Good vs Bad Outsourcing

One of the places I worked had done some limited outsourcing and struggled for years with the idea of doing something far more broad. I left that firm but some of my collegues became involved with the management of the outsourcers contract for the company.

Never outsource anything you don't thoroughly understand and have very well documented. You need to really nail a good service level agreement(s) to ensure that the outsourcing company does not take you to the cleaners, and I think its inevitable that they will try.

I've rarely seen a company come to the end of an outsourcing contract in a happy state. Either they dump the company (find another outsourcer or bring it back in house) or make radical changes in the contract to try and rebalance it.

James

I don't like outsourcing. I don't mind hiring consultants with limited scope, but giving away the keys to my domain doesn't make me feel good.

Anything that needs FAST turnaround, don't get rid of it. The outsourcing company makes more money if they don't have to deal with you much. (So I'd use them for monitoring, at most.)

If you can live with outages of up to X hours without anyone even getting to your systems, or the users, then go ahead. But for people who really care about your business, they need a stake in it.

I had a bad experience of IT outsourcing form the inside i and the rest of my team were kept in the dark, until the news of the pending outsource was leaked, when questioned, we were given a brief explanation, but then a few days later it was confirmed, it was the worse six months of my life, before this happened we were not appreciated or praised for work completed, so you guessed right morale was not low it was rock bottom.

The outsourcing went well (not), processes were missed and a lot of work not taken seriously, to the point we had to do twice as much work after the outsource fixings things, as we did getting it ready to be outsourced.

The good news however, is the new company i moved over too, appreciated my work and rewarded me well, they do listen to thier teams and praise and help where they can, but a word to the wise, ousourcing is not all its cracked up to be, for companies thinking of doing it, think about it and think about your staff.

That outsourcing is here to stay until the bath runs dry is something I guess we have to accept. I dont doubt though that the flow will start in the opposite direction eventually.

Company handling can go a long way to retaining a measure of goodwill.

My former employer made no secret of its outsourcing plans but said nothing of its scope. It engaged in a major ERP project and shipped a lot of its international IT staff to a location in Europe for two years. We worked like demons during that time. twelve hour days were the norm and fining people asleep under their desks in the morning, common.

Why did we do it? The promise that all project staff would be garanteed a job if we saw the project out and completed on time.

We delivered.

A lot of us got sent home early to face the news that we hadnt stayed until the projected completion date and so the company was under no obligation to keep its promise.

The payoff was generous but at 50, finding work was very difficult. The company 'lost' a large number of IT people and flooded the local market.

I get the impression that IT departments dont just get 'dropped' (It would be a bad thing to do anyway) but they are slowly bled to death. A few people here and a few people there. No big news and no shareholders worried about the loss of kowlegable staff.

My immediate manager, to his eternal credit saw a lot of this coming and insisted on a six month notice period for staff lost to outsourcing.

There is no way in the world that an IT professional in Europe/USA is going to compete finantially with the same in Asia. I believe we have to accept that. These guys are every bit as good as us and can deliver.

We (Axyva) provide advice on outsourcing offshore and in doing so I have undertaken assignments in many different organisations [no this isn't a sales pitch!]. The negative reactions are entirely understandable and the perception that an external supplier will feel less responsible is sometimes true. However, in reality it is no different from buying any other type of service that can have a huge impact on your business. Be clear on what you expect to gain and don't view it as a magic effort-free cure for all your problems.

I been out source twice, and both times I seen the good highly trained staff leave within the first year. I lasted 2 years at both companies. After that you left with just management type?s restructing the way you answer the phone!

The Good, the Bad:
I have seen the MIS dept turn from a highly motivated proactive set of team players turn into disgruntled indivuals within 6 months! The Management structure turn into a top-heavy system that out number the original out-source staff.
It def turned the dept into us and them. Un-outsource staff seem to battling with the new outsource management to get the same level of service. Everything had a cost, and no work could be done without a service request been signed. For Joe Bloggs wanting a software install this turned a 5 minute job into 3 days of paper chasing if was outside the scope of the agreed SLA?s. Where it just fitted into works loads as soon as possible before.
In company one base in outer London the mainframe was moved to a purpose build data centre in Manchester. Yes this increase the uptime and allowed maintenance to be carried out during the day etc, but we lost all experience data techies as their where given their cards.
Yes, there was more pooled resources in the out-source company. But buggered if you allowed too use any when you need them.
Both companies insisted the NOS moved from Novell to Microsoft against the wishes of the companies employing them! This resulted in one of companies cancelling the desktop services out-source contract in year 3 of seven year contract.
Training was base on work requirement; this didn?t mean you get any training as staff on other sites would have to cover for lack of knowledge on your site over the phone and emails. And only visited after management agreed cross-charging arrangements.
The Ugly:
Management where concern with targets more and more, and least and least on staff well-being. SLA?s became a joke as staff left the company. Basic work loads became a fire firing exercise, stress levels became too much for some and long time sickness was norm.
Both Outsourcing companies are major names, so don?t trust the name. Research the companies that have been outsource before, talk to there staff, check the skill levels and most of all check with staff that have the outsource unit in their mist.

"Too many executives share this mindset -- some unconsciously, some overtly: "If it weren't for all these lazy, hard-to-manage, ignorant employees we'd have a great company." It's why employee surveys are often nothing more than window-dressing, designed to convince those lazy, hard-to-manage, ignorant employees that they really love working for the executives who treat them with such respect. It also might explain why outsourcing is such a popular strategy: Entrusting the success of your business to some other company's lazy, hard-to-manage, ignorant employees is a much safer bet than entrusting it to your own." Bob Lewis (Keep the Joint Running)

My favorite quote on outsourcing. In my opinion outsourcing is a management attempt to coverup its own failings.

The key point of outsourcing isn't cost (although in countries with hugely overrated workforce like the US it may be a significant driver). It's about focusing on the core business and having well-defined SLAs. Although the unions and the laws have in general been a great help to avoid workforce exploitation, it somehow distorted the employer-employee market away from the natural market rules. Ideally, that relationship should be ruled by performance scorecards (i.e. a contract, in the abstract definition used e.g. in Hobbes and in programming-by-contract): if the contractor provides such-and-such, and the service provider delivers such-and-such, the contractor pays that much. That's exactly the kind of value that the outsorcing model delivers, the whole model is performance-driven, if the SLAs are well defined, everybody's vectors will be pointing in the same direction.

Naturally there are bad implementations of any model, but, from an abstract model standpoint, the outsorcing model is far superior than the in-house model in almost any aspect I can think of (which means that a well-implemented outsorcing will always be better than a well-implemented in-house alternative).

There have been many negative comments posted here concerning outsourcing, and granted, some of these may be valid; however, looking at the situation from a business perspective, the cost savings are the key. The initial investment to setup the outsourced area may be high, but the long term cost savings well justify the expense.

Dont get me wrong, I am a firm believer that jobs should stay in this country, but lets be realistic. We (IT People) have basically priced ourselves out of a job. Why should I pay you 50 to 100 dollars per hour when I can outsource the same position and get 4 people for what I pay for one? And the skills that these outsource people have are every bit as good and in many cases better than yours.

Welcome to reality people. This IS a global economy and not only are you competing with the guy next door for a job, but you are also competing with people from all over the world for that SAME job.

The best move I personally think for anyone in the IT field at this point is to consider employment with one of those outsourcing companies. Just remember though, that bigger, may not always be better. These outsourcing companies will keep onshore staff to supervise offshore resources and work efforts. Try it, you may like it, at least you'll have a job.

And indeed, outsourcing (whether overseas or not) tends to create non-reusable code. After all, if you can get people to pay you later to fix the stuff you messed up today, wouldn't you?

To me, there is nothing more satisfying than being a part of the development process, growing your baby, nurturing it, getting it to a stable, error-free state, and then watch it flourish. I am more than happy to take responsibility for my systems, just so long as I have the authority to make it work the way I think it should.

I've been on the evil side of the fence for several months now, consulting for a company whose product I believe in. But I have to say, I have little zeal to make my clients' products perfect. After all, I'll be gone in a matter of weeks, on to the next client site.

So, I have elected to get back to running my own ship. It's where I feel much more appreciated and self-actualized.

-Mike

I am an outsourced IT person and while I wasnt here during the transition I am here now and it seems to be very smooth.

Over the past 20 years I've watched probably about 300 jobs from our plant head down to Mexico.
The more jobs that have gone done there the worse the quality has gotten. Put on top of that our company put S.A.P.in to full operation which bsicaly almost shut us down and now we are millions of dollars behind and what product we do manage to get in and move we usually have to re-work Mexicos' mistakes before we can ship it.

Because it's always driven by the bean counters; never by the staff with the technical nous. Staff are always considered the most expensive commodity; you have to pay for accomodation, leave, personal development amongst other things. My previous employer calculated that it cost them 2.5 times my salary to employ me.

In my experience, when you have your infrastructure running well, then it always looks as though we're doing nothing. Management then think those lazy, overpaid IT guys are superfluous to requiements. On the other hand, if you're all running round with your tails on fire, then the Management believe you're incompetent and that someone else can do it better (even if their poor business decisions to buy 2nd rate hardware and systems is the cause of you sweating buckets).

I've personally seen three outsource projects and every time the service was brought back in-house within five years (twice at an astronomical cost) because service levels dropped to an all-time low.

What architects of the outsourcing failed to appreciate was the outsourced staff were loyal to their company, not ours. The outsource companies very rarely appreciated our business requirements, didn't want to learn them and were never prepared to go the extra mile. If there wasn't a written process to cover an issue, then it was swept under the carpet and forgotten. I actually saw a helpdesk call to replace a faulty PC take 3 months to complete; the building it was in was a Token Ring house and all the desktop support staff only had experience with Ethernet (I'm not kidding!)

And it looks as though I'm going through it again; though nobody will admit it openly.

If it wasn't for the fact my current post really suits my lifestyle outside of work, then I would have left ages ago.

I've seen the good, bad and ugly sides of outsourcing. From an employee perspective, you will generally have the opportunity to go to work for the outsourcer. If you want to be an IT person, then working for the outsourcer can be great for your career. Most employers create some type of severance package for employees that the outsourcer doesn't want to take. In general, it will be stressful and people will bail before they know the final disposition of the matter. Unless you're in a really tight job market (or you don't have the skills to compete) it won't hurt to wait around for a while. The outsourcing might not happen. Just find things to do that will demonstrate your value to the organization until the decision is made.

From a business perspective, outsourcing can be a positive experience if they follow a few rules:
1) Only outsource non-strategic commodity tasks (e.g. infrastructure management - the monitoring of the infrastructure and possibly some amount of the maintenance) and you keep the functions that give the business a competitive advantage (e.g. application development and support). If the network (or something else) is strategic to the success of the business, you should keep all aspects of it.
2) Put strong service level agreements in place.
3) Understand your fully burdened costs for each IT service you provide and your current service levels before you start looking at outsourcing. This will allow you to force an apples to apples comparison with the costs of the outsourcer.

Businesses that violate those rules often find themselves frustrated with the outsourcer and taking IT back from them because it costs more than they planned.

Good luck!

An old employer of mine outsourced some CRM code development just around the time I joined the development team as a full-time employee. When the contract workers (all of whom were from India and young professionals just starting out) left, we found they'd:
1) left no documentation
2) ignored our naming standards
3) written bad code; bad being defined as inefficient, hard-to-trace and sometimes just non-working.

And, of course, we had to live with it. We spent a lot of hours tracing it, modifying it and fixing it. It was very frustrating.

Outsourcing might be a good move if you know who you are getting and the company which places these temporary employees are within easy legal sueing distance.

Outsourcing is incresingly going to be there. you can not blame the management for their decisions coming out of experience.

It saves money and I bet it delivers very very good quality material as always there is a fear of rejection, loosing a good amount of business.

THe guys at other end are equally or many times more skilled, capable. I have seen many in-house IT work.. It's simply shit. but it goes on as it is in-house. I have seen the puppies working with terrible in-house applications/products, at once becomes bulldog on outsourced material. Even if they miss a simple validation..

Communication is improved you can have video conferancing just as talking across the table. In such cases there is no question of ambiguity and the produce by third party is really fantastic.

So if company is earning more profits from outsourcing. It had better chances of survival and expansion. This benifits the country again. So it's like 'live and let live' in today's Global villege.

Hope u agree to this.

First, lets not confuse outsourcing with offshoring, though in many cases they are one and the same.

Outsourcing can be a useful tool when used appropriatly. In our company, we keep 2 programmers occupied full time working on our ERP system - chaging reports, streamling processes, etc. It would be silly for us to outsource that. But, for companie that only need customization work infrequently, outsourcing gives them ready access to a programmer when they need it withough having to pay a full time salary to have it available.

Many times outsroucing is a choice between cost and availability. Currently, my company pays for a full time DBA (me). With that they get many benefits such as instant SQL access, instant problem solving, support for the programmers, special attention to detail on the databases, etc. They could outsource the DBA function, and they would save money, becuase an outsrouced DBA is responsable for many companies databases, so my compnay only has to pay for a fraction of a DBA, of course for that savings, they lose some of the benefits mentioned above. So, they make a decision based on the trade offs.

So, in many cases, outsourcing can be the right thing to do - as long as the decision involves more than a fincancial angle. If we look at only the bottom line, we would always choose to outsource.

Offshoring - yes, offshore labor is cheaper, as I said in another post somewhere else, how can an American Worker compete with someone making 50 cents an hour with no benefits. Of course, when we say the American should accept lower salary's, we forget that the American has to pay a lot more for many products than his foreign counterpart. Perhaps if we were to compare salries based on cost of living we Americans would still be overpaid - but until a truly global economy is achieved where products cost the same EVERYWHERE, there will always be some that need to make more than others because it costs more to live there! Here's the rub - do we really think Big Business is going to let things improve in those foreign countries? Not if they can help it - this would cost them their cheap labor pool, and even if conditions do improve, how long do you think it will take Big Business to move operations somewhere else? Its not Mexico, India, the Czeck Republic, or anywhere else, they are interested in, its CHEAP LABOR! and they will go wherever its the cheapest, period.

So, we either need to open all the borders and go truly global, and when I say we, I mean EVERYONE, not just the USA...OR we need to start protecting our own - because in the long term, no country can sustain an economy where there are no jobs (and sorry, a service economy can't survive long if there is no "production" occuring as a foundation) - the playing field needs to be leveled one way or another. Of course, this will never happen because Big Business loses (or so it thinks). Of course, does Big Business care? No, if the US, UK, EU, or whomever economy fails, Big Business will already be long gone having moved to wherever the ecomomy is stable. Then...well, then they'll do it all over again. I guess ultimatly, it will go full circle, and the jobs will come back to the USA (or whoever), when, after a failed economy, are now the cheapest labor pool.

Okay, enough ranting.

George

Our entire IT Division of over 350 employees was outsourced in 1997, based on an CEO decsion that IT was not a core competency of the organization, & that there would be savings from economies of scales, access to better technical talent, etc. A five year contract was signed and employees were given the option to go with the outsourcer or take a package. About 80% went with the outsourcer & the rest took the package. At first the move went well. The outsourcer did have some best practices in help desk and data center operation which benefited the client. And the outsourcer had good bonus, salary, & benefits programs for the employees. Also there was a three year protection clause for the employees where they could not be laid off. Unfortunately, the honeymoon period did not last long. The primary difficulty was in the development arena where the client started complaining about project costs and delays. The client was not used to paying $ 100.00-$150.00 an hour for programming support. Nor were they used to signing change orders for every change to specifications. Nor did they like the new bureacracy set up between the real clients, the new IT intermediaries left behind to manage the outsourcing contract, and the outsourced employees whom they were used to going to directly. Also the outsourced employees began to notice that education opportunities were less than promised, and pressure began to build for more and more unpaid overtime. Compounding the problem, the outsourcer was purchased by another organization which sold them off to an even bigger outsourcer that had much sharper business practices that irritated the client even more. The employees found that their salaries were frozen and they were put on very onerous up or out performance plans, and hideous project schedules. Service levels started to decline and the client started hiring IT personnel to create a parallel IT group in addition to the outsourcing company. Costs of course skyrocketed, as did employee and outsourcer headcount. The most talented employees left and the less talented started getting laid off especially after 9/11. In retrospect, the outsourcing business model was based on a five year life cycle which hopefully would lock the client into being dependent on the outsourcer. The outsourcer would lose money in the beginning of the deal but at the end would end up with significant profits. For the employee, going with an outsourcer is a very bad proposition. The work environment is bad, salaries are non-competitive, and the management is very autocratic.

Ahh yes ... hire a company in India to do for "less" money than what your local people get paid. Yeah, RIGHT.

We did that about 2 years ago. We were developing a new version of our product and this genius working here comes up with the idea that we can get an offshore outfit to develop the new code for the product. Should be great! Will really make our application fly - and we'll get it cheaper.

To keep a long story short - the outfit did the work and we came up on the deadline. Guess what? The offshore group did not have any real idea what we were doing! Imagine that! We don't do a good job of writing specs for ourselves - so we hire people that don't have ANY idea how our business model and application works and turn over one of the key elements of the program to them. Yeah ... brilliant.

We spent the next year rewriting just about everything they did. I don't know if our company sued the outfit or not - but I would not hire one of those cheap developers to cut my lawn let alone write code. I could write better code my first year in school (30 years ago) than these monkeys put into a production product. It was absolutely disgusting.

-CB

In July 2001, when I was working in Brussels Belgium as system engineer and operations supervisor for one of the biggest american pharmaceutical company, a corporate decision to outsource all but the developpers staff jobs to one of the biggest mainframes manufacturer, I was very happy at that very momment.
I just changed my hat's logo doing excactly the same job for my new company in my former office, with a bigger salary.

About six months later, just the time needed to transfer my knowledge to my new company, I had to move to that company's offices with... nothing to do from 08H00 AM to 04H00 PM despite the fact I had the same job to perform for my former employer.
I had no possibility to remote-connect to my former company's mainframe ... until being back at home, doing my job until about 12H00 PM.

After about one year of such a pleasant regime, I exploded in face of my manager and ... was fired in a few weeks.

I had to follow a strict psychiatric treatment along four years before finding a new I.T. job in a federal administration.

The cost for my former employer tripled and the pharmaceutical company closed the Brussels manufacturing plan.

No more comments...

I was outsourced 3 years ago. I worked for a Major Financial Bank and they were approached by IBM Global Services. They were promised lower costs and higher efficiency and after 2 years realized higher per user costs and lower efficiency and low customer satisfaction. I hear they got rid of IBM and went to another 3rd party hoping it will be better. My take on it after being in the IT field for 20 years, is it is best to keep it inhouse with motivated employees. Most US IT workers respect a company and go the extra effort to support their companies Business lines with technology needs. I am a staunch supporter of keeping the jobs in AMERICA. I now work for another Major US Bank that believes in their employees. Perhaps you heard of them they are Bank of America- Higher Standards.

Corportate dosent call it outsourcing, they like to call it "globalization", to make sound impressive. And my question is, when you start out sourceing when does it stop? Whos to say the company you out sourced to, out sources part of it to another company? I dont care if it's domestic or off shore, you always run the risk of loosing quality.

I have my experience with completely incapable internal IT departments. The only way out for the corp is to define the SLA's they CAN define and get rid of the dead wood. After the contracted outsourcing period, or even during that period, the new alternative can be implemented. All the mentioned dissadvantages like low morale, loss of good employees, are included as a calculated risk just to save the long term perspective.

However, one of the main problems I observed is the fact that there is nothing more likely to make the outsourcing contract negotiations fail than strickt SLA's with penalties for functions like Backups and other essential services. Outsourcing companies tend to love your money but responsibility and associated penalties seem to be pure poison.

In any case, nothing worse than an illiterate management being pushed into the believe that outsourcing will save their day when that is not the case. That ends in the usual hackfest repeated so many times in this thread.

The best experience I made was with 'cosourcing'. A form of resource sharing. It's beefing up your departement with a long term consulting services contract which as applied on a part time and 'need be' bassis. Low fixed cost and fixed hourly rates. So you can utilize specialized knowledge but you're not taken out by it.

First of all, let's not confuse OUTSOURCING with OFFSHORING. Those are two different things, and sometimes overlap.

I work for a prominent outsourcer. I've got senior-level and architect-level skills. I'll never got back to being an admin at a single company, because that gig SUCKS. I have offshore staff in Europe and India to handle stupid tasks like changing passwords or creating print queues.

I get to spend my days crafting new solutions that use new technology for my clients -- and I don't just play with one of them.

Oh, and my clients love it, because they can go focus on creating their little widgets -- which they were good at anyway while they sucked at IT -- and they'll pay my company to run IT for them. It's all win-win. And, they never laid off anyone. In fact, they are now HIRING people to do more application work (which they retained inhouse) from the savings they got when they sent the data center work to us. As for our end, we've never laid off anyone when hiring UNIX people in Europe or India -- those were additional hires fostered by growth.

Outsourcing isn't for everyone. Companies who want intimate control over their IT infrastructure will hate it and should not outsource. But if IT is just a tool, and they don't care what color the tool is, then outsourcing is great.

A great technologist buried at a widget-maker is better utilized at an outsourcer.

I have been on both sides of this equation. As a part of a team working for a very honest vendor, our customers seldom knew what they wanted and seldom appreciated what they got. A few customers just wanted to rip us off for our time and expertise and then not pay. On the other side, we have had great success outsourcing our servers to a hosting company (because they are a fantastic company), mixed results outsourcing software development, and lousy results outsourcing email hosting.

The sae thing is happening here as well. They are do a "study" (wink) and will let us know in the coming months if they deceide. I worked at Lucent as a contractor to IBM in their outsourcing endevaor. When the contract was up for renewal, Lucent wanted alot for free and IBM said no way. They bickered for months and the Lucent siad, thank but no thanks and now has taken the IT back in house.

The outsourcing/offshore costing initially looks attractive to upper management. (They don't have to interact with the negatives everyday.)

I can say that the service provided is as bad as the low price would indicate. You DO get what you pay for (or, don't get what you don't pay for).

And those of you (who do remain) will spend MORE time wrangling with the offshore provider (who is less accountable) than you ever did with the in-house staff (directly accountable). And you will be less satisfied with the end result.

Some advice:

1. Outsourcing is Top Management's favorite. Remember, these guys' goal is to produce big dollar signs. After all, that's what matters to stock holders because the company works for them. So if a manager can save several thousand dollars, it looks good on his record and resume. But many top managers do not understand outsourcing. And it can be summarized in a few short sentences:
A. If the IT services your company needs are like commodities (like electricity), by all means, do outsource. But make sure that there are many companies you can oursource to - a good minimum is 4. IT commodities include: ISP services, user support (mostly live), e-mail, some web (if you have a website that only requires light maintenanace but heavy module-level modifications).

B. If you need a one time service that requires advanced or proprietary knowledge, then outsource to a good consultant. Their people will come, do the analysis, build the system, and if you are smart, you will require detailed documentation from them as well. If the support after that is trivial - do outsource, if not - hire an in-house professional to do it. He will be worth his weight in gold and probably twice as much.

C. If you need advanced, proprietary knowledge on a regular basis - DO NOT OUTSOURCE!!! You will lose. Keep the talent in-house, because they are your major asset. If your expenses are too high, try to lower them. There are different strategies to accomplish that. One is to turn your top developers into designers and outsource just the coding piece to another company. Of course, you will have to factor in the cost to manage the relationship and the cost of the risk of your new partner having access to the applications architecture models. In 2 years time they can strike on their own.

Having said all that, here are some career tips:

1. Jobs in IT are volatile, esp. entry-level and medium-grade ones. If you are in one of these categories, look for a large company that is hiring. Chances are that they will always need you, or will be slow to change. In both cases, you will see the writing on the wall much before they put the pink slip on your desk. Work on your skills and try to become a senior developer who is top-notch.
Initial startups are also good - they have fresh cash kicking and you will likely have a job for at least two years. And they need talented and new blood for their innovative projects - the kind of guys who get out of college with good grades and a lot of steam to change the world and at the same time don't cost a lot. Start polishing your resume after 18 months, particularly if things don't shine. If the venture capitalists pull the plug, it will be sudden death - 2 weeks max.

2. If you are a senior developer - they will probably make it worth your while to stay during the transition, or will offer you a management position. After all, who else can manage a SLA contract better than the person who built it? You know everything these new guys will have to support and most likely you will train them personally on how to do it. Use this tim to ask them to pay for a management course - your eagerness is key to get their approval.
However, if you are not one of the big dogs, then try to sniff the bad news way in advance and from now on before you land another job, try to get the best severance package possible. Senior jobs are not always available, they don't stay around very long, and thus you may be out of a job for a longer than the usual period of time or be forced to take something else that doesn't match your qulifications. Either way, you will lose money. The severance package is your compensation. So, negotiate aggresively. It's worth it. If the company is well off financially at the time they hire, they will be more likely to give you what you want.

My final paragraph is about the brave hearts. People, you can't be IT for the rest of your lives. You have to look to higher grounds. Take management courses, start your own businesses (always the best option for million-dollar salaries), change careers (teach in colleges if you have advanced degrees), and if you do none of the above, never forget to spend at least 3 hours per week, looking for a new job. It is such a relief when the roomers of outsourcing start and you are out the door much before the pink slips start pouring in. With this strategy, I never had the "pleasure" to get one.

Good Night to ALL!!!

When I worked at Large Un-Named Aircraft Manufacturer in Seattle, they merged with Large Un-Named Aircraft Manufacturer in the Midwest. The second firm had outsourced their entire IT in the last couple of years, and did something really sleazy. The IT people were offered jobs at the outsource company (IBM Global Services) - basically, they were offered their own old jobs back - but they lost all their seniority, their benefits and salaries were cut, etc.

We were trying to merge the information systems of the two companies - I was working on the Exchange merger part - and working both with the remaining staff members of Company #2 and the IGS folks who used to work for Company #2. They told me some real horror stories of the way they'd been treated in the outsourcing. I think it was just a way for Company #2 to make themselves more attractive to Company #1 so we'd buy them and make the stock go up. It was not fun working with folks who were that demoralized.

The really stupid thing is that the senior-level managers all had really smarmy BS arguments like "outsourcing the work to a company whose primary focus is customer support." Um, guys, ANY company whose primary focus isn't customer support doesn't last long. Admit all you wanted to do is cut salaries and benefits to make your stock go up and cut the crap.

How can a company do some thing at les-cost then doing it in house, they still have to pay for a building, they still have to pay a CEO, they still have to make a profit. The only way they can do it is have lower wages and cutting employees benafits. Our company tryed selling our board area, it ending up buy it back a year later.

Exactly! IT is a Core Competency. If a company doesn't have it and is not willing to develop it, they will not survive. In the world ahead, a company's information is its business. It is very bad policy to outsource data to people with no real stake in the company.

OK, I've been through this a few times, and here's my take on the whole thing:

1 - Outsourcing your core competency is a sign of a business with serious fundamental problems. The best way to outsource your core business is to sell it to a competitor. Can't think of anything else that will "fix" your business? Sell. Buy a Dairy Queen.

2 - Outsourcing things that aren't your core competency can help you focus your time, energy, and talents on what is. But be careful when you define your core competency. Banking, for example -- is it really a data processing business? Maybe. Without data processing, isn't a bank just a marketing enterprise?

3 - But don't think outsourcing will save you money. It may cost more. But it will be a predictable expense rather than a big sucking money pit you can't forecast from quarter to quarter. And you can expect certain performance levels. Those are good things.

4 - If it fails, it fails big. And it fails because you didn't manage it properly. Your management probably thought "whew, now that headache is gone and I can do something else." Wrong. It takes all of the things the various contributers to this discussion have talked about -- SLAs, very clear understanding of expectations, performance-related pay, and a determination to make the partnership work. Someone really good has to be responsible for it, and it requires constant effort.

5 - Employees hate the idea of being outsourced at first. Partly because of insecurity. Staff in organizations perceived as failing are beaten up and pushed down for a long time before someone at the top decides it's hopeless, and starts looking for a silver bullet outside the company. So these folks assume they're about to be on the street. Partly because they feel like they're being put out of the family -- I won't be part of the team anymore. But in fact, employees almost always end up happier. It's better (assuming you're reasonably competent) to work for a company that knows what it's doing. They'll treat you better, they won't blame you for problems outside your control, they'll support you and train you.

6. If management outsourced to save money and because they thought it would be easier, the outsourcing will fail, too, and they'll end up bringing things back in house. And they'll have to start over with recruiting, because those former employees aren't coming back -- they like it at IBM or wherever they went. If they do come back, it will be at a higher pay rate. How can they lose?

7. Outsourcing is a good way to get rid of dead wood. It may be the only way to do it without lawsuits, and I think that's the real motivation behind many corporate outsourcing initiatives. Are you "dead wood"? Well, that's another issue, and something you should take responsibility for rectifying. Right now.

8. And now, regarding the over-valued American we've been discussing -- I want to ask why so many of the students in our best schools are from somewhere else, and why the people from outside the U.S. seem to know English and write better than we do. Do "foreign" programmers do only what they're told to do? Maybe. That means communication is going to be a challenge if you outsource. Do American programmers spend half their time surfing and playing fantasy football? Maybe. That means we have a work ethic issue. And maybe we need to talk about all of this rather than walking around with ugly American chips on our shoulders.

The company I work for has out sourced software development to the Ukraine since I've been with them (over a year.). It has its ups and downs, but I have to say I've met some awesome developers. I've also met some that couldn't get past the language barrier and that was very frustrating. All in all I have to say the hardest part was understanding the differemce in the way they think and how they view corporate structure. One thing I will say is that they always give me exactly what I ask for (I mean EXACTLY, that taught me how to ask for things clearly.). The big thing I learned is that they want you to speak simply, they don't find it condecending and ask lots of questions. It may take longer to get things done, but it gets done,and often a lot cheaper than with American developers.

I started this post to see what experiences people had with outsourcing, never expecting it to turn to a debate over the US vs the rest of the world.

To be frank, I should have... Americans (read US citizens) have a healthy drive for being patriotic, which sometimes feels almost neurotic. Not all good things are American in origin! But yes America is successful in a lot of things.

However it has been an interesting read all the way. As some have pointed out, there are benefits in outsourcing as well as drawbacks. But the one thing that is prevailing is the negative aspect of outsourcing. For one loosing control, and two all the what ifs...

To pitch in my own view or two cents: The goal of every outsourcing is the need for the business to concentrate on it's core competence and adding value to that. Most companies today face a tough marketplace where the prices for commodities are going up while earnings are dropping, so how do you compete? By concentrating your spending on sales and marketing. But do you really want to expose yourself to the risks that outsourcing brings along?

I'm betting there are a lot of firms out there in different businesses who are struggling with bad decisions made when trying to save money. Some are bold enough to admit their mistakes and try and go back to the way it was before, loosing a lot of their best in the process.

Time will tell what I'm going to do when the decision finally is made, stay onboard or follow the rats... Why be loyal to a firm that is not loyal to you?

Since they are performing a "study" alot of people here are a little upset. Mainly the ones that have been with this company for 20yrs or more. They are a few years away from being able to retire (Rule of 80, age + yrs of service) and they are worried that if the outsourcing goes through they will loose their retirement or not have the same benefits they were so looking forward to a year ago. They claim its a cost savings when in reality its higher stock prices for the share holders. We get praise from our customer base (yes there are times they hate us) but for the most part they love us. When/if outsourced they will no longer have the personalized service that they have been accustomed to since we will now have to document everything we do no matter how insignificant it may seem.

good and outsourcing cannot be in the same sentance together. Hulk say OUTSOURCING BAD!!! enough said. lol.

Outsourcing, like "shareholder value" is little more than code-speak for C-level managment hatred for the middle class, and a theartfelt desire to see the USA a poverty stricken, slum-ridden third-world backwater. Only then will the working class will understand that industry executives are their "superiors".

Back in August of 2003 the company I worked for started the transition of moving 90% of their IT jobs to India. I was in the second wave to go.

We had heard the rumors of it happening for a year prior but were told that they weren't sending all the jobs over, just a small portion. The truth came out when one of the guys was sent over to train folks on the helpdesk and it was let slip that the entire IT would be shipped out.

3 months after that happened is when it started. Of course I can look on it as a way to improve the financial case for the company but they didn't do it up front with the folks they let go.

Now its 3 years later and the company has started to send the jobs back to the states due to poor customer service and the fact that projects were running behind and costing them more money then they planned.

Some of the folks that still work for the company but in other areas that I worked with told me horror stories. For every 10 calls to the helpdesk they had maybe 2 that resolved their issue without having to wait on hold or get sent to another person with an average call of 1 hour.

The cost ratio went higher then when it was stateside. When the contract was completed they moved the jobs back to stateside at about 4x the rate.

I'd be willing to bet the McDonalds has some need for IT internally, probably in a corporate or supply fulfillment capacity.

To the best of my knowledge, which may be flawed, Wal-Mart does outsource some of its IT pieces, but not all of it.

And to be clear, I don?t believe any of my previous comments said or implied that companies should outsource their WHOLE IT department. When IT services are critical to business deliver, it should be clear to that business that many IT functions cannot be outsourced without risking an impact to their product or service. But it?s possible in some areas where you can leverage the vendor's experience, it may make sense to outsource things like development, or service center functions, or maybe even WAN management. We still have an IT department at the company I work for, but we did outsource several areas, and so far it seems our engagement is more successful than the average company. When any company outsources any IT components in their business, they still need internal IT resources that can manage the vendor?and those people need to be IT employees who understand the systems and processes that are being outsourced.

And to your final question about Toshiba and UPS, here is a Forbes article that went over the general parameters: http://www.forbes.com/personaltech/2004/04/27/cx_ah_0427ups.html.

Contractor with three companies that outsourced and it is never easy. Depending on what is outsourced and whom it effects is what matters.
The last big company I was with completely outsourced the IT department. And they were told that they have been replaced and will need to find new employment. This would take two to three months so they could find other employment. But with all the down outsourcing most of the companies IT employees have gone into other job opportunities.
This is our country problem, we keep giving to every one and forget the people here, we created the Internet and we created most of what you use on the Internet.
We need to teach our children to use and improve the Internet.

American companies can't compete because they have a workforce (including managers) that costs more than people are willing to pay for the goods and services they produce.

We can argue all day about whether it's "fair" (if we want to sound like teenagers), whether companies are "loyal" (huh? Did you confuse your employer with your Grandpa?), whether WE are better than THEY are. But it doesn't matter -- we cost more than people (including you and I) are willing to pay. So they go somewhere else and complain (maybe) about the service or the goods, but they still go.

So get off your bottoms and develop some skills for which people are willing to pay a premium, or get used to being a serf. Become so good at what you do that you are a bargain. Or tell us and everyone else how to reduce the cost and improve the quality of service so our companies CAN compete.

The management that is directing the outsourcing rarely has any idea about what it takes to perform the jobs that are being outsourced. If I have to spend an inordinate amout of time documenting every aspect of a job and training an employee of the outsourcing company, then a fundamental problem exists; the outsourcing shoud not be taking place. Instead, management should spend time with their direct reports learning about the valuable in-house resources that they have access to.

(That's right.....managaers should know how to perform the job of each of their direct reports....a novel concept; to be sure.)

It's funny how you state "it's not just standards" and then go on to list several things that are, indeed, standards.

I agree, you can't run out and buy a dream team. But you can have a policy of getting rid of those that don't meet the standards of the organization. Writing and maintaining a computer system is a skill and an art; it's not a commodity. Three IT folks are not necessarily 3-times better than one.

In my years in the trenches, one of the biggest complaints has always been how downsizing never reduces demanded throughput. Do the math, that means the remaining workers have to work harder. Has anyone ever heard of a company redistributing the salaries of laid-off workers to the remaining people? I never have. And that's the biggest complaint: "my company laid people off, gave me a larger workload because of it, and didn't so much as give me a pat on the back for not telling them to shove it."

I like to liken this to the NFL. Sure, we'd all love the fame and money of being a star quarterback, but there's a real simple reason why we're not all running out and applying for the job. Standards! You have to BE a good quarterback first. And the recruiting is extensive.

Now, imagine if some NFL team said, "hey, let's fire our star quarterback and bring in 4 cheaper quarterbacks... and we'll let someone else decide which 4 we get." I would bet that team would have a very rough season ahead of them.

In the end, yes, I agree, the managers should be better-qualified to manage the people beneath them. But they can't always do that, because most good IT people don't want to be in management (myself especially).

In the end, it seems to me that the best solution is to split the managerial duties. Have one manager that manages the people (vacations, whining, HR issues, pay, etc.) and one that's the manager's right-hand-man (er, person) that handles all the technical details... a Technical Lead or something. They could make hiring and firing decisions together. The TL would lead projects and act as liaison to the business. He/she would have to have STRONG communication skills, STRONG leadership qualities, but also have STRONG technical skills. He/she should spend 25-40% of their time coding, to stay fresh and in-touch with the product.

Just my opinion...

-Mike

Being an IT Manager, I was part of an outsourcing intiative and let go as a result. The company that now manages IT for my former employer is charging "an arm and a leg" for various IT services and hardware that were provided as part of the former department's portfolio. There are no checks and balances when providing solutions to ensure that spending on IT is not monopolized by this outsourcing company. The now outsourced IT department is in the business of making money. There must be an equitable solution for both parties, but the outsourcing company wants it all.

they COULD fly. Sales is just one more reason why outsourcing does not and cannot work as a long term strategy. I.T. IS CORE!!!! How many people have to lose their jobs before management "Gets it"?

First hand experiences since 1967 to 2002 took my project management skills to a point that left my family with 27% of what was promised.
So since 2002 until now we have lived off of one eighth of what we had as a salary and have very bad taste to this date.
Funny part is all through school remember hearing ... don't believe anything you hear and only half of what you see with your own eyes ...
So for this alone never say die, never just sit; but, make sure all your elected know how you feel on all issues and do something from zero you like.
We have choose farming and from zero to now have learned how to raise what we want and sell what we can makes a better life.

You are bang on!

I am a humble programmer from eastern Europe. Of course my company is the outsourcer for western companies. The truth: while the programmers in eastern Europe are not quite bad, the profit the companies make pushes them to hire unqualified programmers. Junior programmers receive a net salary of 200-300 USD a month. The skilled programmers on the other hand are not motivated, because the quality of their life is a total disaster. Without motivation, they move from employer to employer, not doing real work, and finally they emigrate in order to do something with their lifes. So, the software produced by these companies is at best of poor quality. The turnover is very high, but the slave-masters are happy because they make the buck so easy, they don't even have to bother about human resources or management stuff. I think the real problem is a political one, but imho a professional is much better than an army of slaves.

Not being in the IT field, I cannot comprehend what the IT people are going thru within their companies BUT from my dealing with the end user SERVICE end of this outsourcing is it's hell.
1. You get a tech with a heavy foreign accent that says his name is "Paul or Larry" and you cannot understand half of what he says.
2. He starts asking a list of screen read questions that have nothing to do with your problem.
3. First let me say, I'm not a total computer illiterate and pretty well know "MY" system backwards & fowards and most of it's programs that I run.
4. These guys never seem to listen to what you have to say, They can only go by what they read off their screen. If you try to tell them what you've already done to try to solve the problem, they want you to do it all over again.
5. This proves only one thing to me and that is they know "Nothing of Trouble Shooting" a problem from the program standpoint.
6. If it's not on the screen then they're lost.

Outsourcing, offshoring; the latest in buzzwords brought to you by Global Megacorp Inc. Used to be that outsourcing was reserved for those times when a company needed a "hired gun" having talents that were needed but not accessible within the company's ranks.

However, now it has grown to become an effective way to rape the local workforce. Everybody wants to do it on the cheap. Why should a company pay a local IT professional $70000 a year when they can get the same (supposedly) talent for $15000 a year from Bozoz Inc. in Bangalore?

It's all a matter of numbers. Behind those numbers though lies a far more sinister intent. That intent is to rape all workers. When Bozoz Inc. gets too expensive, the effort will be moved to Shanghai Shyster Ltd. in the PRC; and so on and so on. The end result will be a global economy where the labor force (meaning everyone except the elite ownership of the global economy) will be forced to work for peanuts and no benefits.

Each of us should be asking ourselves, "Am I doing better than my Father? Grandfather?". In my case I have to say absolutely not. Retirement will never happen for me due to myriad circumstances beyond my control. Not any of us in the technical professions are "masters of our course" anymore.

My advice, start shooting management until they get the hint that doing right by their laborers is far safer than worshipping the bottom line.