December 21, 2004 08:21 PM

Extreme Outsourcing: Risky Business?

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SQL Server Magazine
InstantDoc ID #44623

Outsourcing and its cousin offshoring are transforming the business of IT. Outsourcing is nothing new: Every project for which IT hires outside consultants involves outsourcing. However, offshoring takes this model to the extreme, shifting the responsibility of projects and sometimes entire departments to foreign-based firms.

Traditional outsourcing, such as hiring consultants for special projects, has well-established benefits. The additional outside resources let your business undertake projects that your in-house IT staff doesn't have the time or possibly the expertise to handle. This type of outsourcing extends your IT organization's capabilities, letting IT focus on its core competencies. And the outsourcing is under your control, because part or all of the consulting work happens on site, letting consultants interact with IT personnel and end users.

But in the end, outsourcing is about cutting costs. And offshoring projects and entire IT departments to firms in countries that have much lower salaries and overhead expenses seems to offer the ultimate in cost savings. The dark side of offshoring, however, is apparent to anyone in the US IT industry.

Offshoring has hit the IT development sector the hardest, taking less of a toll on systems and database administration positions, although those jobs might be in danger in the future as companies look at more drastic cost-cutting measures. Lost jobs for skilled US workers, however, is the tip of the iceberg. Offshoring also reduces consumer spending as a result of unemployment and discourages future employees from entering the IT field.

In addition, companies that offshore IT might face missed project deadlines and reduced IT competitiveness. Communication between DBAs and project developers can be difficult enough when you're all in the same building. Throw in possible language barriers, cultural nuances, and different time zones, and you exacerbate the problem. Misunderstood project requirements lead to poor or wrong implementations, which in turn lead to extended project test cycles and missed deadlines. The result can be a loss of IT credibility with management and end users alike.

Another problem with offshoring: Many organizations that offshore IT still consider IT a cost center instead of an asset, overlooking the advantages a company can gain through effective use of technology. Technologies such as data warehousing and data mining, for example, can help businesses operate more efficiently, cut costs, and turn their line-of-business data into information they can use to find new revenue opportunities. But offshored IT resources typically aren't integrated as a crucial part of a business's strategic planning.

Then there's the thorny issue of security. It's hard enough to enforce security locally, with developers wanting sa rights and end users pasting passwords to their monitors with yellow sticky notes, let alone when your development group is halfway around the globe. Outsourcing a project entrusts important data and vital security information to the outsourcing agency, which lacks the vested interest in security that the company staff has. And one or more competing firms might be outsourcing their projects or IT organizations to the same agency.

Many well-known companies appear to have successfully offshored their IT organizations and dramatically cut expenses−at least in the short term. But such extreme outsourcing has its own set of costs.

Add a Comment

I'm not a native English speaker (Spanish is my mother tongue, and I can speak and write English and French). At the university I studied at back home, one out of every ten professors was a foreigner who usually spoke no Spanish and heavily accented English. I had professors from every corner of India, plus China, Poland, Iran and Nigeria. I learned to attune my ear to all those accents, "Yu Kick My Dog" jokes notwithstanding, and went through Comp. Science BS and MS degrees without much pain. If I could understand badly spoken English (Prince Charles of Britain calls broken English the unofficial language of the world) so can you all(!)

Anonymous User 1/12/2005 10:29:46 AM


My wish is that all humans have work and food to feed their families. If someone wants to work, their will be work. If someone wants to sit on his rear and complain, it will be words wasted into thin air.

Embrace education, learn more than one language, strive for the next higher rung and "TEACH" someone below you your job.

Try to think of it as one world and not "YOUR" backyard only. Call a thief a thief when he exploits another for profit. This tpye of human is a self-serving coward and most likely will die miserable and alone any ol' way.

Anonymous User 1/11/2005 4:59:57 PM


To Anonymous User Jan 06 who responded to my 3 cents. 1) I was not asking americans to learn Hindi. Infact you supported my point. If it would take americans 50 years to learn hindi, they don't deserve to comment on anyone's accent. At least Indians CAN speak english. 2) Americans should at least start brushing up their listening skills. 3) If you think it's meager to do the above, then I suggested americans to move on to higher calibre jobs rather than "offshorable" clerical/technical jobs.

Anonymous User 1/10/2005 7:43:58 PM


To Anonymous User Jan 06,
No disrespect to immigrants working in US, but we're talking about large amount of jobs are "offshored" to another country. There are immigrants who are good in English but how many percentage of them (e.g. They're based in India, China, etc)? And your best point is, you're asking americans to learn Hindi? That's a good one. By the time we master Hindi, it'll be maybe 50 years down the road already.

Anonymous User 1/9/2005 9:38:51 PM


My 3 cents :)
1) I've been working in Pakistan on an outsourced seat for a US reseller for the past 2 years now. Have been working with American, Russian, British, Danish and Welsh and have never heard any complaints about the aforementioned issues. In fact, my ex-boss (a russian) is a good friend of mine now.
2) Americans can't understand an Indian's english accent. Can Indian's ever complain about understanding an American's hindi accent? You can do the maths. Note that I am talking from the perspective of a developer working in US.
3) My recommendation: Learn to progress as Americans have always been. Leave Pakistanis, Chinese and Indians take care of these meager jobs and you being an American can prove your superiority by adapting other superior skillsets (R&D for instance). Isn't that what everyone did to survive and flourish in the days of industrial revolution?

Anonymous User 1/6/2005 8:07:33 PM


I have personally dealt with the Indians and the language barrier can definitely be a major problem. I believe that there should be a minimum language standard achieved by individual staff before these companies can use them to communicate with staff from other countries. If you can't communicate effectively eveything else is a waste of time and money.

Also, in reply to some of the change advocates at the beginning of this thread, why does everyone seem to assume that all change has to be good?

Anonymous User 1/6/2005 5:02:00 PM


No matter what the benefits of outsourcing to India is, (I'm not a manager and dealing on a lower level of technical) I've no clue what they're trying to say most of the time.

Anonymous User 1/6/2005 3:24:11 PM


The article is not well written it is more emotional than professional.I feel the topic was not well researched by the author.

Anonymous User 1/4/2005 1:55:21 PM


the 12/29 Anonymous is right. I've had hoards of probably illegal alien Indian recruiters call me trying to get me to work for peanuts in the USA because Verizon has outsourced all programming to an Indian company in Dallas. I can't understand the Indians and spend most of the phone call saying "What?!"

Anonymous User 1/4/2005 7:51:33 AM


Oh come on, u represent some US company that goes to India to cut cost, a company that pays people 10 or 20 times les just because they are not americans. And u have de nerve to say that indians speak to fast and u can't understand them... well go ahead and learn indian.. that is the least thing u could do! u infatueted jerk!

Anonymous User 1/1/2005 2:34:03 PM


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