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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."
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.