical debt compounds, you start having increasingly-instead of running forward, you just keep running, but staying in the same place is what they call the Red Queen problem, where you fundamentally, if you stop running, then you move backwards, because the software degrades at such a fast pace.

Dan: [28:21] Yeah, that's a scary place to be. I've actually been a VP of Engineering and have felt that before where it's “Okay, we're adding more engineers, we have this debt, I'm not sure that we're moving any faster. It feels like we're moving slower. Something is wrong”. I read the report, It's actually a really cool report, you break down these different- I think you have the high priority, which was developer turnover, causes technical debt, too many languages, right? People are using different programming languages or technology, there's so many out there. I'm trying to think of the-I think that the level down below that was architectural decisions obviously can cause technical debt.

Paulo: [29:01] Yeah, and then compromising on the effect and having substandard solutions and releasing substandard solutions, because you need to meet the deadlines.

Dan: [29:12] Yeah, of course, I have CEO, so Paolo comes to you, you're the VP of Engineering, and says we have a five-million-dollar deal, but they’ll only sign the deal if you can do this new feature two weeks from now, can you do it? Well, you can't really say no, as a VP of engineering. Oh, okay, what are we gonna do to make it happen? [laughing]

Paulo: [29:33] No, absolutely, and we had a-we had a big insurance company that had a similar problem like that, but it was-it was tougher they had this underwriter Workbench portal, building OutSystems, and then the regulator came up with a new rule where they had to actually break down-it was a pretty complex change because it involved the way you calculate the premiums and whatever, so it was pretty complex, and they said-and suddenly they put them a date of about six weeks. So the guys were like, “Oh my god, we have to shut off the business”, because they did an external evaluation of the cost of the change, and it was about six months to change to make a minimal change for that. But fortunately, the team just got the change-the team that was working on OutSystems that got the change, and they actually did the change in two weeks. So they actually release that big change, all tested and everything, four weeks ahead of the milestone. This is-this was in that particular insurance company, that's when we went big, because suddenly, you got the real case of high-speed with quality, right? [crosstalk] [30:36] And it can actually make a difference for the business.

Dan: [30:36] You need the quality. I haven't used OutSystems, to be fair, but if I were-if I was using OutSystems like how does it address this technical debt problem? Is there something that-can you explain it?

Paulo: [30:49] So-Absolutely. So, if you take the anatomy of technical debt, it's reflected actually, in the survey, one of the top issues related to developer attrition, because if you look into technical debt, it is the compound cost of the next change-of future changes, right, until a point where the cost of the change becomes infinite, and the system freezes. And that's where we see in a lot of companies is frozen systems, no one touches, because no one dares to make a change and break everything. And the reason for that is that there's a huge cost in understanding what's there so that you can make a change that's reliable. And so developer knowledge transfer becomes an issue. And that's one of the fundamental things, we actually stumbled on this solution accidentally, we weren't that smart.

Dan: [31:36] That happens.

Paulo: [31:37] Because we had the vision language, yeah, because we had the vision language, and we actually-a system of eleven, we did a benchmark several times, but system of about ten million lines of code transforming to an OutSystems-system have about three thousand objects. It's very different to track the dependencies of eleven million classes, and not ten million classes, but thousands, hundreds of thousands of classes, objects, and whatever, compared with three thousand objects. So in OutSystems, we actually realized that you can lose all your developers and everyone can reverse engineer the solution and make changes, because the platform gives you guardrails for you to make changes reliably.

Dan: [32:15] Yeah, so I think attrition, I think I'm not always predicting the future here, but I think it's going to increase. I'm a remote engineer now. I can work anywhere in the world, I can go to any company that I want, there's going to be more recruiters pinging me on LinkedIn, my opportunity has increased,

Paulo: [32:33] Correct. And not only that, but the problem also in the enterprise, we're not talking about like, really sexy product groups, we're talking about the rest of us, we have a lot of difficulty in-you hire like a top developer, to be able to build-a guy that really understands Android, and he builds you a mobile app for Android, and then you got a guy that really understands Swift and iOS, builds you that, then you get the back office and you get three bodies of code. And you’re building this highly sophisticated model up, after a while it becomes- you start getting into toil, into waste, into doing things that are not cool, which is maintaining [crosstalk] [33:11] doing boring stuff. [chuckle]

Dan: [33:11] Boring! [laughing]

Paulo: [33:14] And these guys have five offers on the table, it's-they have extra jobs-one hour later, they have a new job. And so the attrition rate when you start forcing these developers to go into maintenance mode is huge. So what these platforms-what we believe is going to be the future of these platforms, that we already do a lot of this, is we actually automate a lot of the maintenance process moving forward. So that we take away the toil, the waste, that plagues, that really makes the job of developer actually pretty unexciting when we look into it, because a lot of the innovation portion of it is a very small portion of your life. And so we want to increase that [laughing]-that portion where you’re actually delivering cool stuff, and people are clapping and being happy with you, instead of just wait and say no, which is what most of the IT guys and digital teams have to say to the business or to product owners is “oh, it’s going to take time” that capacity to then be able to now deliver very quickly, it's something that we've seen transform cultures in IT departments, for instance, that have large development teams.

Dan: [34:17] That's awesome. I actually had Hyrum Wright and Titus Winters from Google on the pod a few episodes back and they made a similar or adjacent point, your best engineers are your most innovative and engineers, you don't want them really spending time on technical debt. That's not where you want them to be. It's okay, let's, you know, do this as fast as possible, but use your brain power on innovation. That's what we want to do, and I think you're saying something similar.

Paulo: [34:44] I'm saying one extra thing, because at Google they-everyone is so smart that they don't really have a comparative method, but we work with a lot of companies that have great companies that are made out of people that are smart, but they have different backgrounds and they probably have skills sets that are not up to par with some of the things they're trying to do. What we found is that if you put a particular type of culture and a particular type of collection of tools in the hands of these guys, innovation actually occurs at about 80% of the enterprise, and any enterprise. We’ve seen government bodies that were completely frozen, suddenly became highly innovative just because they could, just because it was possible. So innovation is actually almost tireless inside the brain of the normal human being, it’s just that context becomes a very stiff link, a very stiff link-constraint, in a lot of cases.

Dan: [35:34] Very well said. What's coming next for OutSystems? What’s the future here?

Paulo: [35:38] We actually see a tremendous uptake into increasingly automations of the development process. We see more and more companies starting up wanting to create something very quickly and evolving it. And the market is just becoming more dynamic. And all of these are innovative processes, and so everyone is becoming more innovative, and they don't have the capacity to hire top guys to assemble one-hundred-thousand tools and understand processes. And so we see a huge uptake-we're seeing already, of course, but we see an increasing gross and mainstream explosion of usage of our platform.

Dan: [36:15] That’s awesome. This has been a really cool conversation. Paulo, thank you so much for taking us through your journey from being an engineer to an incredible entrepreneur and billion-dollar company CEO. It was really good having you on.

Paulo: [36:32] It's a pleasure Dan and thank you very much for the channel. It's a great channel with a lot of great content and the audience is fantastic.\

Dan: [36:38] Absolutely. We talked a bit about technical debt, and I mentioned the report, I think it's a really great report, I read it over and had some nice takeaways there. We'll post it in the description below. A quick reminder for our listeners. [music fades in] If you haven't already rated and reviewed the show on your podcasting app, please do. Reviews are super crucial for getting Dev Interrupted discovered. Also be sure to join the Dev Interrupted discord community, that's where we keep this type of conversation going all week long. I also want to say thank you to the more than one thousand of you who are now subscribed to our weekly Interruption newsletter. We bring you articles from the community, inside information, and weekly podcasts, and the first look at our upcoming Interact conference. Paulo, thank you again for coming on. Really appreciate you

Paulo: [37:29] Man, it was a pleasure being here Dan. Thank you very much.

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