Long Term Effects of Outsourcing 628
simulate writes "There have been several postings about outsourcing and offshoring in the past
few weeks. Is outsourcing just a fad? In Outsourcing
Programmers is Bad Strategy for Software Companies
author Michael Bean compares offshoring to the enthusiasm for Internet startups
in the Nineties.
He claims
that
outsourcing programmers is bad for companies not because
of the programmer layoffs, but because technology companies lose their
capacity
to innovate.
Offshoring is a mistake
when technology companies confuse operational
effectiveness and strategy." I don't think the comparasion to Dot Bombs is entirely accurate - the trend to globalization overall has been going on for decades. Still interesting piece.
It'll get worse before it gets better... (Score:5, Interesting)
If I seem a little hostile about this particular trend, it may be because the jobs of a few people I know are under threat as a result of it.
Tech Consulting (Score:5, Interesting)
FYI - I worked for Andersen Consulting (now Accenture) so I know how those guys do business. I left after two months
Outsourcing == Bad Security (Score:5, Interesting)
NOTE: I am *NOT* saying *ALL* people from other countries are dishonest. You can find dishonest people anywhere in the world.
What I am saying is that if you turn control of your software code over to someone else, you run the risk of them altering it to their advantage. This also applies to local hires as well, but it's MUCH easier to keep track of what your people are doing locally than half a world away.
Why do you think that the US Government/Military doesn't outsource? The same with most financial institutions: SECURITY. (Microsoft not included.)
Re:Outsourcing = Capitalism (Score:2, Interesting)
Outsourcing (Score:4, Interesting)
o While Indian programmers (we used 8 different ones for 6 different projects) may be perfectly competent to produce software to spec, they usually ALWAYS built it to spec and NEVER brought up any issues they might have found in the process. Either they didn't see a flaw in the design or just figured it would be job security if they changed or fixed the ap later.
o We had no luck with Russian programmers (We had went thru 4 of them and none could complete the project they say they could have)
o American (We used 10 of them for 8 projects) outsourced programmers communicated MUCH better with their project managers and usually offered suggestions to how we might want to change the app to make it better or more efficient. The applications developed stateside required less QA and went to market faster.
Is this a good enough sized sample to make judgements? Maybe not. But good enough for us.
After the six months, it just didn't make sense to outsource, howerver if we do again, it will be domestic. The shortterm costs may look good but a 33% savings per hour usually gets lost in the longer development cycle.
Slight oversight in the article (Score:2, Interesting)
Information Technology Is a Commodity. (Score:2, Interesting)
Also interesting: Wal-Mart role. (Score:3, Interesting)
Re:It'll get worse before it gets better... (Score:5, Interesting)
I call their tech support number, and get a guy in India, after indicating what I want, I go to their sales department which appears to still be back in the states (American accent anyways). After saying that he can't help me, he transfers me back to India for tech support. After which I just hang up...
Ultimately I searched the web and found someone who does sell Dell Parts including for the older computers.
However Dell gets a Failure mark from me on this, which will affect how I buy my computers in the future. If I can't even get a straight answer about a power supply, can I get a straight answer about other issues that I could have? All I really wished for was a "Yes this is how you order your power supply" or "Sorry this power supply is no longer offered" sheesh...
Did some of this have to do with the fact that one part of the company was in India, and the other part of this was in America, and nobody really knew who to talk to, so I could get a straight answer? Probably...
Anyways herein another issue is realized, collaboration becomes more difficult. It is harder to instruct people on what to do, and what not to do when they aren't in the same place, and instead are half a world away. They don't go to the same management briefings, the support people never hang around the water cooler with the sales people, and in general are the last to know in any such policy changes. Thus would be the least likely to know where I could get a power supply.
Anyways I've vented enough but hope I've provided enough insight on to the difficulties of Outsourcing vs. In-House.
Re:Tech Consulting (Score:3, Interesting)
I am a recent college graduate, and i was astounded by the amount of non-programming related majors that work here, as full time programmers. Psyc, Social work, Art, yeah, every except CIS, CS, other related programming majors.
ps, you can also tell by reading the code that someone who dosen'tknow what is going on, was the one wrighting it.
Re:Gasp! Actual insight! (Score:3, Interesting)
That is exactly right. Indian companies themselves have this figured out pat down with their experience in the ofshore-model as they call it. For this very reason they are now directly bidding for US contract, competing and winnig against companies like IBM, who are still trying to really figure out the model, and so have higher costs. In fact IBM lists Indian company Wipro as one of its most formidable compititer in its core service business in future.
So, either US companies need to figure out the ousource/offshore model in a hurry, or they will start loosing the IT contracts in US and especially internationally to Indian companies.
Re:Weird... (Score:3, Interesting)
In 4-5 years when these guys have been through three,four or five big projects and they have learned the ropes...LOOKOUT!
They now have the tools, the infrastructure, and the background to do just about anything in high-tech. They just lack the direct deep experience. That merely takes time.
With that said, if you really are at the top of your game, you'll be employed, but you won't be making what you were making in 1999.
My own data points suggest that contract labor IN the US is now charging around 1990 rates. So - guess what, the market system DOES work. We were apparently overpaid for what we do and a market correction has occured, i.e. some business moved over-seas and salaries went down.
And no - it didn't feel good, but it is also how capitalism works. See heavy production industries like steel for another example of what is going to happen.
Re:At some point.... (Score:0, Interesting)
2. Indian s/w industry is not restricted to code monkeys. Wipro employs about 16K employees at this moment, with an R&D (around 10% +) involved in innovative products. Doing development, maintainance, testing etc in wide arena from Main frames to embedded systems, mobile devices. Has clientee from US to Japan. Note US DOES NOT FORM THE BULK OF WIPRO BUSSINESS.
3. Outsourcing in injurious to US health. Not a fact in long term. the economy is bound to stabilize- Darwin Effect - Look @ India. we had "thumbs up" which was great and held 90% of softdrink market. Coke and pepsi came along.. this brand ceased to exist. Numerous employees lost thier jobs.. guess why coke and pepsi did not get kicked out of india? coz they had a strategy to handle this. the people who got unemployed got employed else where.
Conclusion: lets shut the fuck up and get some work done! Adios Amigos.
Re:Outsourcing (Score:3, Interesting)
Re:But... (Score:5, Interesting)
The trend we're seeing is people who are just looking at the their numbers, which were probably fsck'd up anyway, and not at the long-term ramifications to their IP.
I just finished a class last semester that drilled into our heads that projects can be calculated in ways that will show them to be profitable, or calculated another way, to be unprofitable. Unfortunately, there's a lot of people out there who think accounting is a science.
Re:Not always a great idea (Score:4, Interesting)
But Quantitave finance jocks in other departments do some seriously wacky stuff for technical analyses and Financial Instruments
MS does well in part because it's the brandname such stock market people see when they're using Microsoft OLAP and MDX (SQL RDBMS tables are two dimensional, MDX is n-dimensional, limited only by computing power. Needs LOTS of computing power.). OLAP and MDX are things that most computer geeks haven't even heard of. They don't realise that MS does in fact do some very interesting stuff.
Makes sense (Score:2, Interesting)
The company I work for is in the process of outsourcing support and QA for older codelines, and those developers are being moved into new development. That way the company saves millions, and they have also protected the area of their core competency ... creating software.
A little perspective (Score:3, Interesting)
Re:Not always a great idea (Score:5, Interesting)
This is an example of the horribly bloated costs associated with hiring American workers. Just because I bought, and can afford, a $428,000 house doesn't mean I'm a better high tech worker, or that I'll work better or harder for the company. It's just a matter of the crushing overhead of living here.
How does that make people more innovative?
Why can't Indians start their own software companies, write their own software and compete the heck out of us?
If I were starting a company that needed a lot of programmers, I think I'd leave the country to do it.
D
There are additional reasons... (Score:5, Interesting)
...for reduced ability in India that many westerners don't realize.
India is a caste-based society. In recent times, the lower castes have been throwing their weight around in their legislature.
Of particular concern is that they have implemented a "graduated" admissions policy in their universities. An upper caste member might not be able to get into a school with a 90% score on the entrance exams, but a lower caste member may be assured admission with a 70% score.
Because of this type of (reverse)discrimination, many upper caste individuals of means leave the country to obtain education and work elsewhere. While India is a big country, the trend is concerning, and western outsourcers should be aware of it.
Re:But... (Score:3, Interesting)
I learned this point first hand decades ago when I had a summer job working for the head accountant of a manufacturing firm. Most of the job involved hand typing numbers from mainframe printouts into spreadsheets on a PC. (The kind of task Perl would eventually be invented to handle.)
However, part of the job was to adjust the magic "fudge factors" in the spreadsheets until the results matched their expectations. Each kind of product had quite a few fuzzy parameters like "overhead", "scrap percentage", and other strange acronyms I didn't understand. Historically, they got certain profit margins on different types of products. The parameters all needed to be tweaked until the profit margins looked right.
They had me, some college kid, making up numbers that affected millions of dollars of accounts and tax calculations. However, I don't think it was even possible to determine a single correct value for these numbers, so my choices were as good as any. After that I realized that most things in the real world are too complicated to accurately project onto the one-dimensional space represented by money.
capacity to innovate ? (Score:2, Interesting)
How des one measure this capacity to innovate ? If one goes by the number of patents - the above arguement may not be valid at all. See this article about patents from India [indiatimes.com]
In fact the increased number of patents from some research labs located in India may be one of the reasons for the trend of several US/EU companies setting up research labs in India.
Re:Tech Consulting (Score:5, Interesting)
I'll second this. It doesn't have to be big projects either, and it isn't just Anderson/Accenture - I've seen it happen with other large consulting companies on smaller projects that could be done with 2 or 3 people in less than 6 months.
The play is always the same - send in the guys in $2000 suits to close the deal and then dump the specfication on clueless new-grad code monkeys. Not only are the coders terribly inexperienced, but they have not been part of the specification process so they have no information to make good decisions or question anything. A few times in my previous job when I cleaned up from such disasters, looking at the code and documentation produced by these people was almost enough to make you cry.
More clued in clients would often do as you suggest - make it a condition that you have to have at least some of the people involved in the specification actually involved in implementation as well.
Re:Not always a great idea (Score:3, Interesting)
They wanted an assembly-line grunt worker who did brute-force unintelligent development and didn't ask questions. Any time I stepped out of line (by suggesting more efficient ways of doing things, suggesting anticipating performance issues rather than ignoring them until it was too late, or generally attempting to use any software development idea invented in the last 20 years) I was shot down quickly and harshly. It was probably a mistake to suggest they could easily eliminate half the development staff on the project by working intelligently, because that means billing fewer hours.
When it comes to hourly contract work, efficiency is verboten.
Re:Outsourcing == Bad Security (Score:3, Interesting)
Sorry... wrong.
I've consulted to 3 of the largest banks in Canada, and they DO outsource. Seeing as Canada only has 4-5 banks, that would meant that most *DO* outsource.
In my experience, it didn't work out in 80% of the work performed (which is why I was called in), due to everything from management issues to lack of technical expertise of the contractors.
Outsourcing means inefficient automation (Score:3, Interesting)
Yeah, I'd say (Score:2, Interesting)
The current programmer is a complete and utter idiot. All the passwords in the program? Plain text. Her idea of security? a simple character replacement string... "But she does it twice, so it's twice as secure".
I brought this up to the owners (very small company) and explained to them that the whole program, which they sell for $20,000 was currently being secured by secret decoder ring-type encryption.
And I got in trouble for breaking the "encrption"... Leaving alone the fact that it took a total of 35 minutes to do, and there weren't any technical support calls coming in, so I had a lot of time on my hands.
The programmer has made some other dumb decisions. She is a bad programmer that doesn't realize as much.
It seems part of the reason that this place is as it is, is the guy that has veto rights on anything that goes into the system no longer works in the company at all-- He's the original guy the program was written for, but th reason he had for using it has gone away, so he just kinda does a "No, because the program shouldn't work like that" whenever he doesn't like something... Meaning that just about all "innovation" gets shoved out.
Speaking of which, I gotta get to work.
No one cares about quality (Score:1, Interesting)
I just dont get it.... (Score:2, Interesting)
Re:Not always a great idea (Score:2, Interesting)
Offshore Outsourcing friend or foe? (Score:3, Interesting)
Most of the readers and contributers see Offshore Outsourcing to much lower waged coutries a threat.
The Indian programmers in India are too busy working to read and write to this thread.
I am almost neutral as my job in Ireland relies on globalisation from the United States, but is at risk from the globalisation to India and China.
Re:I just dont get it.... (Score:3, Interesting)
Obviously you have been misled by the true nature of capitalism. Capitalism calls for products to be produced by efficient countries. Efficiency, needless to say, is measured by price. If you can build something for $1, you are more efficent than me who can do it for $10. "Cheap slave labour" has been the motto of capitalists since Karl Marx started using the word capitalism. It's just that this is happening on a global scale now. In the past, it was between cities or provinces. For instance, companies would threaten to move to a cheaper part of country (usually some area that is poorer and has worse worker regulations) if the local government did not given them a massive tax break or offer lax financing (read free money) to them. Now it's happening on a global scale.
As a side note, what I described in the first paragraph is good for workers, while the latter is bad for workers. In contrast, the first is bad for capitalists and the wealthy while the latter is good for them. It is an eternal struggle between workers and the capitalists! There is no way around it*.
(* If you want to know why there is always a class conflict, think about it this way. Let's say workers=employees and capitalists=employers. An employee wants to work the least amount of hours and get paid the most. In contrast, an employer wants to make the worker work the most and pay the least. This is the essence of the problem. Only one side can win. Any compromise is temporary. Right now the employer side is winning).
Sivaram Velauthapillai
Re:Winchester, IN (Score:2, Interesting)
Yeah, but oddly enough, there are no jobs in little towns with better housing prices. It seems there is an employability gap: You either have to work in crouded expensive cities, or the 3rd world to find an IT job. The "middle" is strangely missing.
Re:There are additional reasons... (Score:2, Interesting)
Re:There are additional reasons... (Score:3, Interesting)
The caste system is breaking down fast. We adopted a little girl from India recently. Used to be that adoption was unheard of in India because you could never be sure which caste the child came from. But there has been quite an upsurge in adoptions by Indian parents in the last decade. This breakdown, though, is mostly a middle class urban phenomena. While there is a large in absolute numbers middle class in India, it is still only a moderate percentage of the entire population. Rural areas are still a bastion of the caste system, but these are not the folks doing software development.
Because of this type of (reverse) discrimination, many upper caste individuals of means leave the country to obtain education and work elsewhere. While India is a big country, the trend is concerning, and western outsourcers should be aware of it.
This isn't a trend, and I doubt it should be of real concern to western companies desiring to hire Indian programmers. India has had a discriminatory university admissions policy for at least 30 years. This issue was being fought out 20 years ago when I made my first trip to India. It is still being fought over and will continue to be fought over just as race based admissions policies are being fought over in the US. Doesn't seem to have hurt India much. Just look at the growth rates they have had since Rajiv Ghandi began to liberalise Indian economic policies in the 1980s.
I'd guess that the very best Indian students come to the US to study and work for the same reasons that many other non-USians do: the US has some of the very best universities and great job opportunities for highly skilled talented individuals. If there is a trend, it is in the opposite direction. Indians who did well here in the US are moving capital back to India, starting new companies, and donating to universities there.
Offshoring/Outsourcing .... (Score:4, Interesting)
I can be considered further biased because me and ALOT of
ppl I know have lost their jobs to it
So in the best objectivity I can muster here are some reasons
I think it is bad
1) Money sent outside the US for third world labor stays there,
thus money that used to pay ppl here, to pay taxes, to buy
food, to further employ americans in a trickle down effect is gone
2) If we were to pay US workers third world wages, and have
third world labor laws, we would be breaking US law
*** So are we gonna lower minimum wage to 50 cents/hour ???
3) If you did pay lower than minimum wage to workers, would
they all have to be sponsored by the government and go on welfare
and increase the already burgeoning working poor caste
4) The value of the dollar has been steadily falling, what are
the implications on real estate, US investments, trade ???
5) Huge layoffs create bankruptcies, repossesions, forfeitures,
and broken homes, and broken marriages . Money being one of
the top 3 reasons for divorce
6) Even with a increase recently in GDP not seen in 20 years,
little to no hiring is occuring
7) Companies that reveal their internal secrets overseas may
just find new foreign companies making their products for even
less, after the plans were just copied by former cheap labor
With no recourse thru US patent law, etc etc, they experience a
TOTAL loss of market share as the foreign government chooses to
support their own ppl
8) Unemployment figures do not count those that are no longer
eligible for checks , they are no longer considered unemployed
9) The US cannot compete equally on unequal ground, we have a
huge tax overhead, and cost of living here is too high to
compete with countries that have poor humanitarian labor laws
10) US companies are going overseas and thru negligence are
creating disasters like Bhopal in India . They act above the
law and thousands die from it
http://www.bhopal.org/
The so called race to the bottom has negative aspects that
I feel will create even more hate for the US, within and
without and there is already a sense of a Elitist class in
this country
The funny thing is they expect to be protected by some of the
poor they pay to serve in the military, but in recent polls
soldiers were ask if they would defend the rich against
an uprising of the poor, you can guess the answer
Peace,
Ex-MislTech