The Hidden Costs of IT Outsourcing

[Jim Bedenbaugh]

From BusinessWeek Online:
While moving software development and tech support offshore is all the rage, many companies find the overall savings aren't that great.
. . .
The shoddy work didn't come cheap, either: The Indian outsourcer went $1 million overbudget. Franklin says he could have done the project for less than $900,000 -- right here in the U.S.
From here.
[ October 28, 2003: Message edited by: Jim Bedenbaugh ]
[ October 28, 2003: Message edited by: Jim Bedenbaugh ]

[Jason Menard]

I'm moving this to Jobs Discussion.

[Jim Bedenbaugh]

Originally posted by Jason Menard:
I'm moving this to Jobs Discussion.

Did you read the article? This was not about jobs.

[Tim Cerillo]

Originally posted by Jim Bedenbaugh:


Did you read the article? This was not about jobs.

Outsourcing affects US jobs. Thus, it's all about jobs !

[Jamie Robertson]

Originally posted by Jim Bedenbaugh:


Did you read the article? This was not about jobs.

Outsourcing is a major topic of discussion in this forum and has a direct impact on jobs in countries that outsource. Scroll through the subjects and you'll find that this fits in perfect in this forum.
Jamie

[Jim Bedenbaugh]

Originally posted by Jamie Robertson:

Outsourcing is a major topic of discussion in this forum and has a direct impact on jobs in countries that outsource. Scroll through the subjects and you'll find that this fits in perfect in this forum.
Jamie

Whatever.

[Jim Baiter]

Don't fret, this forum is probably one of the most read

[Mark Herschberg]

This is definately the forum where we discuss outsourcing and other job related issues. It makes it easier for new people to find information, all neatly in one place. Besides, Natalie will be thrilled to see your article.
--Mark

[Jim Bedenbaugh]

Originally posted by Mark Herschberg:
Besides, Natalie will be thrilled to see your article.
--Mark

Um. . .sorry, but who's Natalie?

[Mark Herschberg]

If you search around this forum, you'll find a number of threads on outsourcing (or as it's called here, offshoring--refering to outsourcing overseas). Natalie is a huge opponent of it and regularly posts links to petitions and demonstrations related to reducing offshoring.
--Mark

[John Summers]

If big business think that because wages are 90% cheaper in India then their IT projects will be delivered at 90% cost they are sorely mistaken.
For a start, a lot of the important higher paid jobs need to be done where the end customer is located, i.e. the system analysts who liase with customers, draw up specs + requirements. The actual project management needs to be done close to the senior levels of the Development department. E.g. if Barclays is designing a new share trading system to be used in it's UK offices, the this project will need managing from the UK. As to what level you have to descend before you can outsource, i dunno really.
Then, you have the cost of setting up secure communications, hiring office space, extra air - flights. But for big companies this will not be a major consideration as they have offices all over. For smaller companies this will probably be a big obstacle.
Now, the major problem with outsourcing is that to keep an IT project on time and within budget you need very careful project management, and if the actual coding is physically removed from the management then project management becomes more difficult. The 'responsiveness' of the business units declines dramatically. So often in IT the crucial factor in being successful is the responsiveness of the business. The ability to rapidly realign business objectives and project goals. Dividing up your management and your 'workers' in different countries is gonna effect this badly. I think we will see that a lot of smaller companies who haven't outsourced are going to start gaining huge competitive advantage because of their business responsivness.
j

[Tim Holloway]

Problem is, when you're delivering a product based primarily on price, anything that would raise costs (and thus reduce profits) tends to go by the wayside. Like QA. It's especially bad when the bid has been made based on overly-optimistic savings projections.

[John Summers]

A mate of mine works in operations for one of the biggest financial institutions in the uk. he says they're outsourcing their development to India, but when they sack for example 100 uk IT staff they do not hire 100 Indians, they take the opportunity to put the screws on the IT dept and will only hire 80 Indians. It sounds odd, but is true. Managers take advantage of the situation to make themselves look good by coming up with plans to 'improve efficency' and 'streamline business processes' so not only do they slash wage bills but they hire less staff over there.
sounds like a recipe for disaster to me.