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The business case for NOT outsourcing software development

By newtc ·
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Is anyone frustrated with the continuing theme of outsourcing that encourages American companies to outsource to foreign software development companies? (c.f. the recent white paper on TechRepublic: Offshore Software Test Automation: A Strategic Approach to Cost and Speed Effectiveness.)

I?m interested in hearing reasons why companies should keep their IT and software development ?onshore.? Any ideas?

TIA, Newt

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economics

by bigbigboss In reply to The business case for NOT ...

This is all about economics. If you can buy a Brazillian car that is better can cost less than a US car, would you buy a US car, even if you know that someone in Detroit is going to loose his job ? Americans did just that, with Japanese cars, in the 70's.

We can't fight with the price of out sourcing. We may have a fight with quality of product. We must analyze our strengths and weaknesses in quality and see how we can improve on our strengths, and also let the decision makers knows about our strengths. But we must also know about the strengths of our competitors, especially those in South Asia, as they are really good.

So, what are our strengths ? On time ? Better understanding of users needs ? Better understanding of our local culture (so that we don't insult our customers in our help text) ? Less bugs ? Faster running programs ? Better testing ? More skillful with complicated systems ? More organized way of doing business ? More compliant with our laws and regulations ?

We must find our strengths before our industry went the way of textile industry.

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Quality? Not from India

by mhallana In reply to economics

Quality has not been my experience with the Outsourced strategy. As we moved our e-Procurement off shore to India, we found that coders are in great demand. They jump ship in a matter of days, and have no loyalty to any American Company. We put our HD there, and wow guess what ticket closures went down, and quality fell into a DEEP cave. For the past few years I bought what you?re saying, and was one of the leaders placing entire applications overseas.

Having first hand experience on HOW the decisions were made: Quality, Better Workers, Better work ethics, and ALL of what you claim, is UNTRUE! The one and only decision we ever made, was on money.

MONEY MONEY MONEY

How fast could our CEO, CFO, CIO, COO pull money out of their options, would it increase the margin to the point that the stock would recover, would it decrease the cost of overhead (sick leave, vacations, benefits) and when would we see the first results.

BUSINESS IS ALWAYS ABOUT MONEY,

I wish everyone would stop being so naive, If you think it is about anything else at all I invite you to talk to the highest level in your corporation you can get to come to meet you.

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Quality ? Not from anywhere

by Tony Hopkinson In reply to Quality? Not from India

Well maybe in extremely rare cases.
But quality in terms of code hasn't been a factor since someone realised you can make money with this sheet.

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True Costs is misleading

by terry_157 In reply to economics

If you have solid user specifications, solid specifications, a sound project manager on site who has good chemistry with his EXPERIENCED team in India or China, who understands the business model and business processes of the client AND has a team of very senior developers, AND a knowledable PM counterpart in the U.S. at the client site AND a good QA team with methods, test beds etc., AND a highly compartimentalized development processes that do not expose the entire application AND a PHYSICALLY SECURE building with card key or biometric entry, AND you have turned off the USB drives etc., AND you have performed competency skill tests on all deveopers and testers AND you have run background checks on all developers etc. AND you are darn sure you can sleep peacefully at night that no one is coping the source or stealing it or reusing it in another application causing potential IP issues AND the application does not cause undue risk of exposure etc. to the Corporation and its key assets, then go offshore and try to save a few pennies.

The reality is few implement the above because they are looking for a "CHEAP" way out. If you lose your source, or you cause RISK to the company in any measurable way, the reality of saving pennies means ZIP as you may have cost the Company or client MILLIONS of DOLLARS in LOSES.

And, if you think it is a WISE development practice to give you most precious corporate assets to people you have never met in another country while you mandate reference & credit checks on your own new hires, then unlock your doors and open you windows and pray your children will be safe from harm with the teen baby sitter as you and your wife go on vacation in Europe. Oh, by the way, don't forget to move to that "other" neighborhood that is across town first as its CHEAPER to live and you are not concerned about the crime reports on TV.

Reality Check - Off shore resources rarely give a DAMN about your business and it is YOU that is taking the RISK! As Forest Gump says "Stupid is as stupid does!"

You don't think this happens, well pal, you are dead wrong!

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Learn to love Rogan Josh

by drowningnotwaving In reply to The business case for NOT ...

Or lahksa when your job goes to Malaysia. Or dim sims 'cos china's next on the block, with nearly a million, english speaking IT grads per year being pumped out.

Their quality problems (which certainly exist now) will be ironed out and, just like the cars, electronic goods and the clothing industry - you're going for the chop.

As I said in another thread, even if the business equation in terms of quantity and quality or overall output is 5 Sureshs = 1 Billy Bob, well oops the money just went o'seas.

So, for all of us who have tch-tch-tch-ed our toungues at the complaining unionists when their factories closed - about how ill-prepared they were, didn't they see it coming, it's all part of globalism and isn't that good for all of us in the long term -

Well now it's our turn.

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The Risk of Hidden Cost

by RAPace In reply to The business case for NOT ...

Immmature process can lead to huge hidden costs. If your org has immature process and you try to outsource to one of the Indian firms touting CMM 5 it is going to get much more expensive.

If you work in an environment where 3 bullet points in an email gets everyone is headdown then your business folks are going to be severly challenged when dealing with a much more rigorous, requirements driven outsourcing. Without considering how difficult it will be to adapt their need for detailed requirements, the cost of change racks up fast.

If you spend half your time in meetings and everyone needs to be face-to-face to make decisions your business owners will not be satisfied with the distributed nature of outsourcing.

If you rely heavily on the development team to solve problems on-the-fly or think independently outsourcing is not for you. It is very likely that your business owners have absolutely no idea that this is day-in, day-out activity.

The draw of outsourcing is cost savings but most companies find that outsourcing has many unexpected costs that, when weighed against the savings, negate the benefits.

Frequently business teams considering outsourcing are ignorant of what it really takes to complete an app dev project because much of it never crosses their threshold.

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Privacy data outsourced

Companies handling your personal data are outsourcing! This is a concern for me, since recourse would be difficult against an incident that occurs outside of the United States.

I already am resigned as well to the fact that I will be flying to India for medical purposes when I get older and start having old people issues.

Better keep my passport updated and handy, eh?

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We definitely DON't outsource

by sarah.seddon In reply to Privacy data outsourced

We made a decision early on in the life of our company NOT to outsource. Firstly, as we develop software, who is to say that one of the outsourcers won't be tweaking the code and putting out himself? We have spent time and money developing our strategy - why we would 'give' all of this information to developers somewhere else? Plus, recently we had a customer who wanted to be able to compare spreadsheets by highlighting formula changes. As our developers are here, with us as part of the team, we thought this was a good idea and were able to present the customer with exactly what he wanted within three weeks. The whole company is able to work as a team. Now admittidly we are a small company, but have actively decided against outsourcing.

In private situations with banks here in the UK, I have been put through to places where it's obvious English isn't the first language. The people tried very hard to be helpful, but couldn't understand what I was asking. Needless to say, I no longer bank with this particular bank!

I'm sure outsourcing has a place, but good customer service (which includes responding quickly to customer needs) is vital.

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No personal data outsourcing - period

by jferanda In reply to Privacy data outsourced

If Singapore government can mandate that the personal data outsorcing is not allowed, so can everybody else.
These practices are detrimental to the workers of the company, state and country.
its not all about money and economics. Its about providing good service, Be understood when and what is wanted, loosing vital knowledge base that cannot be replaced overnight and especially in time of emergencies, terrorism activities, war times and all the other concerns given by the other respondents.

It appears the these outsorcing activities are driven by the globalisation phase currently going around the world. But these are only phases that will come and go as have others in the past.
We seem to embrace concepts and then pay the price down the line.
The price for outsorcing is the loss of tangible and intagible benefits to many:
*Loss of work
*Loss of income
*Loss of expertise
*Loss of personal information
*Loss of control
*Loss of security
*Loss of recorse or difficulty thereoff
Can you please continue with the same format and add your vision of losses to the country and economy?
thanks

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My humble point of view....

by mike In reply to The business case for NOT ...

The first thing that must be remembered- a business exists to maximize profit for its shareholders. If it can perform some of its operations at a fraction of the cost without sufficient risk to jeopardize itself, it only makes business sense to do so. If not, it will lose business to those who do and can offer a less expensive product of the same quality. It may sound callused, to use a quote; ?It?s nothing personal- this is business.?

That being said, I will not jump further into the quagmire of morality this subject can create and will give you one business case against outsourcing. A hint lies in the above paragraph- risk. It doesn?t matter how well your relationship and non-disclosure agreement (NDR) with the vendor is, the sheer reality of outsourcing is a dependency of resources outside of your organization and outside knowledge of how your corporation operates.

Let?s look at outsourcing coding first-

An outside contractor working for you today may be working for a direct competitor tomorrow and will remember all the solutions they used to solve your problems. Unlike ?no compete? contracts that employees may have to agree to, contractors cannot be legally bound to them because of the sheer nature of their business. A coder will not forget how they designed a creative data-mining project for you simply because they moved on to another contract- they will use the knowledge gained from your contract, and if they have any value, will use that and add additional goodies for the next customer- giving them an edge over you.

How about outsourcing technical support?

An outsourcing contractor can come in with very attractive prices for a technical support contract. Once signed, your corporation will likely release in-house support personnel to the contractor or just let them go. A dependency has begun because your corporation now doesn?t have the internal personnel to support their own systems. A couple of years down the road, after the contractor is deeply ingrained into your corporation, rates may rise and what can you do? You can?t fire them overnight because you now don?t have the resources to support your own equipment. What happens if the contractor decides to get out of the support contract business or folds altogether?

It may take your company years to regain what they had.

Now, I?m not poo-pooing on all outsourcing- there are some very good vendors who offer outstanding services. They can be invaluable for temporary projects where a corporation doesn?t want to hire massive quantities of resources for a project that they can?t keep on the payroll forever. That would be unfair to the resources- to be fired or laid off after the project after being lured away from another job.

In conclusion, I would like to state that I believe there are times where outsourcing makes sense and others where the risk may be too big- it has to be viewed on a case-by-case basis.

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