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GE Capital CIO: Outsourcing Went Too Far
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DDURBIN1
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DDURBIN1,
User Rank: Ninja
8/6/2014 | 12:13:40 PM
Re: Yo-Yo Management

I think you hit on a good point.  From an upper management perspective outsourcing has two benefits affecting the stock price.  First is the perceived cost savings on paper.  I haven't seen an outsourcing proposal that didn't predict huge cost savings.  Second, senior management is perceived as "doing" something to benefit shareholders.   The plan is executed followed by the cost saving being a fraction of the proposed saving while business expertise is lost and benefit to business processes becomes less realized.  Hi-Ho it's time to insource again until the next new crew of senior management comes in and looks at the cost savings of outsourcing.

majenkins
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majenkins,
User Rank: Ninja
8/6/2014 | 11:59:09 AM
Re: Yo-Yo Management
Perhaps but my thought lately has been it is more about the stock price and stock options than anything else. "If we don't do something the Wall Street speculators won't push/keep our stock price up and our stock options won't be worth as much." Then they use the same old tired justifications for which ever direction they are going. Perhaps I am getting a little cynical in my old age as I approach retirement.
DDURBIN1
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DDURBIN1,
User Rank: Ninja
8/6/2014 | 11:48:57 AM
Re: Yo-Yo Management
These same drivers to justify insourcing have also been used to justify outsourcing; better code, faster code, lower cost, faster turnaround, better expertise, better support, process improvement and the likes.   I  think this has more to do with human tendencies than actual facts.  The grass is always greener on the other side of the fence until you actually get on the other side of the fence then guess what? The grass is still greener on the other side of the fence even though you just came from there.  Don't know how else to explain it.
majenkins
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majenkins,
User Rank: Ninja
8/6/2014 | 11:33:58 AM
Re: Yo-Yo Management
DDURBIN1, I agree 100% with you. And this issue is also seen in the merge/divest cycle. The same business drivers are used to justify both actions there as well.
majenkins
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majenkins,
User Rank: Ninja
8/6/2014 | 11:31:00 AM
Re: Insourcing and quality
Laurianne, It not only echoes your other article but it echoes what some people were predicting before the outsourcing trend went crazy. I also think Thomas is correct that language probably has a lot to do with the quality.
DDURBIN1
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DDURBIN1,
User Rank: Ninja
8/6/2014 | 9:38:49 AM
Yo-Yo Management

The finance and banking industry was the first industry to start the outsourcing trend in the early 80's to HP, IBM and others followed by insourcing followed by outsourcing to EDS, Perot and others followed by insourcing followed by outsourcing to India, China and others....well you get the picture.  What is interesting about this yo-yoing between out and in sourcing is the exact same business drivers are used to justify both actions.  The next "new" CEO at GE will start the outsourcing again. This article can be used again, just replace the word insourcing with outsourcing and hiring with firing, presto you have a good article on how GE is outsourcing. 

Thomas Claburn
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Thomas Claburn,
User Rank: Author
8/5/2014 | 5:01:00 PM
Re: Insourcing and quality
I'd be curious to know whether there's a difference in results between outsourcing locations where communication is a challenge vs. locations where communcation is in the same language. Is it geography or language that improves results?
Laurianne
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Laurianne,
User Rank: Author
8/5/2014 | 11:59:12 AM
Insourcing and quality
"GE is getting better-quality code and higher throughput using staffers than it did with contract resources, he says. Fowler sees that in measures such as fewer tickets for rework on post-production code that GE-badged employees built." This echoes what Shane O'Neill just outlined in our related article: 4 Outsourcing Trends To Watch.
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