Enterprise Software

More companies realizing the downside of outsourcing

The latest survey from Robert Half Technology says that most CIOs do not outsource technology jobs outside the U.S. Ninety-four percent of the CIOs surveyed said their firms don't outsource. Nearly six in 10 CIOs whose companies do outsource said they are discontinuing the practice mostly because of the management challenges it causes.

A piece in the most recent issue of Workforce Management says that American companies are starting to "backshore." Backshoring is the term used when companies bring jobs back home after experiencing disappointment and frustration with remote, foreign workers.

The article says that backshoring is driven most by five factors:

  1. Cultural misunderstandings — Offshore workers don't understand our culture and so never have an understanding of our product requirements.
  2. Unexpected management needs — Domestic management must do a lot of hand-holding with overseas workers. "You can't ever get rid of your workforce management responsibilities."
  3. High turnover in the offshore workforce — Call center attrition rates are around 40 percent to 50 percent, and IT rates are around 15 percent to 20 percent.
  4. Low skill levels — If a company tries to offshore highly complex work, it can't find the skills, and it can't train the people because they don't have the background.
  5. Work that's too complex — The more cutting edge the technology, the harder it is to offshore. Well-defined tasks are better for offshoring.

The Workforce article cites a problematic relationship between an offshoring group and the Los Angeles-based Arvani Group, a management consulting firm that helps international mobile and wireless companies. Arvani contracted with a group in India to do some research. It was hoping to take advantage of the time zone difference — provide a request the night before and have the results the next morning.

Instead, the research reports came back a week late, containing the same information Arvani had sent, only in a new format. Arvani ended the contract and brought the work back to a U.S. firmĀ  it had used before.

If your company has outsourced, did it find that the problems outweighed the money savings?

About

Toni Bowers is Managing Editor of TechRepublic and is the award-winning blogger of the Career Management blog. She has edited newsletters, books, and web sites pertaining to software, IT career, and IT management issues.

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