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Outsourcing: Why Onshore Vs. Offshore Isnít The Right Question
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RobPreston
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RobPreston,
User Rank: Author
11/25/2013 | 9:41:50 AM
Gone Bad
There's no shortage of press on onshore outsourcing deals gone bad either. As the author suggests, problems with offshore providers can arise because of time zone and cultural/communications differences, but when outsourcing relationships fail it's usually for more complex reasons. 
Lorna Garey
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Lorna Garey,
User Rank: Author
11/25/2013 | 10:18:22 AM
Sabotage?
Judging from the heated response of IT pros to any discussions of sending jobs offshore (or H1-B), there seems to be a 'fox guarding the henhouse' angle.

It must be tempting for an on-staff IT pro to at least downplay the quality of offshore partners, at worst actively seek to sandbag these relationships. Maybe it's fear their jobs will be the next to go, maybe just general prejudice. Either way, if done in a subtle way, that must be difficult for business management to detect.
cheader
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cheader,
User Rank: Apprentice
11/25/2013 | 11:24:16 AM
RealityCheck
With a population of 1.2 million, India does not have one university ranked in the worlds top 300 universities so in other words your outsourcing your work to Devry Institute caliber worker. This is why most outsourcing projects fail
shathcock750
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shathcock750,
User Rank: Strategist
11/25/2013 | 1:04:45 PM
Re: Sabotage?
Ms. Garey,

I do believe you're views have some merit but as an experienced IT professional I do take exception to the "fox guarding the henhouse" comment.  IT has many functions, and when it comes to our corporate systems we must guard the henhouse whether you're a fox or a chicken. 

I've seen first hand how outsourcing works.  Through my own customer service experiences with our local electric utility to software vendors who have gone almost exclusively offshore.  Quality suffers, communication suffers, and eventually your business will suffer.

In the case of my electric utility, I finally got fed up with the inability to understand the individuals who were answering the phones, I have to admit to having a Texas accent but can understand people from Hawaii to Maine with ease, I finally dumped them and went with a competitor not only for the better cost but because their customer service was far superior. 

The software vendors are difficult as well to work with due to the various time zones and the churn of email responses that can take an issue that could be corrected in hours to weeks.  Cultural differences are an issue as well, what may be an emergency on your part isn't viewed as such in other cultures.

Lost productivity, poor customer service, poor communication skills all add up to bad business and has caused many people to question our need for these services when we have more than capable graduates coming out of our own universities that can't find jobs with a livable wage.  This is because those jobs are now done by someone in a foreign country living on their cost of living and a salary that is far inferior to our own.  Yes it costs more but you get what you pay for.

Are there exceptional individuals in countries outside the US? Absolutely, but not enough of them to outshine the ones who aren't.
Brian.Dean
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Brian.Dean,
User Rank: Ninja
11/25/2013 | 3:58:06 PM
Re: Sabotage?
I feel if we look at any economy then they will be a population distribution where technical capability falls into a set percentile, if graphed then we will see the bell curve. Some economies might have for example 100,000 individuals in the 99th percentile while others might have 200,000 individuals with the same technical skills.

If a firm only has enough resources to hire local/technical capable individuals of the 50th percentile, finds an offer that will result in 60% saving by off shoring and ends up hiring individuals that fall into the 20th percentile, then yes money will be saved but service would be gone. However, if the same firm found an offer that resulted in a 1% saving but individuals were of an equal capacity or higher, that's when things work out, complicated yes, but definitely possible if done right.

Countries that have developed economies are all trying to get these savings. Recently, I have seen France and Germany (among many others) reach out to South Asia and elsewhere, Germany's Ambassador even said that for every $1 earned by export, 60 cents where from importing services and material. Firms in an economy are also competing to get their hands on cost efficient products and services. If everything is ignored then the business next door or the country next door will continue to be better off.

 

 
Brian.Dean
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Brian.Dean,
User Rank: Ninja
11/25/2013 | 4:10:13 PM
Re: RealityCheck
Cheader, I think you mean 1.2 billion. And yes firms that manage to get the equation right are successes, whereas firms that just offshore for the act of off shoring are just a random success or failure. And it is exactly these limiters for example the availability of good universities in developing countries that is keeping off shoring limited, and they are many limiters, but if these limiters disappear then off shoring would only speed up.
Lorna Garey
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Lorna Garey,
User Rank: Author
11/25/2013 | 5:28:26 PM
Re: Sabotage?
Re "I do take exception to the "fox guarding the henhouse" comment."

Would it help if I said I am a fan of foxes? They're clever and adaptable creatures that live by their wiles. Sounds like some IT pros I know.

Hens, on the other hand ...
ChrisMurphy
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ChrisMurphy,
User Rank: Author
11/25/2013 | 5:47:52 PM
Re: Sabotage?
The question I hear a lot is "can this outsourcer innovate?" The outsourcer's incentive is often to keep status quo and not to re-invent a process in a way that slashes staffing and costs.
SandyMontalbano
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SandyMontalbano,
User Rank: Apprentice
11/26/2013 | 10:55:03 AM
Reshoring - A Key Factor In Solving Our Nation's Economic Problems
Reshoring, producing more of what we consume, is a key element in solving our nation's economic problems. Reshoring has grown rapidly since 2010 and offshoring is slowing to the extent that the two processes are about in balance for the first time in decades!

Many companies that offshored originally didn't really do the math. As many as 60 percent of the decisions were based on miscalculations.

Most companies tended to make sourcing decisions based on the wage rate or the landed cost, and leave out 20 or more other categories.

In analyzing offshoring, firms must get beyond calculations focused on short-term profit such labor cost and incorporate the total cost and risk of international supply chains.

The not-for-profit Reshoring Initiative's free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring.  In many cases companies will find that, although the production cost is lower offshore, the total cost is higher. TCO Estimator  http://www.reshorenow.org/TCO_Estimator.cfm

Readers can help bring back jobs and increase profitability by asking their companies to reevaluate offshoring decisions. Suppliers can use the TCO software to convince their customers to reshore. 

You can reach Harry Moser, founder/president of The Reshoring Initiative, at harry.moser@reshorenow.org  | www.reshorenow.org

Read ReMaking America AAM's new book on howmanufacturing may see a new dawn in America along with wealth and growth opportunities. http://americanmanufacturing.org/remake-america/ Harry Moser wrote the chapter on Reshoring.

 
RobPreston
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RobPreston,
User Rank: Author
11/26/2013 | 5:04:31 PM
Re: Reshoring - A Key Factor In Solving Our Nation's Economic Problems
First there was offshoring, then onshoring, now there's "reshoring"? What next -- dinahshoring?
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