Offshore Lore Revisited

About a year ago I surmised that the impulse to send tech jobs to ostensibly cheaper offshore locales contained a strong streak of corporate boardroom faddishness. Looks like reality is now beginning to intrude on the fad.

Companies are discovering that the promised cost savings are just not there. A survey of corporate IT types by DiamondCluster International found that over one-fifth had stopped outsourcing projects before completion. The outsourced work often disappoints as the depth of foreign technical expertise does not yet match that of U.S. workers.

"My experience with offshore outsourcing is that you can pay very little for a large quantity of unusable code," one CIO tells CRMBuyer.

Plus stacked against the benefit of lower salaries for offshore workers are the added costs associated with time-zone and language differences. Toss in cultural differences -- suffice it to say no other workers in the world are as blunt and direct as Americans -- and perceived cost savings can melt away.

Offshoring is not going away. But all the jobs are not going to Hyderabad either.

Comments

[I Blame the Parents]

Reminds me of the time I was dealing with Amazon.com's customer service (no 800 number, just E-mail with reps that all have indian names). I was trying to verify the price of a book. It took about a week and a bunch of E-mails before they understood that I was not trying to haggle over the price.

[Patrick]

you can't simply take something like this on faith.

Isn't that what companies do when they outsource??

Adding layers of bureaucratic rules to create "stability" would likely only make things more confusing and alienating and ultimately less stable.

I never said we should do that. Rather, I am lamenting the fact that it is not something our culture even thinks of when making these calculations. Instead we take the short view, and damn the consequences.

[Jason Ligon]

An essential element of progress is experimentation. If American labor feels smug, it is only because someone bothered to find out that they were worth something approaching what they are asking for in wages and benefits.

Another way of looking at this is that we are trying to identify what the comparative advantage of Indian labor is. Nobody ever claimed it was 'everything'.

[speedwell]

The phone number for Amazon.com customer service happens to be 1-800-201-7575. Honest. I just called it to make sure it was still up.

[Patrick]

Duh. I could have predicted this. But that's OK, it was worth all those lay offs to find it out. BTW, you can probably tell I am not convinced that the "jobs churning" effect is a good thing. In fact, I think we pay a price by completely ignoring the cost of this effect on people's lives. Sometimes stability is a good thing.

[Mo]

Patrick,
I agree that the disruption in people's lives was unecessary, but you can't simply take something like this on faith. On the bright side, engineers here now have greater leverage over their companies than they did before this discovery. Before, executives could threaten to ship a job overseas if the engineers did take a pay/benefits cut. Now the engineers can turn the tables and say, "Go ahead and ship our jobs overseas, we'll go to the competition and do better work for less cost." The system works, albeit painfully at times.

"If you've never made a mistake, you've probably never made anything."

[fyodor]

Patrick

How can we possibly "completely ignore the cost of this effect on people's lives" with folks like you forever reminding us?!? It sure sucks to lose a job, for any reason. But trying to artificially contrive "stability" would only force companies to find the "loopholes" to do what they need to to maximize profits, which damn them (sarcasm) they always seem to be trying to do. In fact, it was most likely to maximize profits that they hired anyone to begin with! Adding layers of bureaucratic rules to create "stability" would likely only make things more confusing and alienating and ultimately less stable.