CIO Magazine On Offshore IT 732
lpq wrote to us with a reference to the cover article from this month's CIO Magazine that talks about the off-shore movement of IT from its traditional bulwarks to the developing world. A selection from the article:"
Think again. There are real costs associated with shipping your IT department (or a portion of it) overseas. Our Special Report covers the Backlash from a growing political storm as well as the Hidden Costs you should be aware of before you join the stampede overseas. "
Farming out != Good (Score:5, Informative)
ComputerWorld article on same subject... (Score:5, Informative)
IT's Global Itinerary: Offshore Outsourcing Is Inevitable. An interesting read, and they do make it seem pretty inevitable.
Re:Get used to it (Score:2, Informative)
Re:Americans (Score:5, Informative)
http://www.businessweek.com/magazine/content/01_2
http://news.bbc.co.uk/1/hi/world/439595.stm
http://www.hartford-hwp.com/archives/26/077.html
http://www.cnn.com/2001/CAREER/trends/08/30/ilo.s
I found that an even more recent (2003) study that says south koreans work more hours but are not as productive.
Re:Get used to it (Score:1, Informative)
Does it improve the quality of support? Arguably yes. Outsourced software houses are filled with techs with various different qualifications. If you're looking to fix a problem with an app server for example, they have more people with app server experience than your company probably does.
Does it improve the quality and tightness of the product? Depends. Sometimes it does, sometimes it doesn't. Hit or miss, just like if you developed it in-house.
Does it strengthen the company from within? That depends. If your company's sole purpose is to develop software, then, no, it doesn't. If however, your company is in one of those other industries (yes, they do exist), then why do you need to dedicate resources and time to develop a strong internal software development group? If I need a finance app, why not go and contract out to an offshore group, instead of hiring five people long-term? Once that app is done, what would I do with the additional five people who now have nothing to do?
Re:The company I work for just announced.. (Score:1, Informative)
That wouldn't work. If slavery were re-introduced into the U.S., animal "humane treatment" laws would come into effect, and your employer -- whoops, I mean your owner -- would have to pay to house you, feed you, vaccinate you, etc.
With the currency rate between India and the U.S., the Indians workers would STILL be cheaper than the American slaves.
What's really sad is that this might the only reason we're not all chained to our desks already.
Agreement (Score:3, Informative)
It wasn't just bad, it was even unreadable in places.
Just my 2cents worth, go ahead and mod me down for being redundant........
Re:Get used to it (Score:3, Informative)
Umm... read the article, one of it's main points is that it does NOT lower cost in the short-term. going off-shore can actually increase costs for the short term. It is *long-term* savings that are the real potential benefit. After the transition has been paid for, the kinks worked out and the off-shore staff trained and familiar with the processes and applications and the disruption (including the dissatisfaction of the remaining staff) worked through *then* it can save you a bunch of money. Not as much as it might seem at first but still a bunch. One of the companies was saving 20% - that's a lot of money and can certainly be said to be "working" for them. Over that long term of 20% savings the IT department survivors are either replaced or get over it. As for the rest of the workforce low morale may be a problem in some situations but I'm sure the DHL truck driver isn't that worried about his route being outsourced to India because IT guys he is only vaguely aware exists are now in India.
Re:Salaries are just way too high (Score:4, Informative)
Those ad campaings were produced by Verizon in order to sway public sympathy away from their (unionized) workers that were about to strike in order to protect their benefits. My wife, brother-in-law, and cousin are all techs with Verizon, and, believe me, they do not make anything approaching $75k/year. Possibly with 30 or so years with the company and 15-20 hours of over-time each week (if it is available), then they might the approach $75k. A better estimate would be around $40k/year. Hell, I wish my wife made $75k, my life would be much easier
Re:Cheaper Salary? (Score:3, Informative)
Martha Stewart was only selling stock that was set to go bad... not nearly as horrible as enslaving children...
(and yet Ken Lay runs free...)
Re:It was never about money savings... (Score:3, Informative)
My two partners and I run a small business. All of our specialties are in IT. We are in need of a good salesperson as we have lost several potential clients because none of us have good sales skills or experience. Good product and service to matter but only after you sell the product and gain clients!
I'll have to say that some of the most closed minded people I've met in my life are the IT people. They complain about the management, yet they don't take the time to take business classes, read business books, or research business publications to better understand them.
As the designated administrative person for the business, I've taken several business courses so far. Do you think that assembly language is hard? Try taking a class in tax laws. And after taking several accounting courses, I now better understand why some businesses run their businesses a certain way.
Re:More proof that common sense isn't common (Score:3, Informative)
I don't see any that ARE made in my home country. What is still made here in the US? My computers I'm sure are made somewhere else, even if the companies are American. My desk is from Thailand or Singapore or Hong Kong or Korea. I just looked at my Belkin router... sticker says "Designed In California" and then just below that "Made In Taiwan"... so at least they employ an American designer... except how do we know that? Maybe they hired someone from Taiwan to move over here and design the router...who knows.
I'm willing to pay a bit more to buy goods produced here in the US, or even goods that are mostly produced in the US but I can't seem to find very many. I only drive "American Made" cars but how much of a Ford or Chevy is made here? Are the parts made somewhere else and then the car is assembled here? Why can't they make the entire car from start to finish including all of the parts right here in the US?
So how do we buy American products when most "American" companies build everything somewhere else?
Re:It was *always* about money savings... (Score:5, Informative)
The issue is that you can't compete (Score:3, Informative)
Take India. This is a place where labor is so cheap that you get a driver when you rent a car. You can live much better in a place like that, dollar for dollar, than you can in the US.
Of course, it doesn't help that India is producing some top notch technical talent either. But suppose all other things were equal: talent, motivation and training. Differences in cost of living would mean that US programmers aren't going to be able to compete. The only things that keep all the jobs from being outsourced from the US to India are transaction and communication costs.
Perhaps eventually, development in India will narrow the economic disparities enough that US programmers will be able to compete. Hopefully economic distress in the US won't be part of this picture.
Re:Missing the point... (Score:2, Informative)
WRONG! Because the odds are some PHB hired the fuckwit and so you can't fire him or PHB looks bad, so you are stuck with numbnuts on the project for 10 months doing filing and even then screwing up the project. In India you just say "he is shit fire him" and he disappears, and is magically replaced by someone new, and IME the new person is almost always better as people realise the quality level you are setting and don't want to fail twice.
PHBs hire and fire, and they don't fire their own hires.
Re:Common Sense is Tricky:Outsourcing but NO to H- (Score:4, Informative)
I think your view of the evolution of the US is unfortunate and at its roots simply pessimistic for pessimism's sake -- or perhaps a little prejudiced? I mean no insult, just my genuine feeling from your post.
You back little of what you say with data, and have peppered your argument with the kinds of 'proletariat overthrowing the bourgeious' Marxist rhetoric that died with, well, a vast majority of the Marxist states. Dialectical Materialism is all but dead, unless you like what's happening in Vietnam and Cuba.
For the middle class, undoubtedly the most powerful entity in the US ecoonomy, to die, and the lower-income segment of the population dominate the population numbers, a huge disparity in wealth would have to occur. Mind you I write 'wealth', not 'income'. Look at the average middle-class American, his/her life is not necessarily so different than that of the elite. TVs, nice cars, vacations, McMansions, all of these things abound. The *relative* cost of material wealth in the US, and for the most part the rest of the capitalist world, is constantly decreasing when compared to income.
It's also pretty easy [redherring.com] to find data [mfc.org] that debunks your claim that there is a blooming lower-income representation in the US. There is a *huge* amount of mobility in America in terms of income. As long as the lowliest, poor, academically challenged kid can train to become a plumber and make six figures, people in the US will continue to (with notable exceptions) rightly blame themselves when they're unhappy with their incomes/overall wealth. Mobility is alive and well, and small-medium sized mom 'n pop businesses continue to be a backbone for the economy.
Your post was lined with an implicit criticism of materialism in the US. I couldn't agree with you more, there. What famous Marxist said something to the effect that the West would sell the noose to its executioner? Unfortunately, it seems like the charge from materialism leads quickly to religious fundamentalism, a disease that is quickly spreading through all parts of the globe.
Re:It was *always* about money savings... (Score:4, Informative)
First of all, there are serious differences that must not be overlooked. In general, a business might be capital intensive with relatively cheap labor (think automobile assembly plant or oil refinery), or light on capital with relatively expensive labor (think computer programmer). Airlines are both: capital intensive (airplanes and other specialized equipment) and powerful, expensive labor (pilots, etc).
As such, labor cost is pretty much the only thing a software vendor can cut. An airline can go to the Southwest model and use only one type of aircraft to save on maintenance, or try to force unions to lower wages, or try to reduce flights in unprofitable routes. A software vendor is unlikely to save any significant amount of money by making its programmers use a cheaper computer, or take up less office space. This nature of the software business is also why people can write a competitive operating system in their spare time.
Therefore, they try to find cheaper labor. Slashdot anecdotes notwithstanding, it really isn't clear at all to management that the resulting quality is markedly worse. In fact, the same Slashdot anecdotes would suggest that management hardly cares about quality at all. Like I said, I empathize, but I think "stop chasing each other to the bottom" is not an alternative that US businesses can understand and accept. Moreover, even if they didn't outsource to India (assuming the quality really is worse), they still may outsource to somewhere in Europe for similar quality and slightly lower wages. What would we complain about if they did that?
My point is, either you have a problem with poor quality, or a problem with outsourcing. Using the former as a reason to avoid the latter is really a bit hokey. A problem with outsourcing per se, however, is a political question, not a business or microeconomic one.
(Incidentally, this also likely means that setting up an automobile plant in the US is not that much more expensive than one in Japan or Europe. It's easier for the savings in shipping and taxes to make up for the higher wages, so it's not really fair to compare the two.)