From ComputerWorld: “Gartner says 5% of corporate IT jobs could go offshore by 2005”. Other gloom & doom IT job-loss predictions are relentless as the subject of offshore IT outsourcing becomes a national frenzy.Bob Evans, Editor in Chief of InformationWeek, writes in an editorial: “…offshore outsourcing is a powerful means to a more-powerful end. The goal, as always is to identify and drive business-process improvements through the application of new sources of innovation, quality, and speed, all at reasonable prices. And whether you choose to do that in the United States, or in India or China or Ireland or Israel, it should be a source of pride – not shame.”
For his effort, Mr. Evans was compared to Benedict Arnold. There may be some merit to this. But first, let’s address Evans’ point. His point sounds like the standard sales pitch by an offshore outsourcer. It’s used by short-sighted companies to justify offshore outsourcing. But the bottom line has NOTHING to do with innovation, quality and speed. PRICE is all that matters.
In high school, I was often reprimanded by debate judges for using only logic (and not evidence) to debate. It seems Mr. Evans never heard this suggestion. In fact, we will likely NEVER hear any evidence to prove whether offshore innovation, quality and speed are better. As they say in Missouri: SHOW ME.
Here are 3 examples of how offshore outsourcing LACKS innovation, quality and speed – and, in fact, may ultimately cost MORE.
Royal Carribean In 1991, the Miami-based cruise line began a major effort to replace its custom enterprise system. Hundreds of employees, consultants (including me) and contractors were involved, along with onshore developers from India. An IT manager (now a consultant herself) once told me: “I can get 3 offshore contractors for the same cost as one of you.” My response: “You can. But you’ll also incur 3 times the overhead, get less than one-third the productivity, and I’ll still have to do the work to fix all the problems.” I wasn’t making up that statement – it was based on my actual experience during that project.
GE In 2001, a large division of GE was involved in a large project to build what became one of the most successful B2B e-commerce systems. TCS, the largest offshore outsourcing company from India, had a large team both on site and offshore. Because the quality was so poor, the offshore resources were replaced CONSTANTLY. GE’s IT managers grumbled, but could not break the party line: a mandate to use cheap offshore resources whenever possible. The lack of innovation was so rampant, GE asked (as only an 800-lb gorilla could) my company to TRAIN the TCS employees, so they could replace us. We refused and eventually lost the business.
GE is a poster child for offshore outsourcing, and much of the credit (blame) for growth of offshore outsourcing belongs to the largest company in the world. But where is the proof that GE’s outsourcing efforts have increased innovation, quality and speed and reduced total cost?
JD Edwards In a competitive enterprise applications market, J.D. Edwards had little choice but to consider outsourcing development and support offshore (development – India, support – Mexico). Offshore development centers were used to enhance its flagship OneWorld product. But serious problems with quality led many customers to sue the company. Even bugs that were supposedly fixed, still caused serious damage (I know this from personal experience).
Plain and simple, offshore outsourcing is about cost – period. But it’s impact – the transfer of knowledge and experience – will, over time, eliminate the current US advantage for innovation and quality. And that will lead to bigger problems.