Strategic CIO // IT Strategy
Commentary
8/2/2012
03:07 PM
Rob Preston
Rob Preston
Commentary
Connect Directly
LinkedIn
Twitter
RSS
E-Mail
50%
50%

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.

Global CIO
Global CIOs: A Site Just For You
Visit InformationWeek's Global CIO -- our online community and information resource for CIOs operating in the global economy.
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.

Comment  | 
Print  | 
More Insights
Comments
Threaded  |  Newest First  |  Oldest First
lacertosus
50%
50%
lacertosus,
User Rank: Apprentice
8/3/2012 | 4:02:53 PM
re: Sorry, But Outsourcing Isn't Evil
Off-Shore outsourcing is evil.
Number 6
50%
50%
Number 6,
User Rank: Moderator
8/3/2012 | 8:45:29 PM
re: Sorry, But Outsourcing Isn't Evil
That's the problem with Rob's column, politicians, and many mass media reporters.

They confuse outsourcing with offshoring or offshore outsourcing.

Outsourcing is moving a function outside your company, such as using an outside law firm or human resources benefits company. It can still be in your country.

Offshoring is locating a function or part of a function physically outside your home country location. It can still be part of your company, such as a sales office or another R & D center in Europe.

Offshore outsourcing is a combination of the two, and THAT'S what most of us object to because it's often done strictly for visible cost savings and ignores the hidden opportunity and other costs.
majenkins
50%
50%
majenkins,
User Rank: Ninja
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.
janttila801
50%
50%
janttila801,
User Rank: Apprentice
8/4/2012 | 7:35:56 PM
re: Sorry, But Outsourcing Isn't Evil
I agree.

Anyways, for an alternative perspective, I suggest reading the book "Dragons at your Door: The Cost of Chinese Price Innovation". It's written by a Harvard Graduate. I don't have the book in front of me, but in the book, there's the discussion of the MD-90 aircraft, built by Douglas Aircraft was outsourced and led to the company closing its doors.

The final assembly for the airplane was outsourced to China. After the plane was assembled, there were reliability issues, where the airplane would regularly fall out of the sky due to incorrect manufacture, or cheap rivets or something. Boeing loved the airplane, and they had an ad campaign. It was "If It Isn't a BOEING, I'm Not Going."

Anyways, with the problem of airplanes crashing, once airplane company would buy or fly on a MD-90 Aircraft, Boeing bought the competitor up for pennies on the dollar. There are other use-cases in the book where people of China work for a few dollars a day to learn how US business works, a skill they'll likely pass to their children. Here stateside, we've become quite focused on making the Finance Team happy instead of quality, so take a moment to let the Finance department know you appreciate their hard work and financial innovation during the Bush administration.

But having multiple family members that work or worked on DoD projects, similar to what I have done in the past, and also having an uncle who worked at the Pentagon said that oftentimes, the additional work (and re-wrork) in the form of training inexpensive labor often costs as much (if not more) than developing the product in the US from the beginning, which I somewhat agree.

The point is, feel free to outsource when your company doesn't need the specific technical knowledge, or if you desire competitors as the business knowledge, products, and patents, will likely be shared with other companies.

When you outsource, the main productive activity is documentation. Consultants sit down, ask employees what they do, and diagram how the function of their job is. I actually don't do this. I have a different take, especially when it comes to working at American companies. However, the amount of additional documentation, including internal documentation on how the business functions, can be valuable to competitors, and when you hand it over to an outsourcer, who is just there for the project, the documentation or knowledge can't really be recalled. Sometimes, all the outsourcer needs to know is how your using technology to be a better competitor.

Usually this type of documentation and process flows are kept under lock-and-key, saved for internal folks only, but some technology outsourcers, including companies like Accenture, KPMG, Ernst and Young, often use resources, based in India or China for their inexpensive labor, and ability to train overseas folks how to do the jobs Americans used to do, and make a good living at.

So, let's look at it from a financial perspective- To train overseas labor correctly and also make the outsource project effort worthwhile, rework has to occur. After it's been developed and re-developed 5 times, it will likely work. Re-writing the software 5 times means you HAVE to set up shop overseas, and use AGILE/Scrum. Usually these SCRUM meetings happen daily, at 9:00pm in the US, and also when India is awake. Usually around 7:00am in India. So the consultant is calling long-distance, about to go to bed, and when he awakes for the next day, he'll find a mailbox full of additional questions that couldn't have been answered when he's asleep.

So anyways, this is great for people who like to stay awake 18-20 hours a day, with very little rest, and fresh out of college. So to formally become a part of China, let's also toss out Minimum-wage laws to effectively compete with China-based labor. It seems that's what the US Finance teams collectively desire.

So In "Dragons at your Door", the book written by MBAs at HARVARD, the McDonald Douglas failed when it made a pretty bad airplane. However, the Government-sponsored aircraft subsidiary, whom legally owned 50% of the China business, continued working when McDonald Douglas was acqired by Boeing, and produced more aircraft. They kept the documentation and diagrams, and started making the MD-90 in China again, where intellectual property rules don't exist, and well, from what I heard the new airplane flys, and has FAA certification.

So sending documentation on how to build airplanes offshore can present challenges too.

Also, the desire to put financial needs above quality can be a relatively big issue with outsourcing, leading to rework, and additional disclosure. For example, the FBI recently had a $600M budget overrun with Sietnel, a new case-management software package that was 10-years late to manage case files at the FBI. Odd thing is, it seems to run customized off-the-shelf software. Keep that in mind too, when your outsourcing.

Outsourcing may work well for the IT industry, which, with the exception of Apple, pretty much abandoned the US about 15 years ago due to mergers and acquisitions.

When the project is done, the people who built the product for you, well, they usually go work for your competitor, sometimes to do the same thing...

But the thing is that my uncle, whom, after 20 years of work on DoD and defense projects, said that quality suffers, if your honest. I agree.

If you look back in the past, the DoD outsourced systems and upgrades, for no-bid presidental projects outsourced directly to Halliburton for an oil pipeline; likely to help reduce the wholesale price of gas, so Texas-based oil companies could continue to have excellent shareholder returns.

The DoD also had an issue involving purchasing counterfeit network hardware, which was purchased and deployed, through multiple levels of outsourcing. The final seller found to ultimately fill the Government Contracts, had Cisco certification, but the companies actually purchased counterfeit equipment online at lower cost, sometimes from Chinese suppliers, and eBay.

Anyways, what actually happened was the FBI, and DoD was this- The Government was paying normal, almost-full-price for Cisco network equipment, only to find out that it was counterfeit hardware installed at Government and DoD facilities. The Product was actually manufactured in China, nearly 100% identical to the actual equipment sold by Cisco, even had Cisco's copyrighted software running on it. It seems Cisco never pursued legal action. Now, I don't know what you think about that, it certainly isn't evil, but it may be considered lying. Similar issues occurred-- at the time, I was working at Microsoft, in the Global Supply Chain organization, and well, they similar challenges. The biggest challenge was keeping GFS organization afloat. So they were a little fast-and loose with outsourcing too.

Similar to DoD and FBI, Microsoft was buying counterfeit hardware too, and placing them into Microsoft data-centers that managed Microsoft, XBox, Bing, Live, and other online services.

But instead of purchasing equipment from Cisco-certified vendors (like the DoD projects, who were just fast and loose with their suppliers) Microsoft just bought equipment directly from eBay and negotiated an on-site agreement for all Cisco hardware, another for Juniper, and similar for Dell. They also paid Cisco a site-level service agreement fee, to maintain the hardware, which they bought on EBAY. Pretty interesting/

But the thing is, that outsourcing definitely hurts. It hurts the original equipment manufacturers, who set a price based on actual labor required to produce a product, usually in the USA. You can learn more about the counterfeit Cisco routers by doing a search (maybe on Google) for the Powerpoint presentation. The file name is "FBI-Criminal-Investigation-Cisco-Routers" You'll find it.
iosax
50%
50%
iosax,
User Rank: Apprentice
8/3/2012 | 5:38:12 PM
re: Sorry, But Outsourcing Isn't Evil
The only reason outsourcing is not going away is our politicians are owned by the same corporations doing the outsourcing. The only reason the feds keep printing worthless money is the outsourcers know the migration to developing countries can only be sustained by the american middle class. If they destroy it too fast they won't have a market to sell whatever they produce offshore. Chinese and Indians are still not able to buy most of the stuff they're producing
dophi
50%
50%
dophi,
User Rank: Apprentice
8/3/2012 | 5:38:17 PM
re: Sorry, But Outsourcing Isn't Evil
I won't say outsourcing is evil but I will say outsourcing will not be here forever. Going by the picture, I would say Mr Preston hasn't been around long enough yet to be making statements like "it's not going away", unless he is refering to the here and now. There was a movement in the late '60's until the mid '70's. It was similar to time sharing in that many users bought time on a central computer. Companies didn't have their own installations. They leased time and resources. Today's movement is not unlike that of the past. The same thing that killed the business then will, in my opinion, do the same in the future. It will become too costly, clumsy, inconvenient and unreliable.
dbell947
50%
50%
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?
ssamuelson061
50%
50%
ssamuelson061,
User Rank: Apprentice
9/4/2012 | 12:54:56 PM
re: Sorry, But Outsourcing Isn't Evil
And I'm sure Rob will agree when the Off-Shore his editorial job to someone who speaks English "good enough". Although there will be grammatical errors, statements of non-fact, and misspellings in most of the articles, it's accepted in today's culture so it's a cost I'm sure his bosses will be willing to write off when they see the savings to the bottom line by paying their editor 10%-20% of his current salary. Even though Congress will find it offensive and put together a "program" designed to stop the undercutting of his profession's salaries by foriegn workers, the "program" will have no teeth and companies will openly flaunt it. If "good enough" works (doubtful), InformationWeek will survive. If your customers want quality (most likely), the upper management will say "Wow - who would have thought quality was that important? We need to lay off more Americans to cover my mistake and keep my salary inflated. Let's also implement a quality program to fix my mistake. We can off-shore that work to some other foriegn nation and hire a translator. What could possibly go wrong?"
bfreedman940
50%
50%
bfreedman940,
User Rank: Apprentice
8/3/2012 | 5:45:19 PM
re: Sorry, But Outsourcing Isn't Evil
IT outsourcing is a cauldron of current political and economic issues: globalization, competitiveness, immigration, product quality, labor markets. All these issues existed before the IT outsourcing became the flavor of the month. They'll still exist after the spotlight turns to a new hot trend. Clearly the global political, legal and economic policies are fun to think about, opine about and elect presidents about.

IT outsourcing is merely a management tactic. Outsourcing isn't good or bad. Outsourcing isn't a guarantee of success. It is legal and ethical. If done right it, t can create competitive advantage and economic gain. If done wrong it is a costly drag on success.

Businesses (and hand-wringing policy wonks) ought to look beyond the single inflamitory statistic of cost per hour of labor in different countries, and evaluate outsourcing strategy (or insourcing strategy) on its ability to deliver economic advantage within the current (and projected future) legal and political climates.
MECH1
50%
50%
MECH1,
User Rank: Apprentice
8/3/2012 | 5:49:24 PM
re: Sorry, But Outsourcing Isn't Evil
The statement that outsourcing is not Evil is correct. Paying for a college education and having someone down size you for a person out of the country?
Usually the same people who cry when we stop "BUYING AMERICAN" and their profits go down.
Corporations such as Microsfot do not want to lose market share? I suggest we ALL buy from someone else. It would be correct to do that.
The consumer outsources and it is not EVIL?
They go to the Government and ask that we bail them out (GM).
What is EVIL? Evil maybe a one sided argument? Did you consider the other side if consumers outsource?
Can we outsource our Congress? Can't do the president as he has to be native born.
Majo
50%
50%
Majo,
User Rank: Apprentice
8/3/2012 | 5:54:22 PM
re: Sorry, But Outsourcing Isn't Evil
US corporation only need US consumers to finance the move and expansion of plants abroad and then to kick-start their marketing overseas. With over 3 billion people in Asia 350 million in North-America is chump change.
No one in North-America can compete domestically since corporations like Apple own all the patents and will sue the pants of any upstart.
Host
50%
50%
Host,
User Rank: Apprentice
8/3/2012 | 6:07:05 PM
re: Sorry, But Outsourcing Isn't Evil
Ray Sjolseth, President, of Seesmart Technologies, Inc., a manufacturer of LED lighting products, explains why the company is GǣinsourcingGǥ a line of LED lighting products back to the US as an GǣAmerican-made line.Gǥ
Among the reasons Sjolseth gives for manufacturing the new LED line in the US are: Timely delivery to customers; Quicker turnaround time; Avoiding costly air freight charges; Better control of manufacturing process; Closer eye on product quality; Better cash flow management; and Able to satisfy customers that demand American-made.
Edwardo0
50%
50%
Edwardo0,
User Rank: Apprentice
8/3/2012 | 6:07:25 PM
re: Sorry, But Outsourcing Isn't Evil
Sorry? Sorry for what the sorry state of IT support in this country due to the support people being offshore? Sorry because their English and accents are so outrageous that many people hang up in frustration? Or sorry becuase the continued outsourcing of IT skills contributes to the lareg unemployment in this country. Your article reminds me of a saying my mother had "If John jumped off the Brooklyn bridge would you jump too?" Just becuase these companies are doing outsourcing doesn't make it a good thing. As a matter of fact it is a bad thing regardless of what you think. It gives the impression of low-quality support to a companies product support. I would much rather pay more money for a product that is produced and supported in the USA than buy any product that has off shore support. You are right - It is a hot item, but not for the reasons you proclaimed. You never gave any sound logical reasoning as to why out-sourcing offshore is good for the economy of the US.
PJS880
50%
50%
PJS880,
User Rank: Apprentice
8/3/2012 | 6:18:39 PM
re: Sorry, But Outsourcing Isn't Evil
I think that if it was your company and you could save money on outsourcing then you would. I donGt want to hear all this mumble jumble about how evil it is, the bottom line is these are companies and their goals are making the biggest profit and spending the least amount of overhead. Some of these companies are also finding out that outsourcing is not a very profitable solution to their needs. I think Preston nails it when reporting this story, he seems to not be favoring one way or the other, just reporting. When you become a large company making millions of dollars you sometimes forget your core values when it comes to saving money. Businesses are not there to provide services and products to break even. If outsourcing can produce the same results for less money then why would you not make that viable business solution? I understand your loyalty to American workers and applaud it, but other countries are producing the same quality for less and sometime not. It is not a cut and dry decision; it is what makes best sense for your business not the rest of the country. Sorry if the truth makes me a douche, but talk to me when you run a multi-million dollar company and tell me money doesnGt make a difference in your business decisions!

Paul Sprague
InformationWeek Contributor
chuck_w
50%
50%
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?
PJS880
50%
50%
PJS880,
User Rank: Apprentice
9/6/2012 | 5:45:15 PM
re: Sorry, But Outsourcing Isn't Evil
@ Chuck I comment on my personal opinion, that being said....it is literally impossible for you to go through your daily routine without interacting as a customer or company who uses outsourcing in one way or the other. The facts speak for themselves Chuck, In a study conducted (The telephone survey of 100 chief financial officers at U.S. technology companies with annual revenue of $100 million to $15 billion, conducted by accounting and consulting firm BDO Seidman LLP, also found that nearly half (49%) of those business offshore some manufacturing or services outside the U.S. ) I am sure that half of our country is switching to outsourcing because the quality of product, or service is not as equal! I am glad to hear that the colleague you have worked with have worked out greta here in this country, and sorry you did not have success where millions of other have. Source? For what outsourcing...here is one, Coca Cola....because there quality has gone nothing but down hill since they started outsourcing!
I take it you do not own and operate a business within the US? I am not saying that all outsourcing is better quality, I am saying if you are a business owner you would see the viable way to conduct your business. Companies do not choose outsourcing as a way to tell its customers hey we care about you and your community along with unemployment an day other community problems. Companies choose to outsource for one reason, money. Even more if the quality of whatever that company produces is not affected. Now stick up for yourself.

Paul Sprague
InformationWeek Contributor
Works Cited:
http://www.informationweek.com...
rdeck605
50%
50%
rdeck605,
User Rank: Apprentice
8/3/2012 | 6:23:19 PM
re: Sorry, But Outsourcing Isn't Evil
From his picture, he wants to put on a tough guy persona. However, he forgets Henry Ford realized he needed to pay his workers enough to buy his product so he had a market to sell to. He has phone numbers of American technical support personnel and doesn't get a "technician" in India that cannot take an address or phone number correctly and tells you to take a cloth and wipe off the paper tray on a printer to solve a Wi-Fi connection problem (Dell). I switched brands because the tech support was inferior, not because of where it came from. If you look to outsource because it is cheaper and easier to administer one contractor than hundreds of employees and a call center, fine. Just be sure the quality is there or your business is really buying a down turn in your sales in the future that you cannot understand.
PJS880
50%
50%
PJS880,
User Rank: Apprentice
8/3/2012 | 6:32:03 PM
re: Sorry, But Outsourcing Isn't Evil
The point you are making is not valid. If Henry Ford was faced with the same decisions today and he could save by out sourcing, I believe he would. Outsourcing was not a big thing back in early half of the century. There was a certain pride in America producing its own goods. That pride does not seem to exist anymore among Americans. Let me point out that I am not a fan of outsourcing but I understand using it form a business perspective. Apply that same principal to Ford Motor Company now and see what you can come with.

Paul Sprague
InformationWeek Contributor
chuck_w
50%
50%
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?
PJS880
50%
50%
PJS880,
User Rank: Apprentice
9/6/2012 | 5:50:13 PM
re: Sorry, But Outsourcing Isn't Evil
That is exactly what I think and if faced with the same decisions today, oh wait they were and which way did they go??? Obviously people who have nothing to do with your organization will not care about it as much as the people directly involved with your organization. That being said companies donGt outsource because they believe that outsourcing companies care more about the success of your company than your employees. They do it for the almighty dollar..period!
Paul Sprague
InformationWeek Contributor
RobPreston
50%
50%
RobPreston,
User Rank: Author
8/3/2012 | 7:04:50 PM
re: Sorry, But Outsourcing Isn't Evil
I'm neither a tough guy nor (responding to dophi above) young. But I appreciate both misrepresentations!
PJS880
50%
50%
PJS880,
User Rank: Apprentice
8/3/2012 | 7:08:21 PM
re: Sorry, But Outsourcing Isn't Evil
I donGt know Rob you kind of look like Henry Rollins in your pic, and Henry Rollins is tough! Lmao

Paul Sprague
InformationWeek Contributor
rdeck605
50%
50%
rdeck605,
User Rank: Apprentice
8/3/2012 | 8:08:59 PM
re: Sorry, But Outsourcing Isn't Evil
The reason for the considerable downward pressure on costs is a combination of world competition (not going away), slow domestic demand because of the financial situation of the middle class who have not had income growth in 30 years, and short term focus of upper management to get the megabonuses that have become endemic in corporate America. Cutting costs won't bring demand up to where we all want it. The 1% cannot consume the economy back to health. Outsourcing alone did not kill the economy. Some outsourcing is healthy if the quality is there. Indifference to the customer is rampant to get bonuses for management. We have cut costs so much we have killed the goose that lays the golden eggs - the consumer.
BGREENE292
50%
50%
BGREENE292,
User Rank: Strategist
8/6/2012 | 5:39:13 AM
re: Sorry, But Outsourcing Isn't Evil
Exactly. When off-shoring becomes a major channel for outsourcing-- all to boost the profits of few at the expense of the many-- this is a perversion of the capitalist dynamic.
.
Even Ricardo (earliest champion of globalism in trade) did not envision a "race-to-the-bottom" among workers of the world, constrained to bid for placement of a factory in their community by lowering wages and plundering the tax base. The winners of such competitions are losers, in the long run.
TreeInMyCube
50%
50%
TreeInMyCube,
User Rank: Apprentice
8/3/2012 | 6:30:30 PM
re: Sorry, But Outsourcing Isn't Evil
Offshore outsourcing of IT is a business practice. And, like other business practices (derivatives, anyone?) it can be abused. When offshore outsourcing is done poorly, the quality of service delivered is diminished, customer satisfaction decreases, costs may increase, all while American IT workers are losing their jobs. On-shore outsourcing would certainly provide some of the benefits Rob mentions in the piece -- hard-to-find expertise, new ideas -- with fewer of the costs to society of displaced workers. But I challenge you to find a CIO who would say, "I can't find any company in the US which could deliver software technology XYZ, so I had to outsource offshore to get it." Lower cost is always, always a factor in the business case for off-shoring.
Stratocaster
50%
50%
Stratocaster,
User Rank: Apprentice
8/3/2012 | 8:03:32 PM
re: Sorry, But Outsourcing Isn't Evil
The federal government outsourcing analogy is often a red herring because we taxpayers end up paying more for contractors and the services they provide than we would if they were federal employees. Especially for DoD contracts.
moarsauce123
50%
50%
moarsauce123,
User Rank: Ninja
8/4/2012 | 6:12:00 PM
re: Sorry, But Outsourcing Isn't Evil
That is because the Bush/Cheney administration introduced the idea of using no-bid contracts for everything without bothering to even check once if there is no overcharging for services. While there always has to be the option for no-bid contracts to shorten procurement cycles (especially in defense) those need to be limited to short term contracts.
Aside from that, government employees typically get government benefits, which despite all the complaints are still top notch compared to many private sector benefits. But the government benefits are also unsustainable if everything would be done by government employees. Aside from that, there are also plenty of tasks that the government only has infrequent or periodical need for. For example, collecting and crunching census data is only done every ten years. Should the government keep all the employees around for the years between? And many private sector companies built excellent expertise over decades, which is why any airplane or vehicle used by the government is not built by government employees. Running large scale manufacturing operations just so that nothing gets outsourced would be total humbug. Nationalistic views are also wrong in the decision making. Best example is the air tanker contract that was forced to be given to Boeing, although Airbus would have built a much better fleet for less money and all that still on US soil with mainly US workers. Now the air force gets crappier product for a much higher price. What's the point of that?
BGREENE292
50%
50%
BGREENE292,
User Rank: Strategist
8/6/2012 | 5:28:49 AM
re: Sorry, But Outsourcing Isn't Evil
In pursuit of its obsesssion with outsourcing government functions to the private sector-- and therefore, one more remove from accountability to American taxpayers-- the G.W. Bush administration did experiment with outsourcing at one agency, and found disturbing results.
.
The in-house product quality was at least as good, if not better, than the private sector effort. And it cost less. Primary reason-- the government agency does not make a profit or act as middleman to service delivery.
moarsauce123
50%
50%
moarsauce123,
User Rank: Ninja
8/6/2012 | 5:06:15 PM
re: Sorry, But Outsourcing Isn't Evil
Not disagreeing here, but there are a lot of tasks the governments are in charge of, but reasonably cannot do through agencies. Aside from the examples I already gave look at anything in regards to infrastructure. Roads, bridges, water lines, sewer canals etc are all contracted out to private companies. Yes, these companies run a business with the goal to turn a profit, but the extra government pay to generate that profit is still cheaper than keeping engineers and construction crews on government payroll just in case a new bridge is needed.
And there are surely many examples where constant workloads are present and in that case cutting out the middleman and keeping government staff for those tasks is the better solution. Assuming that productivity is the same and waste is prevented.
BGREENE292
50%
50%
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.
.
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.
.
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.
moarsauce123
50%
50%
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.
jries921
50%
50%
jries921,
User Rank: Ninja
9/5/2012 | 6:34:49 PM
re: Sorry, But Outsourcing Isn't Evil
It's called "patronage"; the idea being to steer as much money as possible to supporters of the "good guy party", so they have a stronger motivation to support it (and a disincentive to support the "bad guy party"). There was a Democratic politician in the 1860s and 70s New York City who made this a high art form, but went to jail when he overreached. I'm sure you've heard of him: William M. "Boss" Tweed. He apparently had standards though: the courthouse his henchmen so ridiculously overcharged for is still in use as a government building 130 years later.
Sam Iam
50%
50%
Sam Iam,
User Rank: Apprentice
8/4/2012 | 4:38:53 AM
re: Sorry, But Outsourcing Isn't Evil
Intermingling of terms. The US government outsources much of their IT. They do not offshore, to my knowledge, any of their IT. Offshoring, not outsourcing, is the live-wire.
BGREENE292
50%
50%
BGREENE292,
User Rank: Strategist
8/6/2012 | 5:17:49 AM
re: Sorry, But Outsourcing Isn't Evil
Uncle Sam does, in fact, outsource to Unisys and other nominally American corporations which DO off-shore their labor pools. This is an egregious offense to American taxpayers, taking its place in notoriety alongside massive cost-plus over-billing by this vendor to Uncle Sam.
.
Unisys, in fact, has a sordid history of both off-shoring as well as billing fraud.
http://www.washingtonpost.com/...
.
But transparency has problems at Infosys, as well--
http://news.slashdot.org/story...
moarsauce123
50%
50%
moarsauce123,
User Rank: Ninja
8/4/2012 | 6:02:41 PM
re: Sorry, But Outsourcing Isn't Evil
In the end it comes down to what gets outsourced. Core competencies cannot be outsourced without doing damage to a company. A company that relies heavily on IT resources would be foolish to outsource that, but cleaning their offices, do the billing, deliver coffee supplies, provide legal advice, and a bunch of other things not core to the business are typically contracted out. There is no point in hiring a bunch of people who are not continuously used. Every household in the US outsources - or do we make our own electricity, build our own cars, and grow all our own food?
The point is that too many companies outsource without caring to keep service quality at the same level. Yes, the point is to lower expenses, but not lower quality of services and products. And with that I see no problem to offshore some work. The work suitable for outsourcing and then for offshoring are low level entry jobs. Keeping them in the US and hire US workers sounds nice, but the pay would be minimum wage - and that helps nobody. On top of that, the hire expenses will impact global competitiveness. There is no point in keeping everything in the US, but close the company after a short time. Rather keep the high paying jobs and core skills in the US and find contractors to take on the non-essential work at the same or better quality level.
A company that wants to offer 24 hour phone support might want to contract out work to a partner in Australia and Ireland. That will provide for the desired service to the customer while not having to hire people working the night shift and getting all grumpy.
Overall we should focus on quality, not so much where it comes from. Further, make sure that those jobs that secure a living stay here. Minimum wage, no skill jobs don't help anyone around here, besides that, we got enough opportunities for cart pushers at grocery stores. Why compete with them for workers?
Guest154
50%
50%
Guest154,
User Rank: Apprentice
8/4/2012 | 7:04:27 PM
re: Sorry, But Outsourcing Isn't Evil
Maybe Rob should be replaced by an outsourcing company today.
That way we would all enjoy all the benefits of outsourcing.

BGREENE292
50%
50%
BGREENE292,
User Rank: Strategist
8/6/2012 | 5:07:51 AM
re: Sorry, But Outsourcing Isn't Evil
Why does Rob say the things he does? Simple enough-- Information Week desperately wants to keep the loyalty of its largest corporate readers and advertisers, many of which happily support off-shore outsourcing. And it will adjust all editorial statements to cultivate their patronage. Can we imagine Rob biting the hand which feeds him (literally)?
.
Beyond the context of advertisers and their wishes, however, Rob's ideas reflect only the hoary lessez faire economics which brought us Wall Street disaster. And with essentially the same results-- Rob has faced the critics of outsourcing, but finds it impossible to end his support, even when shown its pernicious nature. Reason? Like the fund managers and megabankers of Wall Street, Rob is making too much money to stop.
janttila801
50%
50%
janttila801,
User Rank: Apprentice
8/4/2012 | 7:34:09 PM
re: Sorry, But Outsourcing Isn't Evil
I agree.

But the thing is that my uncle, who works on defense projects, which are often outsourced, is that quality often suffers.

Also, if you look back in the past, the DoD outsourced some database and system builds, along with the FBI. Ordering network hardware was also outsourced to third parties who said they could purchase equipment at lower cost. Anyways, what actually happened was the FBI, and DoD was paying full-price for Cisco network equipment, only to find out that it was couterfeit hardware, manufactured in China, that was nearly 100% identical to the equipment sold by Cisco.

At the time, I was working at Microsoft, in the Supply Chain organization, and well, they had challenges too. The biggest challenge was keeping the organization afloat, but instead of purchasing equipment from Cisco-certified vendors (like the DoD projects, who were just fast and loose with their suppliers) Microsoft just bought equipment from eBay and negotiated an on-site agreement for all Cisco hardware, another for Juniper, and similar for Dell.

But the thing is, that outsourcing definitely hurts. It hurts the original equipment manufacturers, who set a price, and unless your buying purchasing directly from a bankruptcy auction, the pricing should be relatively close to the MSRP price.

Here's where you can learn more about the counterfeit cisco routers; just follow the URL:

www.docstoc.com/docs/39297210/...

Also, my uncle who works on DoD projects, said that oftentimes, the additional work (and re-wrork) in the form of re-training inexpensive labor often costs as much as developing the product in the US, which I somewhat agree. The amount of additional paperwork, including internal documentation of how the business runs, can be valuable to competitors.

For example, in the book "Dragons at your Door: The Cost of Chinese Price Innovation", written by a Harvard Graduate, there's the discussion of the MD-90 aircraft, butilt by Douglas Aircraft. The final assembly for the airplane was in China. However, after the plane was assembled, there were reliability issues, where the airplane would regularly fall out of the sky due to incorrect manufacture, or cheap rivets or something. Anyways, once no one would buy or fly on a MD-90 Aircraft, Boeing bought the competitor up for pennies on the dollar.

So quality can be a relatively big issue with outsourcing, leading to rework, and additional disclosure. Plus the FBI recently had a $600M budget overrun, for software that was 10-years late to manage case files at the FBI. Keep that in mind too, when your outsourcing.

It may work well for the IT industry, which, with the exception of Apple, pretty much abandoned the US about 15 years ago due to mergers and acquisitions.

Displaced
50%
50%
Displaced,
User Rank: Apprentice
8/5/2012 | 4:27:00 AM
re: Sorry, But Outsourcing Isn't Evil
Rob, I always read your column and usually agree with you conclusions.

For this article, I'm afraid you are completely wrong,

Offshore outsourcing and onshore 'guest worker' outsourcing truly is evil to the US workforce and this economy.

Outsourcing was, by definition, a choice made by a company's management to:

- utilize specialist skills from the outsourcing vendor in the chosen outsourced functional areas.
- reduce the need for specialized staff in-house in the chosen areas except for oversight.
- maintain or improve quality of service
- potentially reduce operating costs for staff and infrastructure.

The ONLY factor being applied by nearly every company right now is:

- Lower labor costs

with the end result being :

- overseers having to salvage or rewrite woefully inadequately delivered code.
- milestones being constantly missed
- no accountability for failure

The outsourcing vendor is 'supposed' to protect the integrity and quality of the company's outsourced functions by Service Level Agreements :

I think the IBM case with Texas has proven how much legs those have!!!

We in the trenches know the offshore/onshore guest worker outsourcing fad as being implemented is sheer madness and doomed to failure, I've seen it at every Fortune 500 client I have been at in the last 10 or so years.

How about the bigger picture Rob that collectively, these companies are destroying the knowledge base in this country and literally giving it away to competitors. Where is the logic in that????

Why do they do it? Managers want bonuses and to get promoted or the hell out before the fraud at their company gets exposed.

I'm not going to insult you and say you're now drinking the Koolaid from NASSCOM or some other nefarious organization with a biased interest but how about listening to the people who have to work in this industry, the workers NOT the managers,. You might actually get the real truth for once.
Reggie62
50%
50%
Reggie62,
User Rank: Apprentice
8/5/2012 | 4:43:05 AM
re: Sorry, But Outsourcing Isn't Evil
ALL outsourcing is done for pure greed.. It's not like these corporations would die if they stayed doing things as they do.. It's only so the few at the top can generate more than they already have at the expense of any and all who don't
petey
50%
50%
petey,
User Rank: Strategist
8/5/2012 | 4:59:13 AM
re: Sorry, But Outsourcing Isn't Evil
off shore outsourcing is cheap and those that use it will bake the cheap costs into their budgets, never again to be pulled back to a higher cost structure. The issues I've seen and personally experienced with off-shoring is a lack of direction from the company which outsources. Usually they outsource some technical function, say web app maintenance then place a MBA US manager in control of the process, not knowing a thing about details, causing a complete lack of direction which in turn makes the offshore people look like idiots. If these companies would instal a few lower-level tech savvy US employees to oversee the offshore operations, things would run smoother because they talk the same level of technology. There is still room for some US programmers to direct these offshore folks and I think it would make a big difference in productivity rather than giving them a high-level proposal or have them come up with their own ideas. The key is to manage the resource, if its not managed well, you have chaos. Don;t delegate everything to the offshore reource or I guarantee you will have a mess on your hands.
petey
50%
50%
petey,
User Rank: Strategist
8/5/2012 | 5:10:42 AM
re: Sorry, But Outsourcing Isn't Evil
Also, the Indian offshore people I've worked with are knowledgeable and decent, when given direction and monitored. These companies also need to get better at writing contracts. Indians do not have the same work loyalty as US meaning they will leave for pennies more which means the contracts should penalize offshore companies when this occurs and force them into a more stable worker envionment.These to ideas alone would save most of the out of control costs and work problems dealt with by US companies. The myth is that 10 dollar a day labor is a tremendous savings with no thought about how that labor is utilized, when in reality it is more like 25 dollars if you manage it properly which is a big savings too.
BGREENE292
50%
50%
BGREENE292,
User Rank: Strategist
8/6/2012 | 4:40:44 AM
re: Sorry, But Outsourcing Isn't Evil
So, after outsourcing your labor offshore-- to the disadvantage of Americans-- you are now concerned about the "work loyalty" of Indian staffers? Perhaps they learned their version of loyalty from their employers, who shutter factories not because they could not profit, but because of greater profits overseas.
.
This curious phenomenon also explains why large business is sometimes hostile to union activity and labor demands. Company managers claim a right to organize (and collude) on their own, but it becomes an outrage when workers presume to do the same.
JimC
50%
50%
JimC,
User Rank: Apprentice
8/5/2012 | 5:47:38 PM
re: Sorry, But Outsourcing Isn't Evil
Having been a COBOL programmer more than thirty years ago, I had a bird's eye view of some low-quality, inefficient, "quick & dirty," spaghetti code put into production and left there with very little documentation explaining the convoluted logic deep in those in-house developed systems. That led to frustration in trying to maintain those monstrosities written by people who "learned to program" on the job. Many became project leaders and actually fought against structured programming techniques being taught to early '80s students of Computer Science and Information Systems. The tipping point came when purchased software packages, often written by those new CS/IS graduates, were acknowledged as clearly superior to most in-house application systems. A whole lot of bad programs were replaced by those independent software vendor products, but not all. Applications that couldn't be replaced by ISVs sometimes had their maintenance (hardware/operating system compatibility, feature enhancements, bug fixes, etc.) outsourced and offshored to India. If brilliant, well-educated, well-trained, hard-working programmers there can produce work that's superior (better, faster results for less money) to what's done in the U.S., then that's how a modern, capitalistic, global economy should function. If average or poor work done in the U.S. is swapped out for average/poor work done elsewhere, then all that's left is cost savings -- if any at all. Here's a quote that's all too true with outsourcers: "There's never enough time to do it right, but there's always enough time to do it over." Reward the world's best work, not its cheapest.
BGREENE292
50%
50%
BGREENE292,
User Rank: Strategist
8/6/2012 | 4:32:06 AM
re: Sorry, But Outsourcing Isn't Evil
Yes, of course the better programmer should win-- but win what? At issue is not mere code quality, but national prosperity-- hundreds of thousands of jobs and the economic wealth they generate. Jobs so important, many rising national economies have staked their future on computer-driven infrastructure and enterprise.
.
Seen against this stark reality, those who pretend to off-shore jobs in their "search for quality" actually compromise our national interest. The way the multinationals play it, hiring programmers and other technical staff is a zero-sum game-- we lose when they win. In fact, the H1b visa has been turned by US outsourcers and their congressional friends into a cynical exercise, in which Microsoft and others claim they simply cannot find enough good help.
.
As the huge glut of corruption surrounding Unisys and Infosys testifies, the H1b stampede is a rush to profit by importing two foreign applicants for the price of one American programmer. Here is what Unisys president Richard Marcello said, "We were able to eliminate a whole bunch of actually U.S.-based jobs and kind of replace them with two folks out of India" (Richard Marcello, president of technology, consulting, and integration solutions-- and thanks to Mr. Marcello for his unintended candor.)
.
http://news.slashdot.org/story...
.
Only a country which can meet its own need for competent specialists-- rather than importing them from India-- has a future. This is not a debate about decades-old spaghetti code from a bygone era, but the clash of corporate greed with the interests of communities across America.
uiswatcher2
50%
50%
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.
zeroisone
50%
50%
zeroisone,
User Rank: Apprentice
8/6/2012 | 3:16:38 PM
re: Sorry, But Outsourcing Isn't Evil
Rob Preston is the kindest, bravest, warmest, most wonderful human being I've ever known in my life. Why don't you pass the time by playing a little solitaire?
rhultz752
50%
50%
rhultz752,
User Rank: Apprentice
8/6/2012 | 3:37:17 PM
re: Sorry, But Outsourcing Isn't Evil
So what's you're point.
NSL
50%
50%
NSL,
User Rank: Apprentice
8/6/2012 | 5:13:31 PM
re: Sorry, But Outsourcing Isn't Evil
Rob, it seems as if you're purposely obfuscating the issue. The issue brought up by politicians, and American workers isn't general outsourcing, but specifically outsourcing to people and companies in foreign countries, which means American jobs go overseas. Outsourcing to consultants, contractors and other companies which are local, regional, or national aren't particularly at issue, and you know it.
jgorman281
50%
50%
jgorman281,
User Rank: Apprentice
8/6/2012 | 7:11:43 PM
re: Sorry, But Outsourcing Isn't Evil
Some types of activities can be outsourced well others cannot. It is not always about money. High level BA tasks are generally kept inhouse while low level coding can be sent out. The best uses of outsourcing is when a company needs a specific skill for a very short period of time, it is generally more sensible to hire a contractor than to train an inhouse resource for limited use. WIth a robust outsourcing relationship these individual and one-off tasks can be quickly and effectively handled on a repeating basis with litte recruiting effort on the part of the company. These one-off resources often cost more than the in-house employee.

Additionally, many companies are pulling back from off-shore outsourcing becasue the rising wages overseas are cutting into the costs savings. As emerging economies develop companies need to move on to even cheaper markets to maintain the advantage. IE: Indian consuling moving to China or Vietnam.

In manufacturing, rising gasoline and deisel costs combined with long lead times hurt profitability of overseas manufacturing, so some of those jobs will likely come back onshore. This is the same reason Japanese and German companies build cars in the US, Cheaper labor and very low transport costs for the finished product.

The spectrum of outsourcing and also offshoring is ever changing and quite diverse to make any blanket statements.
JimC
50%
50%
JimC,
User Rank: Apprentice
8/7/2012 | 12:37:49 AM
re: Sorry, But Outsourcing Isn't Evil
Can the argument be reduced to the following few sentences? Company X is a multinational with its headquarters in the U.S. They state that they have a limited amount of money and are looking only in the U.S. for a certain number of IT stars. They also state that if they look worldwide for workers of the same high caliber, more of them can be found for less total cost. The larger the "fishing net," the better the odds of catching a specific kind of desirable fish. Dredging the ocean floor for low-cost, ubiquitous "fish" is a problem and rife with fraud (passing off common as stellar).

In this global economy, the U.S. should be able to skim the best & brightest talent from India, China, etc. If they can't, then that rare talent will remain overseas and likely work for competitors of U.S. companies. Make the world a capitalist meritocracy by finding the best talent and rewarding it.
DS150
50%
50%
DS150,
User Rank: Apprentice
8/7/2012 | 10:59:58 AM
re: Sorry, But Outsourcing Isn't Evil
Offshoring is a major problem in my mind. You claim it's sour grapes, but I've seen tremendous downward wage pressure and insane competition for even low-paying positions. I'm making 40% less than I was five years ago, but my skill sets have only increased. So why would I be happy about that? Try looking at some of the IT job ads. Companies out there are now looking to pay someone with a CS degree or a seasoned network admin $10 an hour, and those jobs usually come with a laundry list of qualifications.

Here's a thought. Why does this website need your overpriced writing skills? Let's pay someone named Punjamatar 1/5th of what you get. Maybe we will get some unique insight, and IW can save a ton of money right? What's wrong? That doesn't sound good?
BGREENE292
50%
50%
BGREENE292,
User Rank: Strategist
8/7/2012 | 4:19:54 PM
re: Sorry, But Outsourcing Isn't Evil
SQUEEZING THE SERFS
.
No matter how glittering the generalization about global trade, the "globalist" argument is least concerned with lowering trade barriers. Those hiding behind the global trade flag want only a means to balloon profits by decimating local industry and trade with corporate advantages of scale and massive campaigns of bribery.
.
As practiced today, corporate globalism is a continuing argument for multinational corporate monopoly and abuse. Thanks to the globalist rationale, the world economy is heavily influenced by criminal cartels which scoff at national restraints and barriers.
.
Globalists would increase profits by (1) escaping taxes, in effect "gaming" the tax incentives put in place in their native country by their own lobbies and pliant congressmen (2) penetrating, dominating and destroying native markets, putting local farmers, trade and industry out of business and (3) forcing those without great capital to engage in a race-to-the-bottom, where communities slash local taxes to beg for corporate indulgence and local factories
.
All this, to enrich those anti-patriots who like to meet in obscure places like Davos, Switzerland, and register their corporations (for tax purposes) at obscure locations like the Virgin Islands, Bermuda and Vanuatu.
.
As you put it eloquently, even coders have their version of the race-to-the-bottom, in which one does the work of two, but for half the price and twice the credentials. In other words, "squeezing-the-serfs" is a very old practice, as old as slavery itself.
delphin
50%
50%
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...
TimTaylor21
50%
50%
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.
ANON1237384778315
50%
50%
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.
iosax
50%
50%
iosax,
User Rank: Apprentice
9/4/2012 | 1:49:19 PM
re: Sorry, But Outsourcing Isn't Evil
Outsourcing offshore is here to stay because our so called democracy is just a superstition. The same people doing the outsourcing are the ones paying for political "reelections" in a vicious circle of bribes and favors. And it's not evil only until your own job gets outsourced, which in the case of a technical magazine is not really that hard, since all indians speak English. We should force the government to publish the number of jobs created off-shore along with the number of jobs created in the US by american companies, they'll never do it willingly, for obvious reasons
braya
50%
50%
braya,
User Rank: Apprentice
9/4/2012 | 5:45:25 PM
re: Sorry, But Outsourcing Isn't Evil
The real evil is uncompetitiveness and unadaptability. What is the percentage of Americans who received real formal college education in I.T.? I'd bet the numbers is definitely lesser than the demand. Majority of Americans should get real solid education and experience before the few would bitch and whine about it. Unfortunately, the current American I.T. pros in the industry became collateral damage to outsourcing. Why not move up to management or executive level? That department is as competitive too? excuses, alibis, blah-blah-blah..

Outsourcing makes perfect business sense. It is an irrefutable fact that globalization is here to stay however we bitch about it in Capitol Hill, ironically, it is us Americans who started it. The sooner we swallow our egos, the sooner we are better off.

..or quit the industry before you put a gun to your head.
twiddler99
50%
50%
twiddler99,
User Rank: Apprentice
9/4/2012 | 6:59:06 PM
re: Sorry, But Outsourcing Isn't Evil
As others have observed, Rob's article doesn't make a sufficient distinction between outsourcing and offshoring. Outsourcing is simply an enterprise's decision to contract some particular expertise instead of maintaining that expertise in-house. Offshoring, on the other hand, robs jobs from U.S. workers, and outsourced offshoring is essentially treasonous. It's exporting jobs from the U.S. when high domestic unemployment is dragging the country down economically. So "sorry" Rob, but echoing the entitled attitude of the corporate elite, and quoting statistics on the ubiquity of offshoring does not make the practice ethical. It is unpatriotic.
jries921
50%
50%
jries921,
User Rank: Ninja
9/5/2012 | 6:25:25 PM
re: Sorry, But Outsourcing Isn't Evil
The thing is, that management jobs are not the one's that are outsourced or offshored, though I'm sure that he'd tell us (honestly) that if his boss thinks he can replace him with an Indian working out of Bombay; more power to him. Never mind that due to immigration restrictions, people aren't free to follow the jobs from country to country, nor do offshorers really want them to (ie. it's not really a free market).

It is telling that the mania for cheap labor never seems to extend to executive jobs.
jries921
50%
50%
jries921,
User Rank: Ninja
9/5/2012 | 6:59:35 PM
re: Sorry, But Outsourcing Isn't Evil
While I think I understand your position and you explain it well, the fact remains that regular employees have a lot more interest in the future success of the firm that outside contractors can afford to (their jobs depend on it). It's also the case, that while speculators may applaud gratuitous layoffs in the endless quest for cheaper labor and higher (short term) profits, the cost is that employees have little or no incentive to be loyal to company, and every incentive to bolt if someone offers them a better deal.

Loyalty up never exceeds loyalty down. It never has and never will.
MALLEN432
50%
50%
MALLEN432,
User Rank: Apprentice
9/9/2012 | 10:24:56 PM
re: Sorry, But Outsourcing Isn't Evil
The real issues as I see them are actually quite clear. 1. Regardless of any quaint ideas of ethics or proper politics, labor will move to where it is performed at the least overall cost - to include the shipments of raw materials and finished goods. 2. The era of national borders as it relates to commerce are quickly coming to a close.
With these two thoughts in place I would point out to those who see the issues as involving class to wake up and look around. It certainly does involve management, if line-labor jobs are outsourced to another nation someone is supervising the effort and managing the effort, it is only directed from the US. Also, I would point out that if our national leades had handled the bankruptcy of GM and that of Chrysler properly there would certainly be foreign ownership and management of those firms - a lot of the managers of those companies would not be there. I would argue that it their direct failure to match the market demands, leading to their lack of profitability, that they, in fact, should absolutely not be there now.
When you really come down to the full realization of the purpose of a business it exists to do one thing - and one thing only. That purpose is to provide income for those who own the company. It does not exist to provide jobs or careers for company management. The company exists for those who own it. Capital for machines and technology, for hiring and salaries, is the cost of doing business - absolutely not its purpose.
Those of us who do not own a company, perhaps even do not own stock shares in one, must be aware of the dynamic. It is wonderful that companies treat us well and with humanity, it is also wonderful if they pay us fair wages and benefits for the effort we bring. The reality is that 'loyalty' does not figure anywhere in this paradigm. Just as the company will not think too hard on letting me go if my efforts are not a good fit, I should not think too hard on leaving if I can fit better with another employer.

All of the above said: If you want to end outsourcing we need to jump headfirst into the deep end and embrace technology to accomplish the results we want at the least cost. We must be better as individual producers within the companies we work for.
Transformative CIOs Organize for Success
Transformative CIOs Organize for Success
Trying to meet todays business technology needs with yesterdays IT organizational structure is like driving a Model T at the Indy 500. Time for a reset.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest September 18, 2014
Enterprise social network success starts and ends with integration. Here's how to finally make collaboration click.
Flash Poll
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
The weekly wrap-up of the top stories from InformationWeek.com this week.
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.