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Outsourcing Growing Beyond India
PreacherTom writes "One of the most controversial aspects of the global economy has been the newfound enthusiasm of companies, freed from the constraints of physical location, to outsource jobs. No country had embraced tech outsourcing with more passion than India. Of late, problems are beginning to arise in Indian outsourcing: engineers will start a project, get a few months' experience, and then bolt for greener pastures. The level of attrition can cause the turnover of a project's entire staff within the course of a year. Combine this with salaries in Bangalore that are rising at 12% to 14% per year and it is no surprise that companies are looking beyond India to a slew of emerging hotspots for IT, such as Brazil, China, and Vietnam. Will Ho Chi Minh City be the new Bangalore?" From the article: "India remains an IT outsourcing powerhouse, with $17.7 billion in software and IT services exports in 2005, compared with $3.6 billion for China and $1 billion for Russia... India's outsourcing industry is still growing at a faster pace than that of... other wannabe Bangalores... By the third year of an outsourcing deal, after all the costs have been squeezed out, companies get antsy to find a new locale with an even lower overhead."
While its true that it helps to 'flatten the world' into a large community, it harms our own communities when we outsource. Sure there is that short term bottom line issue of money, but you don't have to go much beyond 'short term' to see that the cost of wages is hardly the big cost in outsourcing. Before this story came out there were many others telling us how good outsourcing is and those that told how bad it is. The indicators have been there all along as to why it is bad.
.... and all those nice cliche's
Big indicators have been the outsourcing of work from India to China! The fact that customer service companies in India cannot communicate with the average person in western English speaking countries on a level that is equitable. The high turnover rates have always been there as a problem that was politely ignored in favor of lower initial labor costs.
Any project manager can tell you that trying to lead a project of software engineers that is not only geographically separate, but separated by as much as 12 hours from the part of the company that needs the software.
All of that is not news, or shouldn't be. What is news is that more and more companies are finally realizing this. There will be companies that continually hunt to find short term savings, like gold rush miners, but in the end, customer service and ease of development will drive down the desire to outsource work.
Yes, I know that Bill et al have proclaimed that there is a shortage of IT workers in the US, and apparently there is a glut of degreed IT workers in India. The trouble with such claims is that those Indian IT workers (no matter how many degrees they have) do not have any kind of realistic understanding of the western world's business environment, and often I swear that they really have no idea about software either, but I suppose that is borne from not understanding the business culture as well.
This story is really about how outsourcing work to foreign countries is coming back to bite the people that thought outsourcing was a good idea to start with.
Those who won't learn from history
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So, now that management has run out of ways to prove that their plans work they will find a new, even cheaper place... good luck with that.
So far I have not come across many Fortune 500s where outsourcing actually worked in the end - that means not just a lower rate but comparable quality. There are plenty of CxOs that announce how much money they saved and all, but if you talk to the techs they almost consistently have another story to tell. For each 100 hours of outsourced work I estimate the average will be about 40 hours of US time to review and fix the programs... And those 40 hours will eat up all the cost savings you had in the original 100 hours. Its sad - but in the end for a million line codebase that has a certain quality, it doesn't really matter where you do it - the cost will be the same... The only ones that have a big advantage there is the russians. No idea why but their quality is usually better than you find anywhere else and the prices are reasonable too.
Before outsourcing, look beyond the hourly rate and consider skills. Then analyze your savings after the project has been in production for a while - and check if your expectations actually came true.
Peter.
Is suspect 98% of the time.
1. Workers who lost really well-paying jobs to outsourcing:
I'm sorry no one informed you, but one of the economic reasons you were paid so well was that your job was coming to an end. It was always a temporary state. Consider the extra wages a "retraining allowance" paid in advance.
2. Shareholder Demands:
Clearly outsourcing is a cost-reducing effort. As long as those costs are measured in dollars and cents your job is on the chopping block on a quarterly basis. Unless every business owner/shareholder in every country in the world becomes simultaneously enlightened, this is the benchmark.
The new american worker rules are:
There is no such thing as job stability.
Get paid for today's work because there is no promise tomorrow. e.g. retirement and vesting options are mostly vaporware.
If you are lucky enough to be near the top of your wage curve, live at or about the middle of the wage range for your industry if at all possible. This gives you a nice F.U. fund if there's a sudden change in your employment circumstances.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
As long as money, products, and information are free to traverse national borders but people aren't, tehn as soon as one region wises up and starts demanding what they are worth, the megacorps will simply move on to the next desperate region. They will let the uppity region become poor again before moving back in.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
For the past two years, I have been an independent contractor for Oracle Egypt, Xceed (the largest call center in the middle east) and some other firms.
Yes, these "professionals" *think* that they are worth what their contemporaries in the U.$ are getting, but the plain truth is that they are not.
They are not productive. By that I mean they lack consistency, attention to detail, and follow-through. This includes employees at all levels, from administration to management.
Process, an abused word in the American work-place is a "newer" term in many countries.
Many of us underestimate the cultural expectation of service and professionalism in the U.$. that we are assimilated into long before we begin professional work.
This attitude and perspective is MISSING in the "professional approach" among professional in developing markets. Most of them think that their technical skills/development merit their position and pay, which I have explained and demonstrated to them will not be enough to KEEP the job.
Sadly, 9 out of 10 professionals at Oracle Egypt want to be told what to do. They resent having to explain themselves, sell their solutions to customers (explain what they hell they propose and why the customer should implement their solution), and especially lack the communication skills to build customer rapport.
The unstructured and self-managed work environment is a challenge to them, and they wind-up in a corner asking each other what to do, and their managers form India offer/set no better examples and are usually in the corner with them.
I keep thinking, one day -a divorced, childless pre-menopausal white woman is gonna ride-down on y'alls asses.
European customers of Oracle are HAVING FITS about the level of service professionalism that they are receiving.
They complain about the "non-technical" work expectations, the (life-long) continuous learning expectations and especially having to do such on their own time.
Microsoft call centers are popping-up all over developing markets because it is a tool used by Microsoft to stem the use of non-Microsoft "solutions" in developing markets.
For example, here in Egypt Microsoft is the preferred vendor to the Egyptian government, Xceed (contact center) is owned by Telecom Egypt and the Egyptian Ministry of Information and Telecommunications. The work environment is what I can only imagine what a working in prison to be.
Egypt is a low-risk environment, and most of these professionals refuse to even learn about open source tools and technologies. For now, there is no threat of an Egyptian solution-provider in this market competing AGAINST Orace, M$, etc.
From what I have observed, all this 'outsourcing' is doing is helping to build a middle-class in developing markets so that there are customers with the income to consume western goods/services.
It's working, too. These markets have bodies, but not necessarily brains.
Oracle Egypt has pretty much aggregated all of the professionals in the region who are not working for their business partners and customers and is WAREHOUSING them to keep them form Microsoft -who incidentally was only doing product activation for Europe and is now recruiting for DB professionals -most of whom already work for Oracle.
Now, M$ is poaching and driving the cost of "labor" up. These "professionals" will jump ship for more undeserved money, IMNSHO.
BTW: Oracle-Egypt's pay scale as far as I can be nebby enough to find out ranges from $500 p/mo for "Customer Care" to $1000-$2,000 p/mo. for Oracle Analysts. Xceed pays from $150-200 p/mo. for "call center" employees. Administrative staff make from $300-500 p/mo.
Until they start using the magic word -"FIRRREEEE-DUH," no change is gonna come. They just don't have to.