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. "
More proof that common sense isn't common (Score:5, Interesting)
Sad that people who spend years on an MBA degree that presumably includes a course on Spotting The Obvious 101 can't, well, spot the obvious.
Contact (Score:5, Interesting)
There is nothing to compensate for talking round the water cooler and say "Whilst I think of it...". I hoenstly believe that the development costs might be lower but overall it will cost more on the bottom line
Rus
The company I work for just announced.. (Score:5, Interesting)
With the success of this initial stage and with our need for resources continuing to grow, we will be resourcing to grow this team substantially in the coming weeks.
While we are directly recruiting in India now, we would also welcome your recommendations of suitable external applicants that you may be aware of as potential permanent employees in Bangalore.
Applicants should have 3-5 years experience in billing system deployment with perl, SQL, Oracle and Unix skills. Willingness to travel internationally and to be based and paid in India is a requirement.
Here's what bugs me about my company specifically, and the trend of moving work to India generally:
1. My company is trying to do this covertly, like we wouldn't notice more and more layoffs in our offices in North America and Europe while at the same time increased staffing in India and a requirement that those Indian workers must be willing to travel internationally.
If you are going to farm your workers out to India , at least be honest about it and admit what you are doing, all in the name of a temporary increase to share price....which leads me to point two:
2. If your company will go bankrupt unless you move your workforce to India, then fine. But if you are going there to save a few bucks and make the share price jump 1/4 point, then fuck you. I get billed out at around $300 US per hour, of which I see less than $30 US. Isn't that enough of a profit margin? Maybe we should bring back slavery so that they can make that margin jump to a full 100% of the $300!
I don't hold anything against India workers, but I truly hate any corporation that farms work to India (and other cheap countries) all for the sake of a quick buck.
Re:Get used to it (Score:1, Interesting)
Love the numbers (Score:3, Interesting)
No back up. No studies. Nothing. These numbers appear to have just been dreamt up. If they weren't - if there's some serious data behind it, then why not just present the data?
Cheers,
Ian
True (Score:3, Interesting)
Our staffing company, in all its brilliance, hired an Indian systems manager to run one of our overseas offices. they saved about $1000 per month in salary. Well, due to his one week of wrecking half the systems, that $1000 they save per month will necessitate his working at least 6 months just to pay for the phone bill.
You see, he crashed the e-mail server, basically irreparably. Needs to be redone from scratch, and he, of course, has not the first clue of how to do this. So who does he call past mignight to unfuck his system? Me! The only American sysadmin at the company.
While e-mail is down, the workers turn to fax/phone for communication, so our long distance and cell phone bills are now skyrocketing, just because of this twat. I wrote a nasty-gram to HQ about how whatever money they thought they were saving has just evaporated.
Going overseas is not always the answer. There is some superb, home-grown talent that even makes economic sense to employ, when all factors are taken into account.
Knunov
Re:Screw free trade (Score:5, Interesting)
Screw that! (Score:3, Interesting)
I'm not getting used to anything.
If the corporate system does not work for me, then screw it. It's a system and we have choices. Companies are all in favor of free markets except when it comes time to compete, why should I be any different!
My question is, why can't the people of India build themselves up the way the Europeans and the Americans did. They can't because of an economic system that screws everyone. Third world nations can't get their markets started by themselves because the first world nations don't want them to industrialize outside of their control, and the first world citizens get their careers continuously destroyed by their supposed leaders.
You know what this system is? It's a bunch of robber barons screwing over the third world and the first world at the same time, adding no value to the system anywhere.
If you really wanted the third world to be able to compete, you would get rid of all intellectual property world wide, and let the value of the dollar and the euro plummet to match parity with the rupee.
Banding together - joining TORAW? (Score:3, Interesting)
It's not hard to find reasons for CIOs to worry. "Do you want to do business with companies that take away jobs for U.S. citizens by outsourcing work to foreign countries?" asks The Organization for the Rights of American Workers (Toraw), a group of displaced, angry American workers laid off by Connecticut insurance and financial services companies.
I'm browsing TORAW's web site [toraw.org] now, and they look like an interesting organization. Not focused just on moving jobs offshore, they're also advocating a hard look at "non-immigrant foreign workers" - specifically, H1-B visa holders.
I like that TORAW explicity states that they're not against "permanent green card status immigrants", or against anyone based on ethnicity or country of origin. From what I've read so far, they address my concerns without hitting my Green Party [gpus.org] hot buttons. The US should be open to those who want to come, stay, and build a new life -- but we can't afford to export our jobs and livelihoods.
Unfortunately, I can't tell if TORAW membership is available to all concerned Americans. Their membership form is encoded in virus-friendly Microsoft Word format, as are their brochures, and the CIO article notes the local CT connection.
But an organization like this looks like just what we need to keep the IT industry from being the next textile industry [timesdaily.com].
Re:Salaries are just way too high (Score:3, Interesting)
Security Implications of H-1b/L1/Outsourcing (Score:2, Interesting)
It is one thing to outsource unskilled work-it is quite another to outsource the "command and control" infrastructure of a company-companies that do that have effectively reliquished their autonomy.
Re:Get used to it (Score:2, Interesting)
Also, offshoring is actually helping the industry prepare for the potentially devastating effect of the demographics shift [business2.com]. Without offshoring to hedge the job demand that will make 1999 look like a small ripple, a glut in workforce contributes to a shrinking economy and potentially depression-like atmosphere. (Major economists have been predicting one at around the 2020-2030 time frame). Beef up your debugging skills: companies may require them very soon, and in a bad way.
Re:CIO Magazine on offshore IT (Score:2, Interesting)
They are!
The US Republican Party now has a band of young and enthusiastic fund-raisers in Noida and Gurgaon, India [business-standard.com]
3 things (Score:4, Interesting)
Second, if companies can send jobs overseas, and move their capital around whither they will, so too should workers be able to chase the jobs. I'm sure many folks here would be more than happy to code while sitting on a beach in Goa.
Third, with video conferencing a CIO/CFO/CEO could really be anywhere in the world. So why not hire an Indian CEO with a degree from Stanford for $50K? Think of the millions the company would save! Hey, what's good for the goose is good for the gander.
Re:Hidden agenda? (Score:5, Interesting)
Re:The fault in our economic system (Score:4, Interesting)
Fortunately I live in a free country so I don't have to whisper my non-mainstream thoughts. I feel sorry for you poor Americans.
Ok I'm being deliberately provocative, but you raise an interesting point. I have a friend that grew up in the USA until his early twenties, then came to Europe, then decided to spend some more time in the USA in his early thirties. He returned to his old community where he still had many friends he grew up with. He said he was amazed by the fact that he was completely rejected by many former friends just because he had some non-mainstream views. Nothing very controversial either, at least not here in Europe - Bush is corrupt, Americas foreign policy these days is much worse than it used to be, stuff like that. He said that people he grew up with would completely stonewall him and reject him just because of his opinions. Now, I don't know what you might think of this, perhaps in America this type of behaviour might be "normal" or accepted. But pretty much anywhere I've been in Europe people don't reject you just because of your opinions. The fact that you have said I shouldn't "be talking about it too loudly" because I have mentioned something that might be considered socialist makes me understand what a hard time my friend must have had returning to the USA. He only lasted four months before returning to Europe.
Re:Farming out != Good (Score:3, Interesting)
Outsourcing is fraught with hidden costs. Because of the fact that your resources are in a far off land, simple problems can often become huge problems because managing them can be greatly complicated by distance, language, social expectations, assumptions, and work ethic (basic cultural differences).
While I'm sure there as to be some success stories, I've yet to personally see a single Indian outsourced success story. Not one. All that I've seen follow the same downward spirl.
If a company has no experience managing remote workers, the last thing they should ever get in bed with is an outsourced software development project. If they can't manage their own workers right up the street, they are doomed for failure with a much more complex project, which might be a thousand miles away. In fact, I've even seen companies bring Indian workers in to minimize some of the distance management issues, however, again, they followed the same downward spirl.
Why IT? Why not off-shore lawyers? (Score:3, Interesting)
But IT is hardly the only information-only occupation. How about writing, law, engineering, architecture?
My point is that off-shoring IT in the end will show to be not anymore beneficial as any one of these other professions.
(Imagine a law firm that uses cheap lawyers from Bangalore)
The article sums it up pretty nicely (Score:2, Interesting)
In my opinion, you outsource to gain expertise you don't otherwise have, focus on your core business or other sound commercial reasons. Reduced costs should be the last reason for doing this. I have seen far too many outsourcing contracts go bad as a result of a failure to factor in the appropriate costs (this is on the providor as well as customer sides). I'm not saying don't ever do it, but be aware of a few things.
One of the comments at the end of the article also raised a good point: intellectual property. Be careful about dealing with *any* outsourcing company whom you suspect might take your brilliant idea and sell it on the open market. The opportunity cost of this happening can be staggering.
Another often forgotten part is the opportunity cost of not having an internal staff who understand and are aligned with the goals of the organisation. That is, those high potential technical and management staff who add more value to the business with their ideas/techniques etc than they cost in terms of total compensation. Do you want to outsource those people? An outsourcing comany has only one goal: to maximise the amount of profit they make per contract. This is not a bad thing, but it may mean that their goals diverge from your own.
The IT market seems to be very cyclical when it comes to outsourcing. It happens to be in favour right now, but who knows if that will be the case in 5 years time.
Common Sense is Tricky:Outsourcing but NO to H-1Bs (Score:5, Interesting)
How? First, please visit the web site that explains "H-1B Myths [ucdavis.edu]". Professor Matloff, who teaches computer science at a top-notch university, has campaigned tirelessly to terminate the H-1B program.
Anyhow, we have only 2 choices.
The second choice is best and will result in the long-term gain of jobs for Americans. The United States of America (USA) is a big market, and companies will set up shop in the USA once their share of the market reaches a certain critical size. As well, domestic content laws facilitate this trend. Toyota and Honda are excellent examples; they have built huge manufacturing and design facilities in the USA.
Further, by terminating H-1B employment, you ensure that American jobs stay with Americans.
The second choice also directly deals with the strongest bogus argument by unethical American companies like Intel and possibly Google [slashdot.org]. Even when Silicon Valley has 8% unemployment, they insist that cannot find American workers for critical jobs and that they must hire H-1Bs. We in the Slashdot community should say, "Fine. Go set up shop overseas. There is plenty of labor there."
Re:Get used to it (Score:1, Interesting)
Re:Let's see some stats there (Score:3, Interesting)
I know, lets see it strengthen itself by only keeping managers on the payroll. We can call the company the Titanic. Oh, and just to make sure, hiring lawyers is off-limits.
First, the most motivated worker is the one whose job is on the line, like it or not.
Yeah, motivated to spend company time and resources farming out his resume. I guess morale can't be measured in dollars so it must not count.
Hell, remember the dot com boom? Where was the employee loyalty to the company then when employees were shopping themselves to the highest bidder?
Thats odd, I thought it was in all those people who put in overtime and ran the company without pay because they really wanted to see it succeed. You can call them stupid, I call them loyal.
Why should they take that cost hit for nothing when their employees leave anyway when the economy gets good?
Is it tit-for-tat then? Companies abused workers and the workers unionized long ago. Then unions started striking and laws were passed in many states outlawing union-only shops. Then the economy got good and people were looking for the best pay they could get. Then the economy got bad and the companies are shafting its employees by firing them rather than reducing their pay. Where did it start? Where will it stop?
All I know is that the American auto industry strengthened itself immeasurably after moving manufacturing jobs overseas.
Amusingly enough, the foreign auto industries strengthened themselves by moving their manufacturing to the US.
We're not talking about people on mission-critical projects fearing for their jobs.
Except that we *are*. Read the article. Do you think DHL's software is not mission critical? And what about the failed projects that didn't get mentioned by name in the article?
the economy will no longer guarantee $60,000 a year and job security to someone who can only write mediocre code with no other skills.
Right now it won't guarantee $60k to people with excellent skills. It won't guarantee anything at all to anyone just graduating from college regardless of their skills. Management has been blinded by the capitalist $ worship, and rarely takes other things into account. After all, morale, skills, and other touchy-feely stuff like that doesn't even figure in to the bonus your buddy-buddy incestuous board members voted you last month (don't forget to vote for their raises at their board meetings, thats the deal, right?)
Cringely's two bits on this topic (Score:2, Interesting)
Body Count: Why Moving to India Won't Really Help IT [pbs.org]
So where are the savings? (Score:3, Interesting)
According to the article, the hidden costs of overseas outsourcing could cost between 16 - 65 percent of the total project cost.
I just don't see any savings here. Consider:
And I haven't even gotten into the cases of project overruns, code delivered late, or in an unworking state, etc...
Mainstream Silence (Score:2, Interesting)
What strikes me most immediately about the phenomenon of offshore outsourcing is the low level of the outcry about it in the mainstream media. Just one more revolution of the vicious circle - the global economy's levelling effect. Maybe even schadenfreude that it's happening to a highly-paid sector of the economy. But in RTFA, they make the comment that in the last offshore wave, the service-sector economy replaced the manufacturing economy, providing a soft landing. This time, they suggest, is the "structural" adjustment for which there doesn't seem to be another soft landing on the way.
The problem is in the Friedman-esque [acton.org] incentives that make it preferable for this to happen rather than to keep the jobs at home. I don't want to seem a wild booster of the US economy in this one - it's pretty much every country for itself out there - but the structural adjustment the article refers to hollows out the competence base of American IT. From there, I worry about the stock of high-value jobs and the follow-on impact that this will have on the US economy in strange places, like university tuition and social security funding.
No doubt it's coming, but it seems to me that the CIOs aren't operating with sufficient perspective to do anything about it. That's why the wider silence is disturbing to me. The CIO articles are definitely worth a read once the /. effect calms down.
Re:It was never about money savings... (Score:4, Interesting)
(mod parent up).
When I was employed at "VeryLargeSoftware Corp", (who incidentally, has an office in Pune), I saw engineers who were denied new hardware, essential for fulfilling the needs of engineering a product to run on the same equipment our customers were running on. For budgetary reasons.
Our company engineered many products, because we were a result of many mergers and buyouts over the years, with satellite offices all over the country. But the sales team really focussed on our top-selling product. They could not be made or enticed to actively sell the other products. As a result, the other products, regardless of technical merit, whithered and died, and the satellite offices were closed down one by one, putting engineers out of work. The sales guys didn't care, because their offices were at our HQ.
So While the sales guys were, essentially not doing their job - they refused to do their job, and our officers refused to force them, and while our engineers were being constrained by opressive and crippling budgetary restrictions, the sales and marketing groups were rewarded with offsite meetings at posh resorts, junkets (one of which was a company-paid trip to South Africa, including a safari trip, resort stay, and an engraved commemorative gold watch - as a reward for what ultimately turned out to be a year of lackluster sales).
Freinds who had been laid off and got jobs at other software companies, had reported similar situations.
Offshore or Onsite Projects will fail if unmanaged (Score:3, Interesting)
But regardless of the fact whether its offshore or onsite all software projects are doomed to fail if there is no proper management in place. You can have a thousand people bang on it, but if you dont have a client who takes an active role in resolving issues, and identifying most needed features, if you dont have a team who is inspired and is capable of being focussed, If you dont have a manager who can lead and still be part of the team, every project is doomed to fail in the first few months.
One of my buddies who work for Kraft, USA recently told me that their project was recently outsourced to a firm in Russia. Now understand that these guys had more than an year and more than a couple of million to implement a solution the customer needs. But the weasel manager(whom I would blame here) who couldnt keep his team together and his client satisfied, chose to drop ball midway and outsource the project. They had all the time and money in the world to finish this project on time and now there are a bunch of guys out of work.
I cringe whenever my Director mentions having an offshore team handy when we talk to our (potential)clients. I feel he is not focussing (enough) on the positives of using our organization as a technology partner, but rather using the offshore model as an economical reason to justify taking projects offshore.
Recently I had the (mis)fortune of having to explain to a potential client about the feasibility as well as our internal processes when it comes to an Offshore project. Communication, I told them, is the key whether its offshore or onsite. I didnt mention the monetary advantages since to me, they exist, but i dont give a damn. For my client, I aim to make the best possible system with the best resources I have at the current time. And whether its done Offshore or onsite, I still aim to do my best. In the case of Offshore, I have to be doubly sure and have to push harder to ensure that the timelines are kept and the channel for communication remains open.
Re:Get used to it (Score:3, Interesting)
Actually, you are wrong. You see, finance is engineering. The units are dollars instead of joules, but the principles are entirely the same. I mean this quite literally - the equations of certain derivatives are the equations of heat transfer. CFD algorithms are used to price bonds. Managers are engineers. A corporation is a piece of technology, just like an engine.
We don't think it's immoral when an engineer tries to get the most computation done per clock cycle, or the most torque from an engine, or the most heat from a furnace. Why do people get upset when a manager tries to maximize the output of his engine?
Re:It was *always* about money savings... (Score:3, Interesting)
NAFTA, on the other hand, what Ross Perot called the "giant sucking sound", was primarily responsible for huge employment losses in the blue collar labor market. If I remember correctly, the government and big business were all for NAFTA, but the working people were all against it. Sound familiar? The difference is that we (tech workers) don't have even the unions to lobby for us like the blue collar folks did.
Greed (Score:2, Interesting)
Re:It was *always* about money savings... (Score:4, Interesting)
Humm so looks like slashdotters don't have any problems lumping all the businessmen into one group but gets offended if they are lumped into one group...
Check this out... (Score:3, Interesting)
$ - Less than $4K
$$ - $4K - 12K
$$$ - More than $12K
About the Offshore IT folks (Score:4, Interesting)
Dilbert pokes fun at IIT grads [indiatimes.com]
Contents:
Jokes apart, the ongoing backlash in the US against job losses to Indian techies has found a place even in the famous cartoon strip Dilbert, the latest of which (September 15, 2003) goes on to take a dig at IIT grads from India.
Asok, the brilliant but naive Indian trainee, the cynical Wally and the ever-sceptical Alice are sitting in the boardroom with the pointy-haired Boss. Asok says that though he was the project manager, nobody replied to his e-mail.
However, he is proud of the fact that he is an IIT graduate and considers himself superior to his counterparts and thus had been able to finish the project himself. When Wally asks him, "Are you tired?", he replies: "I am trained to only sleep during National Holidays".
And this spoof shows up the threat of Indian takeover in global arena specially in the field of technology. It also show up the Indian techie - the IITian - as he is perceived by his colleagues: a work maniac who has inhuman abilities to slog and thus outpace his American counterparts.
India's IITs have, of course, been the subject of admiration - now bordering on envy - in corporate America for more than five years now. A 1998 BusinessWeek article on India's whiz kids has this to say for IITians: "The rise of IITians, as they are known, is a telling example of how global capitalism works today. The best companies draw on the best brains from around the world, and the result is a global class of worker: the highly educated, intensely ambitious college grad who seeks out a challenging career, even if it is thousands of miles from home. By rising to the top of Corporate America, these alumni lead all other Asians in their ability to reach the upper echelons of world-class companies."
A researcher at UC Berkeley estimated that fully 20 per cent of start-ups in Silicon Valley are IITian-owned. Amazon.com CEO and founder Jeff Bezos has described the Indian IITian as a "world treasure." Bill Gates says the computer industry has benefited greatly from them.
Besides graduates of the prestigious IITs, where the quality of technical training is comparable to the best of the educational institutes in the world, India has a growing bank of 4.1 million technical workers, supplied by over 1,800 educational institutions and polytechnics. These train more than 67,785 computer software professionals every year - many of whom are a threat to America's homegrown computer jocks in the competition for jobs.
With the recent swell in outsourcing key software development jobs to India - coming on top of the BPO migration - a mixture of awe and resentment about India's brainpower is beginnning to develop. The American media have so far been mostly kind to IITs and IITians. CBS 60 Minutes had a very flattering portrayal of IITs recently. In fact, a co-anchor on CBS 60 Minutes had gone on to describe IIT Bombay thus: "Put Harvard, MIT and Princeton together, and you begin to get an idea of the status of this school in India."
But as usual, cartoonist Scott Adams - who draws and writes the Dilbert strip six days a week, is probably ahead of the pack in anticipating media and public opinion about IIT grads.
Here's the:
Dilbert strip [unitedmedia.com]
Personal results of outsourcing (Score:1, Interesting)
Not one of nine at the first company could tell you the difference between a printer port and a LPT port.
When asked about the Control Panel, several indicated the laptops keyboard, or alternatively the small status display LCD just above.
At the second company, all six of the "Lead Techs" -- the ones that were supposed to teach the other 20 back in India -- fixed a static IP address conflict by recommending a three-hour reimage, reload, and reconfiguration to be performed by the local (USA) staff.
One infamous trouble ticket: "computer wont boot - removed battery floppy drive hard drive - computer still wont boot - escalating".
Be careful to ensure that you actually get what you are looking for. In both cases, middle management falsified efficiency reports in order to present a scenario combining lower costs with increased efficiency, to provide a seemingly glowing success to their superiors. Underlings who are informed by their superiors on the obvious advantages of a course of action have an unhealthy tendency to seek to ensure that no contradictory information appears.
Furthermore, please be aware that as you send jobs overseas, you sacrifice flexibility and adaptability, as well as the ability to grow expertise with your software, your clients, and your business practices within your own company. You'll be paying the same amount every quarter for services that will not grow or mature with time, nor will you have any real input or direct control over the systems and people that will be providing a critical service your company.
In order to avoid these pitfalls, I recommended initiating a change control process simultaneous to the offshore migration. Select one or several technologically competent individuals from departments not under threat of downsizing and use them to monitor the abilities and capabilities of the overseas contingent. Ensure that these individuals are not in any way under the management or influence of anyone in the department that is being decimated -- this is simply good practice to obtain clean information. An efficient practice would be to use those IT professionals that already take care of your own computer, office, and local area network - under the assumption that you know these people well enough to have faith in their judgment in an area you are not directly qualified to hold an opinion.
Finally, above all else, remember to listen to and except the reports that these people will bring you, even if it tells you straight out that you made a mistake. Unfortunately, based on what I've experienced, they probably will...
As an addendum, I should also report here that both companies that outsourced their local IT staff have had to develop suspiciously large "High Availability Technical teams", "High Piority -- Rapid Resolution desks", and "Priority Escalation teams". I would regard any post-outsourcing recommendation to form any variant of one of the above departmental groups as a clear bureaucrateese admission of failure. Basically, your department heads have noticed the startling new levels of incompetence in the IT department and are taking steps to protect themselves -- the rest of your employees and / or customers will not be so fortunate.
H1B experience... (Score:1, Interesting)
Way back in '97 I was working for a large telecom company's office in Holmdel NJ as Unix sysadmin. Like me there were 6-7 H1B holders mostly from India. Even in those days there was a talk of "you guys come here and steal our jobs". However people who used to talk tay way , most of them were just high school graduates who had no backgrounds in computer engineering, worked as mechanics/ construction workers who later became computer operators before becoming SAs.