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8/2/2012
03:07 PM
Rob Preston
Rob Preston
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Sorry, But Outsourcing Isn't Evil

Outsourcing remains pervasive in both the public and private sectors, and it's not going away, despite the widespread backlash.

Outsourcing is the polarizing IT management issue of our time. Few if any IT practices are so widely embraced at the highest corporate levels, yet so widely derided by the rank and file, especially when the work that's outsourced is moved offshore.

On the message boards, outsourcing is blamed for everything from Dreamliner delays at Boeing to the second-quarter loss at Microsoft (despite the fact that a one-time, $6.2 billion financial write-down was the real cause). Outsourcing providers and customers are portrayed as miscreants and dolts.

One critic, commenting on an InformationWeek column Allstate CIO Jim Ditmore wrote about his negative experiences with outsourcing earlier in his career, surmised: "Would it be correct for me to guess that a non-technical CIO and other ignorant CXOs made the decision to outsource? Were the screams of protest by knowledgeable 'IT people' (a.k.a. the drones) ignored because they were supposedly interested only in saving their own jobs? Can the sales process for the outsourcing deal be described as 'people who don't know what they're selling telling lies to people who don't know what they're buying?'"

Outsourcing's also a political livewire. Even though the federal government outsources much of its work, IT and otherwise, to all manner of contractors, consultants, integrators, and other vendors--and some of that work makes its way offshore--the Obama administration talks about outsourcing as if it were worthy of an Un-American Activities investigation. The Romney campaign can't backpedal fast enough from any suggestion that the former executive engaged in the practice when he was governor of Massachusetts and CEO of Bain. Likewise, many executives still keep their companies' large outsourcing contracts close to the vest, for fear of a public relations backlash. I've talked with plenty of CIOs who rave in private about their offshore vendors--but take the Fifth in public.

[ Learn why Obama's Attack On Outsourcing Rings Hypocritical. ]

The fact of the matter is, outsourcing remains pervasive in both the public and private sectors, and it's not going away, despite the social and political blowback. For example, 82% of the 564 business technology professionals who responded to our recent 2012 State Of IT Outsourcing survey said their companies use such services, up slightly from 81% a year ago. Among those that outsource, more than half (59%) use offshore providers to some degree. And 31% said the composition of their IT workforces will shift more toward outsourcers in the next year, while only 15% said it will shift away (54% said the mix will remain about the same). My colleague Paul McDougall will dive deeper into those survey results, including the perspectives of customers, suppliers, and other industry players, in an upcoming InformationWeek feature story.

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There are exceptions to the trend, of course. New General Motors CIO Randy Mott made national headlines last month after InformationWeek reported that he plans to reverse the automaker's historical reliance on IT outsourcing--from a mix of 90% outsourced and 10% in-house staff to 10% outsourced and 90% in-house—in an attempt to execute projects faster and cultivate auto technology expertise internally. GM's plan to hire thousands of people for four new software development centers in the United States, rather than locate one or two of them abroad (like in China, its fastest-growing market), probably is based in some measure on the fact that the company owes its existence to the $50 billion bailout funded by American taxpayers.

Allstate's Ditmore warns CIOs about handing off their critical intellectual property, much of it IT-related, to outsourcers. And don't count on IT outsourcers to cut costs, he said. "While most small and midsized companies don't have the scale to achieve cost parity with a large outsourcer," Ditmore says, "nearly all large companies and many midsized ones do have that scale." He argues for doing only small outsourcing deals, for which it's easier to establish SLAs and measure performance.

If so many leaders are so leery of outsourcing, why do so many organizations continue to do it? Because when these contracts and relationships are properly thought out, vetted, and managed, they can deliver strong results--especially when they're tied to strategic business outcomes and not just brute cost savings. Outsourcers can bring hard-to-find expertise and fresh ways of thinking to some of the most pressing business technology challenges.

Outsourcing isn't a panacea for dysfunctional IT operations and management. But it's not the devil some of its detractors make it out to be.

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ANON1237384778315
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ANON1237384778315,
User Rank: Apprentice
9/3/2012 | 5:15:13 PM
re: Sorry, But Outsourcing Isn't Evil
I never thought outsourcing was "bad" or "evil," even offshore outsourcing. What I believe is harmful is the mentality that says, "If some outsourcing is good then more is better." Even if outsourcing may be cheaper, it may not be better. Apple, for example, manufactures its iphones overseas, but designs them at home. Mindless outsourcing can play havoc with your quality control and ultimately control of your business.
chuck_w
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chuck_w,
User Rank: Apprentice
9/3/2012 | 4:27:02 PM
re: Sorry, But Outsourcing Isn't Evil
You believe he would. You do NOT know. The man apparently had had some insight into what made a successful business. Apparently that wasn't a mentality that said we should pay the least amount we can to our employees, outsource their jobs to low cost/low qualty destinatiions, and reward upper management with untold millions while we're doing it. I'd ike to give him the benefit of the doubt and believe he'd look for innovative ways to save money while not putting the screws to his employees and yea, to his country.

Corporate America, in general, is broken, and outsourcing/offshoring our technology jobs to destinations that do a LOUSY job of fulfilling the task is just one component of that.

I'm curious, do you also believe that these individuals - and I don't care what country they're in - care anywhere NEAR as much about your business succeeding as your own employees do?
chuck_w
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chuck_w,
User Rank: Apprentice
9/3/2012 | 4:07:21 PM
re: Sorry, But Outsourcing Isn't Evil
What? Same quality? Apparently, you do NOT work in outsourcing and/or offshoring, do you? I do. Where did you come up with the "same quality" argument? Did you read it? Or did you experience it? If you experienced it, I'd like to know which organization you're working for.

I'm speaking solely about IT outsourcing/offshoring here --

While my colleagues from other countries that I've worked with HERE have done an OUTSTANDING job, the ones I've dealt with outside of this country have NOT - it's that simple. It's not a blanket statement. There was one I spent a good deal of time training and she did a great job. So great, she got a promotion off to another account. In essence, people are hired with no IT skills to do IT related work. Sure, we'll train you. Guess what? It doesn't work.

Please, I'd like to know your source - I'm serious. Is it what you've read from the penny pinching CIOs and CFOs that are NOT on the front lines, or are you just trying to stick up for your colleague?
TimTaylor21
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TimTaylor21,
User Rank: Apprentice
9/3/2012 | 4:05:43 PM
re: Sorry, But Outsourcing Isn't Evil
Outsourcing may not be evil but offshoring is. Not only that, it should be illegal. Public companies that use public capital do NOT have the legal rights to offshore public capital or resources in a democracy.

None of this matters because outsourcing is going to collapse in coming years. It is a manifestation of the growth of massive, unmanageable corporations that is a result of the M&A boom. That was a criminal racket perpetuated by bankers and a tax code that encouraged corporations to take on debt to buy other companies.

The party is over. The author is still in the matrix. All in due time. These massive Humpty Dumpty corporations are headed for collapse.
delphin
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delphin,
User Rank: Apprentice
9/3/2012 | 3:24:28 PM
re: Sorry, But Outsourcing Isn't Evil
Yes, outsourcing is evil. In my experience it has led to less customer satisfaction (both inside and outside customers) and a general reduction in quality customer service. I have worked at 5 organizations (Fortune 100 no less) where outsourcing was done or being done. The fundamental business cultures of the firms were actually at odds with where they decided to outsource certain services. I have witnessed a loss of talent and by the time the firm realizes their mistake - the institutional and business knowledge is no longer in the organization and they are in a deeper hole than when they started!

What burns me more is that they say this is done to 'increase shareholder value...' or some such nonsense. I, through my IRA or 401K, am now a shareholder in some of these organizations. They are not increasing value when these decisions are made...they are only lining the pockets of management. Most 'drones' don't think this way...but I do.

Finance/MBA types are making decisions based on a narrow set of criteria that are not to benefit anyone but them. It is about making money in the next 30 days...the future be damned. It is not what money have you made for the company this quarter or this year or even lately...some firms it is how much did you make or save yesterday and if the answer does not meet some artificial short term criteria - you are out the door.

It is offensive on so many levels...
dbell947
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dbell947,
User Rank: Apprentice
8/30/2012 | 10:18:32 PM
re: Sorry, But Outsourcing Isn't Evil
Hear hear!! I certainly hope you are right. I live in the SF Bay Area, and our new "earthquake proof" Bay Bridge was made entirely in China during the middle of the Great Recession. So all those millions of taxpayer dollars were taken OUT of domestic circulation, and sent on a one-way trip to China. Gee, you would have thought that during a recession it would have been handy to hire local unemployed workers, and get the benefits of all that money being circulated in our economy. Of course our politicians had a different idea. BTW: the quality of the welds is becoming a bit of a concern as well as the quality of the steel itself. Oh well, we save a bundle didn't we? What's a collapsing bridge among friends?
uiswatcher2
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uiswatcher2,
User Rank: Apprentice
8/13/2012 | 7:22:01 PM
re: Sorry, But Outsourcing Isn't Evil
Rich Marcello part of the gang of failed H.P. execs that ransacked Unisys was booted out of the plane with his golden parachute in under three years.
moarsauce123
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moarsauce123,
User Rank: Ninja
8/13/2012 | 5:16:32 PM
re: Sorry, But Outsourcing Isn't Evil
I agree. And the main reason why congress nods is that people like Boehner hand out bribe checks right on the house floor. Yet, a good number if not even a majority agrees apparently with such practices, because these individuals get elected back into office. It is incredible that the right-wing Reps and their even more extreme tea bagger friends get any votes. But they have a good scapegoat to blame it all on.
majenkins
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majenkins,
User Rank: Moderator
8/8/2012 | 7:46:36 PM
re: Sorry, But Outsourcing Isn't Evil
I agree though I would go a little further. I think many of the people that confuse them do so intentionally to try to justify offshoring by equating it with outsourcing. Whether this author was trying to cause confusion that or was just all mixed up I can't be sure however I would guess the former was the truth.
BGREENE292
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BGREENE292,
User Rank: Strategist
8/7/2012 | 4:59:23 PM
re: Sorry, But Outsourcing Isn't Evil
We agree government vs. private production is a case-by-case situation. The only objective is to maintain (1) maximum effectiveness for tax dollars and (2) appropriate levels of control to foster and protect the public interest.
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That is an issue of accountability and transparency. In many instances, a private contractor has resisted efforts to provide appropriate transparency, claiming market damage from such disclosure. In only a few, usually well-publicized instances, a government agency has resisted such scrutiny.
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But the current "privatization" rationale is perhaps intentionally misleading. By no small coincidence, rampant corruption by private contractors during the term of G.W. Bush demonstrated privatization meant anything but the public interest. Likewise, too many congressmen have been content to wink and nod as private contractors (under their somnolent oversight) got away with robbing the taxpayer.
<<   <   Page 2 / 7   >   >>
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