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The Hidden Cost of Outsourcing
Alien54 writes to tell us CNNMoney is reporting that outsourcing may not be as big of a bargain as some might think. From the article: "With consumers enjoying more choice than ever before, evidence is growing that great service is essential for long-term customer retention. To cite just one example, a recent survey of pension policyholders in the United Kingdom found that 75 percent would leave their current provider if they experienced bad customer service."
Of course, when people switch providers, they will switch to the lowest-cost (or greatest price-feature) provider, not the one with the best quality of service.
And to be frank, in most areas I'm quite willing to forgoe service for price. Even the best service policies are generally too restrictive and inconvenient to be worth it. If it's cheap enough I can have a third party repair it (or have a backup plan if it's a service-only thing), or just replace as needed and it will still end up being cheaper and less inconvenient. Oh yeah, bring me that cheap Chinese sugary goodness, baby!
Trust the Computer. The Computer is your friend.
When you call JetBlue airlines and talk to one of their reservations agents, you talking to someone sitting in their home. ALL of their reservations agents are home based. They get away with cheaper labor and a happier workforce.
Not that there's anything wrong with Indian call centers but half the time I can't get past the Indian accent to understand what the hell is being said. There is a limited amount of things they can do as well and to say that Indian call centers provide "customer service" would be an overstatement.
When you call a company for customer service you should be able to get someone able to bend the rules if circumstances warrant. The "paid parrots" of Indian call centers can't do that.
Often this is not the case. As a part-time marketeer, I can tell you that often what I do to lure customers away from my competition is:
1) "educate" my target segment to expect a higher level of service (change their expectations)
2) tell my competitor's customers that my competitor does not offer that higher level of service (given the new expectations, make them feel unhappy with their current provider)
3) make damn sure my own company offers the higher level of service when my competitor's now-unhappy customers go looking
4) don't compete on price; higher service can demand equal or higher price
5) repeat as necessary
Believe me - I'm not the only out there doing this either.
Okay first the disclaimer:
/.ers on this (maybe I should be submitting this to Ask /.) Is the quality of the outsourced job really terrible?
I'm currently working as a Customer Support in a local company in Malaysia where we help our client's client (mostly from the US and UK) troubleshooting their generic computing problems over the telephone.
Anyway, I've been working for a almost a year now and from what I've seen, the company I worked for has been recruting really skillful/talented people (most of them have CS degrees from Australia) to do the support.
However as you may know, most of these people speaks really poor, non-standard English. To make the matter worse, most of them (including me) have problems with our clients' American/English accent. Personally I'm sad that I've had clients that hanged up on me because they couldn't understand me in some occasions.
Okay so now, I would like some opinions from my fellow
Most outsourcing decisions are made far up the corporate food chain. It's the job of the management staff to handle any difficulties before they are visible to those at the highest levels. As long as the work is passable and any damage canbe contained, no one hears anything and nothing gets fixed.
Also, those complaining about outsourcing are probably wasting their breath. The next round of outsourcing is going to be targeting all the "innovation" jobs in IT like systems architecture and design that we thought were safe. I'm planning to stay in for the long haul and hope that some of this comes back around. However, we need to adjust our expectations to the new reality. If it's cheaper, it will be done. Unless consumer prices and our rampant spending are adjusted, we have no way to compete with people who will do good enough work for 10% of the price.
The real hidden cost of outsourcing is the loss of a talent pool. If and when I have a kid, I'll encourage it to be smart and study, but I think I'll encourage it to be a lawyer or an MBA. They're not replaceable, and the professions (medical, law, etc.) have a very strong organization that keeps the barrier to entry and salaries high. A good example is pharmacy. Pharmacists don't make their own compounds anymore; they pour tablets from the big bottle to little ones, and get paid very high salaries to do it. All they have to be is careful.
When I saw the article the first company to come to mind was Dell. I have had terrible experience with their customer service. A typical problem requires waiting on a succession of customer "service" agents, all the while listening to a recording telling me how important I am to Dell.
Yeah, right.
I have gone through this process only to have an agent hang up one me, leaving me to start over.
One time the agent was downright rude a number of times, finally putting me on hold for 20 minutes and then disconnecting. The total call time just with that agent was about 2 hours.
I have gone through tiers of agents only to be told I would have to pay a bunch of bucks (I was trying to get new copies of the original re-install disks). I tried again, went through more hours and tiers of agents, and got the disks free.
I called to extend my warranty. After a long time, I was told that I couldn't. I tried again, different agent, and was able to extend it.
In fairness, though, the people who finally solved my problems were usually in outsource centers in India or the Phillipines.
Dell's problem goes way beyond outsourcing. They have too many tiers of agents, in too many different groups, with too many who can do nothing but follow scripts. They are, in other words, simply clueless about how to do customer service.
Of course, if the Dell products I have had were more reliable, the issue of their customer service would be moot.
I have been a Dell customer for a long time (almost a decade). Only recently have they provided such horrible customer service.
Next time I need a laptop, I'm going to try to find someone who is clueful about after-sales service.
I certainly hope that somebody with some power at Dell stumbles across this threat. And cares!
The only good weather is bad weather.
A lot of the points the parent makes are not worthy of any response as they seem more rooted in bigotry than reason.
1) After you teach the Indian company how to write good software for your industry, a relative of the owner of the Indian company will go into business in competition with you.
This is true in pretty much any business relationship. Whomever you teach how to do a thing for your profit will try to figure out ways of doing that same thing for their profit.
3) All products require innovation. Indian programmers are not usually innovative; it's not a quality of the Hindu culture.
This is one of those bigotry motivated points.
I know enough Indian people to say this is false. You don't have to believe me though- take a look at the list of Nobel laureates. Just wanted to refute one in case anybody was wondering.
4) No matter what the project plans say, programming requires decision-making that affects the long term health of your product and your company. How often does programming require far-reaching decision-making? Possibly as often as once per hour.
The general point here is completely valid, and people will have to learn how to evaluate companies for their work performance. Switching industries- who would you rather hire to do special effects for your eature film: Zenera (my company) or Industrial Light and Magic ?
Well, ILM has earned their reputation through lots of successful high profile projects. You can look at a ton of their work. You'd be smart to go with ILM unless your project is small and you can afford a risk, then you can risk a small unknown studio like Zenera.
My pricing reflects that- I am much cheaper per man hour than ILM. That's my company giving prospective customers a valid business reason to choose us. It decreases risks in case of failure and costs in case of success.
The same is true in any sort of outsourcing- I talked about reputation, but a management team must examine who they are outsourcing to, and their prior work product, in order for the move to be effective.
5) People in India are amazingly poor for a reason. That reason may (will) affect the work they do for you.
If the parent means to refer to the lack of materialistic motive in their culture, I fail to see the validity of the point.
In general, Indian culture values education. That is valuable- especially in a knowledge industry like programming.
Mostly however I think this "point" is, again, motivated by bigotry.
6) There's a big overhead in crossing cultural boundaries. On the other hand, programmers in the U.S. may spend a lot of time playing video games rather than learning social skills; there is a big barrier between someone with low social skills and the normal world, also.
This sounds like a point, but ends up being a non-issue. Indians, or any other foreign contractors will have to expend their own internal efforts on these issues. Native contractors are likely to use that as leisure time. Both are "wastes" from a productivity standpoint.
(I know there is a point here about leisure time being restorative and allowing people to work more effectively when they are on task- but there are some studies that indicate that what is really needed is time away from the "primary" task, a secondary task is often just as effective as a pure leisure time. Let the shrinks sort it out.)
7) You may not notice the low quality of your product until it is too late. That's why you outsourced, isn't it?: You wanted to avoid giving attention to a critical area.
Anyone who outsources their critical business processes is a fool.
There are valid reasons for outsourcing, most of which boil down to focusing on where your expertise is, and letting other experts do what they are good at for you.
Using Apple as an example, they outsource almost all of their manufacturing and assembly. They focus on design and engineering. (Software and hardware)
Don't post innacurate information
If you do, I swear by my pretty floral bonnet I will end you.
They don't need our or anyone else's stinking IP. You've been reading too much western propaganda.
Mmm... no. Sorry.
There are a lot of bright people in China, but there are also a lot of companies out to swipe IP from other countries. The most recent example I've read about is a whole segment of the auto industry over there devoted to copying the designs of companies like Honda and Mercedes.
One of them even stole their *symbol* from Audi, which they slapped on a copy of another manufacturer's car. I thought that one was particularly funny - it reminded me of the bootleg Versace/Universal Studios "dual logo" t-shirts in Kamikaze Girls.
"...always new atoms but always doing the same dance, remembering what the dance was yesterday." -Richard Feynman
I work for a Forture 200 company. We're actually using 3 different offshore vendors. Wipro is one of them. We have a large onshore staff of H1B workers in addition to the offshore resources (we are in year 2 of implementing an offshoring strategy).
My intent is not to bash Indians or offshore workers. Prior to us pursuing offshoring, easily half of the people placed as full time hires were Indian anyway, and their status varied from native US citizens, naturalized US citizens, green card holders, and H1B visa holders. With my last team, I was the only white guy in otherwise all Indian team. We used to joke and say I was the affirmative action guy.
That being said, with the offshore guys, I've seen a dropoff in quality with respect to English skills compared to the onshore guys. The onshore guys (and girls), for the most part, have decent English skills (there are exceptions, of course). From a technical skill perspective, the onshore guys are equivilent to the distribution we get if we were placing the candidates ourselves. Some are good, most are in the middle, and some are bad. The Wipro guys do have the advantage of having a large knowledge network they can call up for solutions to things they can't figure out themselves.
The big problem with outsourcing is, at least in my company, it's being presented as a silver bullet to cure all of the IT cost problems. It isn't. It's costing us more, especially when you factor in time to market impacts to NPV. This isn't the fault of the outsource providers (for the most part, Unisucks is a different story), but the fault of our business customers who aren't really a good fit for an outsourcing model, and unless they change the way they deliver requirements, never will be.