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Lawyers from around the country weigh in with tips for client companies on negotiating and maintaining an agreement with a managed service provider.
As an outsourcing service provider, you know the importance of the next deal over the horizon. Ensuring that your company will thrive sufficiently for the next deal requires that you manage your business with an eye toward the future. Consider the following six issues...
Annual raises of 10 percent or more are now the norm in India's $17.2-billion-a-year outsourcing industry. It supplies workers who write software code, answer customer service calls, do legal and equity research and engineering design, among other jobs, for overseas corporate customers.
But despite rising pay, outsourcing firms face annual attrition rates of 15 to 30 percent in their Indian labor force, compared with 10 percent in outsourcing companies in Eastern Europe and 7.5 to 15 percent in China, according to industry experts.
Labor shortages and turnover problems are affecting India's other high-growth industries like financial services, retail and airlines, but nowhere is it as pronounced as in outsourcing.
"High turnover, rising wages and a shortage of suitable talent in India's most popular offshoring destinations are proving to be bottlenecks," said Diana Farrell, director of the McKinsey Global Institute, a research group based in San Francisco.
Employee churn is now one of the biggest challenges for the Indian outsourcing industry, said Nandan M. Nilekani, chief executive of Infosys Technologies, one of India's largest outsourcing companies. "Talent acquisition, transformation and management are critical anchors for the growth of the industry," said Mr. Nilekani, whose company added 8,026 employees in the quarter ended in September. Infosys has 46,196 employees.
Competition has become more intense as demand rises faster than the supply of trained workers. Even with pay increasing, Indian engineers are paid a quarter of what their American counterparts earn, which feeds the outsourcing boom.
According to Nasscom, the outsourcing industry trade group in India, the country produces three million college graduates every year, and 350,000 of them are engineers.
"It is great raw material, but only 30 percent of this pool is ready to plunge straight in and deliver," said Kiran Karnik, president of Nasscom. Improving the quality of that pool, Mr. Karnik said, is on the industry's "A-list of challenges."
The problem of churn is even more acute for outsourcing companies offering lower-skilled back-office work like call center services. Once trained, those workers tend to hop from job to job. Some outsourcing companies in that field are reporting a complete turnover of employees in the span of a year.
"Employees could leave because the chicken curry at the place next door is better or the girlfriend has moved to another company," said Saurav Adhikari, vice president for corporate strategy at HCL Technologies, based in New Delhi, another large outsourcing firm.
While growth in outsourcing will continue in the near future, said Frances Karamouzis, research director at Gartner, the attrition problem "will be looked upon as the early signs of the limits and boundaries around the India model."
Even for companies that are successful in attracting new workers, attrition is a challenge. Patni Computers, another leading outsourcing company, based in Mumbai, for example, has grown from 6,000 employees two years ago to nearly double that number now.
"We especially feel the pain when employees in critical projects and positions decide to leave," said Milind Jadhav, senior vice president for human relations at Patni.
Smaller operations feel the squeeze particularly severely. In Hyderabad, bigger outsourcing businesses like the Indian unit of the Oracle Corporation have an advantage in attracting employees. So Sierra, with nearly 1,000 workers worldwide and headquarters in Fremont, Calif., has had to try more innovative programs to attract and retain workers.
"It is like being at Oracle in the 1990's Silicon Valley," said Marc Hebert, Sierra Atlantic's executive vice president and a former chief information officer at Oracle.
Sierra Atlantic has adopted retention strategies like permitting crucial employees to change jobs across departments within the company. The company also offers top performers bonuses and flexibility in work arrangements. As a result, it has cut attrition to 16 percent this year from 22 percent last year, company executives said.
[Nov 08, 2005 ] Outsourcing's image problem - Computerworld
A recent Opinion Research poll leaves no question that outsourcing -- particularly offshoring -- suffers from an image problem. Among 1,000 Americans surveyed, 72% of respondents said outsourcing is "really all about corporate greed," and 25% associated the word outsourcing with job losses.
That a quarter of those surveyed made the mental leap from outsourcing to layoffs shows a level of public misunderstanding about the labor practice not previously documented, according to Jeff Resnick, Opinion Research executive VP and managing director. He observes that even though many workers whose jobs are outsourced remain employed (though on the outsourcer's payroll) when jobs are outsourced domestically, survey respondents apparently equated outsourcing with sending jobs offshore.
The poll's overall findings contain many contradictions. Most of the people surveyed thought that outsourcing is good for the world economy and bad for the United States, but only 28% were worried about losing their own jobs. And although 69% of respondents believed the public can influence a company's offshoring decisions by boycotting its products, only 49% said they would pay an extra 20% for an American-made product.
BANGALORE - The incessant rains that submerged vast swathes of Bangalore in the last week of October couldn't have come at a worse time. The rains came on the eve of Bangalore's annual information technology exhibition - BangaloreIT.in, billed as one of Asia's hottest IT events.
Not only did the rains swamp the technology fair, but worse, they laid bare Bangalore's crumbling infrastructure at a time the city, India's hi-tech hub and capital of southern state of Karnataka, was preparing to showcase itself as the country's most attractive investment destination for IT.
The floods caused scores of houses to collapse, drains to overflow into homes and entire stretches of road to wash away. Water entered office buildings, including one of the offices of Wipro, India's third-largest software exporter.
The water was a wake-up call for the city, although its infrastructure has been crumbling for years. Residents and businesses have been complaining about power outages, narrow, pot-holed roads, endless traffic jams, inadequate public transport and abysmal drainage facilities.
In particular, IT companies have been vocal in their criticism of the government's failure to improve matters. Things had got so bad that 135 frustrated IT companies had called for a boycott of BangaloreIT.in this year.
They were only placated at the last minute by promises of improvements from Karnataka Chief Minister Dharam Singh. Singh has good reason to fear disgruntled IT companies.
Bangalore contributes 36% of the country's total software exports, expected to cross US$16 billion in total this year. It accounts for 97% of Karnataka's IT and allied service exports, which grew to $6.3 billion in 2004/05, up from $4.13 billion a year earlier.
In 1998, there were 680 IT companies in Bangalore; there are 1,584 today, of which 622 are multinational corporations. Bangalore is home to Indian IT top guns such as Infosys and Wipro, which are headquartered there, and global IT giants such as IBM and Oracle.
More than 200,000 people are employed in IT and business process outsourcing companies based in Bangalore. Besides, the IT sector has nearly a million people feeding off it - from guest houses to car rentals and security services.
I just got my weekly issue of (fill in your weekly computer rag) and under the news section is "Difficult ERP Rollout Slows Furniture Maker". Is it just me or does this seem like the norm with SAP R/3 rollouts?
Let's see there was
The City of San Antonio
That whole UK fiasco with EDS ( I pretty sure that was SAP R/3 )
So my question is who is buying this crap and why do companies continue to try and roll it out when there is one high profile, expensive, failure after another?
Dell Computer tried to use SAP to replace its DOMs (Dell Order Management System). This was many years ago and the price tag that I recall was around 14 million dollars. For what? Not a single Dell employee was using SAP when I worked there. In fact Dell tried to replace DOMs so many times it became something of a joke [but that's another post]. It is always amusing to watch a company squirm because their entire backend system is running on a competitors hardware (Tandem).
Has anyone worked on a SAP R/3 rollout that wasn't a death march? I really want to know. Five or six years ago I was seriously considering jumping to the SAP platform because the developers were making gobs of money. These days you couldn't pay me to work on a SAP rollout. I'm both older and smarter. Who wants to work on something doomed to fail?
Batt compares the economics of contracting with an MSP to those of leasing a new automobile instead of buying it. "The cash outlay overall is more if you lease, but you have upfront costs if you buy," he says. In contracting for a service, Pulte obtained the latest and most sophisticated technology right away at a much lower upfront cost than it would have incurred had it bought and built its own CRM system, Batt notes.
TPI's Slavin says customers shouldn't consider MSP services in terms of potential cost savings anyway. "There's not a straight-up IT cost savings, because the MSP is usually providing some service that the current internal IT infrastructure couldn't have done," he says. It's more about results, such as gaining access to a new customer set, expanding your business or reducing your time to market, he says.
5 What's the exit strategy?
Whirlpool's Luersman recommends that users take particular care in working out this part of an MSP contract. She also recommends building very specific timelines and details into the contract upfront. For example, if Whirlpool has a fluctuation in its employee head count or needs to change a business process as a result of an acquisition, Convergys has a 60-day window to work through and change all of the services it provides.
Bill Martorelli, another analyst at Forrester, says users should also be sure to include change-of-ownership provisions in all contracts with MSPs. Over the past few years, Martorelli notes, there has been an ongoing consolidation in the MSP market. "If a new owner takes the acquired MSP in a different direction, the user wants to be able to get out of the contract," he says.
Even more important to consider is a replacement strategy, says CareerCurrency's Bean. "Exit strategies are an important consideration, but it may be time to also reconsider IT's inherent reluctance to outsourcing," he says. "The proper question relating to an exit strategy is not how do we get out of something but how do I replicate the underlying process somewhere else. It's about protecting the investment."
A failure to involve the IT department in outsourcing decisions is fuelling cynicism about the real motives for outsourcing - and leading to a dangerous disconnect between the board and IT managers, according to new research.
The study of 103 IT managers from mainly UK private sector organisations found only a quarter of outsourcing contracts are based on a joint decision between IT and business managers.
The research points to a disconnect where business mangers make the decision to outsource and then pass on responsibility for the service level agreements (SLAs) to the IT department, with almost 40 percent of business managers rarely involved in negotiating the SLAs.
Dr Jim White, business technologist at business service software provider Managed Objects, which sponsored the study, said there is a perception among IT managers that the business is not sufficiently involving them enough in outsourcing decisions.
White said: "The reasons for outsourcing going wrong are cultural and leadership related. If you don't engage IT you are not engendering value or sharing a problem.
"The problem starts at the beginning when you don't involve IT they feel insecure and are perceived as a burden. It is creating this cynicism."
He said SLAs are the tangible point where this division is most visible and argued that the reason why many outsourcing contracts have poorly defined SLAs is because they are left with the techies.
He added: "When you outsource the issue should be quality of the actual service, not the technical details."
[Oct 15, 2005] CNET/Indian outsourcers follow a megatrend By Zubin Jelveh
Interview with Nandan M. Nilekani, the chief executive of Infosys Technologies, the India's second-largest outsourcer. He claims that "We have sort of become masters of delivering high value and high quality at lower cost, and on top of that we're trying to add consulting". He uses an interesting justification
"You guys told us for so many years to cut out this socialist rubbish and go to free markets. We came to free markets and now you're telling us, "Stop, don't come"... Every time Wal-Mart replaces a person at a checkout counter with an automatic machine they're eliminating thousands of jobs. This is one more facet of that, except it's more emotional because instead of a checkout counter machine replacing Steve Smith, some kid in Bangalore is replacing Steve Smith. You can point to that kid and say, "He took my job."
Is your job at risk? If it's the type of work that can be done over a wire, then probably yes, says Nandan M. Nilekani, the chief executive of Infosys Technologies.
Infosys is India's second-largest outsourcer. After achieving success in software engineering and back-office service, it has now begun to compete with companies like IBM for more lucrative consulting work. This week, Infosys reported that its second-quarter earnings rose 36 percent. It raised its earnings forecast for the full year on stronger demand and a weaker rupee.
In a recent interview, Nilekani, a chief executive who makes $60,000 a year at a company worth nearly $20 billion, spoke about Infosys' success and the danger that it and other companies like it pose to American competitors. ... ... ...
So now you'll be competing with the likes of IBM and Accenture. Do you think you'll change the cost structure of the consulting business?
Nilekani: This is a battle of business models. We believe that at the end of the day we have a disruptive business model that is a threat to the existing business model and older companies will have to reconfigure themselves to look more like us if they're going to be globally competitive.
What would that mean, to look more like you?
Nilekani: In any software project, we do 30 percent of the work in the U.S. and 70 percent in India. Our competitors do 100 percent of the work in a particular location. We have sort of become masters of delivering high value and high quality at lower cost, and on top of that we're trying to add consulting. Their challenge is to retain their relationships and business knowledge while reconfiguring their internal operations to become as efficient as us.
Do you think you will be able to accelerate your consulting services as fast as companies like IBM ramp up their operations in places like India to lower their costs?
Nilekani: I think the challenge is fundamentally different. For us it's about hiring and growth and building a brand; for them it's about restructuring the work force and I think, frankly, I wouldn't want to do that job because it's very painful, whereas this is exciting.
What do you say to people who think that globalization will inevitably harm the United States work force?
Nilekani: Every time Wal-Mart replaces a person at a checkout counter with an automatic machine they're eliminating thousands of jobs. This is one more facet of that, except it's more emotional because instead of a checkout counter machine replacing Steve Smith, some kid in Bangalore is replacing Steve Smith. You can point to that kid and say, "He took my job."
Does it feel odd to find yourself lecturing Americans on the joys of capitalism?
Nilekani: You guys told us for so many years to cut out this socialist rubbish and go to free markets. We came to free markets and now you're telling us, "Stop, don't come."
InformIT Comments on the Article The Future of Outsourcing: September 11, 2011 by Alan Gore
If it's not clear, I meant to say that the CMM cert process is itself subject to manipulation and fraud by the fact that anybody can submit any project (even one they didn't do) for review to the people at Carnegie Mellon.
The "true believers" refers to those at CM and elsewhere who continue to preach "Software Engineering" when the vast majority of its adherents cannot reliably or even consistently produce success from project to project. None who has far more failures than successes when using their own methods is in a position to lecture others on the "right way" to make successful software. Once again, the emperor has no software project magic fix, and processes which demand innate skill cannot be mass-produced in a population without that inate skill. Get over it.Durba, your idiotic generalization will make you nice fodder for the next c
by markusbaccus OCT 09, 2003 02:23:05 AM
The CMM is a cert in that it rates a company's adoption of an apparently unquestionable methodologly which has a 2/3 rate of failure. It is the logical equivalent of saying, "If you don't blow on that dice three times before you roll it, you only have a one in six chance of rolling a six. Umm-- prove it.
Do me a favor, learn how to recognize logically falacious arguments like an "appeal to authority" or a "non sequitor", ("why isn't the SEI doing something about it?" == fallacious belief that SEI is in a postion to adequately identify fraud merely because it is a recognizable authority, or that it would even have an incentive to do so. e.g. "He is an expert in physics so he would never lie to protect his project's funding." Oh, and since we're on it, you implicitly made an error of misplaced deduction when you missed my point. (e.g: "I lit one match, so all matches will light." i.e., it may be true that ONE project met the standards of the Capability Maturity Model Level 5, but that is not an indicator of whether that company really lives up to those standards on any other project.
Finally, you draw an inappropriate and insulting conclusion based on a faulty analogy which rests upon a statistically insignificant sampling of people (one guy who is self-selected to be non-technical, or else they would have no need to offshore their work to your company, now would they??? Duh!
Here's a clue Durba: Offshoring is not due to a shortage of American talent, it's due to a shortage of American talent who could afford to live in America on $10 per hour. Now, drawing upon my many years of experience with teams from many nationalities, it may surprise you to know that I would estimate that about one in ten IT workers are worth their pay, the other nine are worthless or a menace, and this ratio holds true regardless of their nationality (Although Eastern Europeans do seem to do much better than 10%). Since you guys merely adopted our IT training and introduced no new methods (unlike the communist bloc countries), I would suggest that this should surprise no one who thought about it.
Continuation for Durba so he can catch the clue train.
by markusbaccus OCT 09, 2003 02:26:21 AM
If you want to go down the road of idiotic generalizations about particular nationalities, I could tell many stories of *real* one-dimensional thinking by Indian techs which led to far more catastrophic results than inconveniencing you with a non-consequential question. If such a trivial issue is your idea of bad, it makes me wonder if you even know what bad is. Since you're using a web browser (undoubtably IE) as your FTP client, I can only imagine how lost your team would be if you Windows-jockeys had to rely upon a command line FTP client, which of course would never have such a problem and would have superior performance to IE's lame-ass implementation. Maybe the guy didn't know to look in his browser settings because he actually is used to using a different and better tool for the job than you are?
That wouldn't surprise me, because I've met many Indians who seem to have a special gift for assuming they know better than people with many times their experience and ignoring what they are told until after the predictable disaster strikes, at which time they usually act like they have discovered something remarkable all by themselves or become strangely silent as they scramble to fix their opus to fuckology. People like that will almost never produce good results, which is why they will need to rely upon protectionism, nationalistic prejudice, and nepotism if they want to keep their job in the face of global competition.
Which, since we're on the topic, Durba, let me ask you a simple question: How are you going to keep your job when you have to compete with people who will work for $3.00 USD per hour, or worse, $7 a day? What worth will your four year degree be then, genius? Get it yet? Think about it. Wipro is already working the Vietnam angle for when you guys get uppity. Given that little reality, your heyday won't last for four decades like ours did. Maybe an American will bail you out when someone finally convinces a critical mass of managers that development quality, not cost, is what leads to better ROI. Then only the truly skilled will do well.
Past history supports Alan's view
by gerbilinheat OCT 06, 2003 09:58:51 AM
Most of us recall the flight of aircraft engineers / aerospace technicians in the late 1980's after the meltdown of the Reagan Perpetual War Budget that resulted in the Reagan and Bush tax increases on the middle class.
Ultimately, we wound up with Lockheed retiring from the commercial aircraft business entirely, McDonnell Douglass and Boeing both suffering in worldwide sales from the British - French consortium Aerospatial and its world class Airbus series.
Currently, China, Thailand, Burma, Peru and several U.S. carriers are going Airbus.
All these steps, and these identical results, occurred in the steel, aluminum, automobile, shipbuilding and textile industries. NONE have returned to significant and lasting profitability to date.
Simply, if you let go of your expertise, you let go of your market.
by Harley OCT 06, 2003 02:58:20 PMIgnoring the issue of religion, really don't need to travel down that rabbit hole, the real issue that no one has talked about here is the impact on the economy. Simple math, replace a 100K software job with a 30K job and the baker, butcher, laundry, auto, home repair etc. that the 100K software job supported are gone also. This is simple trickle down poverty for America! For heavens sake, the US government is sending contract software jobs over seas while millions of unemployed Americans can and are capable of doing the work. Overseas outsourcing needs to be controlled now! Whether you believe Wall Street or not, the economy has not hit bottom yet, and I believe it is just taking a breath before it plunges much further. Sometimes people need to hear the radical extreme to open their eyes to what could happen.
[July 25, 2005] Joel on Software - Hitting the High Notes By Joel Spolsky.
IMHO he has the point: "The real trouble with using a lot of mediocre programmers instead of a couple of good ones is that no matter how long they work, they never produce something as good as what the great programmers can produce."
... ... ...
And in fact the conventional wisdom in the world of copycat business journalists and large companies who rely on overpaid management consultants to think for them, chew their food, etc., seems to be that the most important thing is reducing the cost of programmers.
In some other industries, cheap is more important than good. Wal*Mart grew to be the biggest corporation on Earth by selling cheap products, not good products. If Wal*Mart tried to sell high quality goods, their costs would go up and their whole cheap advantage would be lost. For example if they tried to sell a tube sock that can withstand the unusual rigors of, say, being washed in a washing machine, they'd have to use all kinds of expensive components, like, say, cotton, and the cost for every single sock would go up.
So, why isn't there room in the software industry for a low cost provider, someone who uses the cheapest programmers available? (Remind me to ask Quark how that whole fire-everybody-and-hire-low-cost-replacements plan is working.)
Here's why: duplication of software is free. That means that the cost of programmers is spread out over all the copies of the software you sell. With software, you can improve quality without adding to the incremental cost of each unit sold.
Essentially, design adds value faster than it adds cost.
Or, roughly speaking, if you try to skimp on programmers, you'll make crappy software, and you won't even save that much money.
The same thing applies to the entertainment industry. It's worth hiring Brad Pitt for your latest blockbuster movie, even though he demands a high salary, because that salary can be divided by all the millions of people who see the movie solely because Brad is so damn hot.
Or, to put it another way, it's worth hiring Angelina Jolie for your latest blockbuster movie, even though she demands a high salary, because that salary can be divided by all the millions of people who see the movie solely because Angelina is so damn hot.
But I still haven't proven anything. What does it mean to be "the best programmer" and are there really such major variations between the quality of software produced by different programmers?
Let's start with plain old productivity. It's rather hard to measure programmer productivity; almost any metric you can come up with (lines of debugged code, function points, number of command-line arguments) is trivial to game, and it's very hard to get concrete data on large projects because it's very rare for two programmers to be told to do the same thing.
... ... ...
If the only difference between programmers were productivity, you might think that you could substitute five mediocre programmers for one really good programmer. That obviously doesn't work. Brooks' Law, "adding manpower to a late software project makes it later," is why. A single good programmer working on a single task has no coordination or communication overhead. Five programmers working on the same task must coordinate and communicate. That takes a lot of time. There are added benefits to using the smallest team possible; the man-month really is mythical.
But wait, there's even more!
The real trouble with using a lot of mediocre programmers instead of a couple of good ones is that no matter how long they work, they never produce something as good as what the great programmers can produce.
Five Antonio Salieris won't produce Mozart's Requiem. Ever. Not if they work for 100 years.
Five Jim Davis's -- creator of that unfunny cartoon cat, where 20% of the jokes are about how Monday sucks and the rest are about how much the cat likes lasagna (and those are the punchlines!) ... five Jim Davis's could spend the rest of their lives writing comedy and never, ever produce the Soup Nazi episode of Seinfeld.
The Creative Zen team could spend years refining their ugly iPod knockoffs and never produce as beautiful, satisfying, and elegant a player as the Apple iPod. And they're not going to make a dent in Apple's market share because the magical design talent is just not there. They don't have it.
The mediocre talent just never hits the high notes that the top talent hits all the time. The number of divas who can hit the f6 in Mozart's Queen of the Night is vanishingly small, and you just can't perform The Queen of the Night without that famous f6.
Is software really about artistic high notes? "Maybe some stuff is," you say, "but I work on accounts receivable user interfaces for the medical waste industry." Fair enough. This is a conversation about software companies, shrinkwrap software, where the company's success or failure is directly a result of the quality of their code.
And we've seen plenty of examples of great software, the really high notes, in the past few years: stuff that mediocre software developers just could not have developed.
Back in 2003, Nullsoft shipped a new version of Winamp, with the following notice on their website:
- Snazzy new look!
- Groovy new features!
- Most things actually work!
It's the last part... the "Most things actually work!" that makes everyone laugh. And then they're happy, and so they get excited about Winamp, and they use it, and tell their friends, and they think Winamp is awesome, all because they actually wrote on their website, "Most things actually work!" How cool is that?
If you threw a bunch of extra programmers onto the Windows Media Player team, would they ever hit that high note? Never in a thousand years. Because the more people you added to that team, the more likely they would be to have one real grump who thought it was unprofessional and immature to write "Most things actually work" on your website.
Not to mention the comment, "Winamp 3: Almost as new as Winamp 2!"
That kind of stuff is what made us love Winamp.
By the time AOL Time Warner Corporate Weenieheads got their hands on that thing the funny stuff from the website was gone. You can just see them, fuming and festering and snivelling like Salieri in the movie Amadeus, trying to beat down all signs of creativity which might scare one old lady in Minnesota, at the cost of wiping out anything that might have made people like the product.
Or look at the iPod. You can't change the battery. So when the battery dies, too bad. Get a new iPod. Actually, Apple will replace it if you send it back to the factory, but that costs $65.95. Wowza.
Why can't you change the battery?
My theory is that it's because Apple didn't want to mar the otherwise perfectly smooth, seamless surface of their beautiful, sexy iPod with one of those ghastly battery covers you see on other cheapo consumer crap, with the little latches that are always breaking and the seams that fill up with pocket lint and all that general yuckiness. The iPod is the most seamless piece of consumer electronics I have ever seen. It's beautiful. It feels beautiful, like a smooth river stone. One battery latch can blow the whole river stone effect.
Apple made a decision based on style, in fact, iPod is full of decisions that are based on style. And style is not something that 100 programmers at Microsoft or 200 industrial designers at the inaptly-named Creative are going to be able to achieve, because they don't have Jonathan Ive, and there aren't a heck of a lot of Jonathan Ives floating around.
I'm sorry, I can't stop talking about the iPod. That beautiful thumbwheel with its little clicky sounds ... Apple spent extra money putting a speaker in the iPod itself so that the thumbwheel clicky sounds would come from the thumbwheel. They could have saved pennies ... pennies! by playing the clicky sounds through the headphones. But the thumbwheel makes you feel like you're in control. People like to feel in control. It makes people happy to feel in control. The fact that the thumbwheel responds smoothly, fluently, and audibly to your commands makes you happy. Not like the other 6,000 pocket-sized consumer electronics bit of junk which take so long booting up that when you hit the on/off switch you have to wait a minute to find out if anything happened. Are you in control? Who knows? When was the last time you had a cell phone that went on the instant you pressed the on button?
- Emotional appeal.
These are what make the huge hits, in software products, in movies, and in consumer electronics. And if you don't get this stuff right you may solve the problem but your product doesn't become the #1 hit that makes everybody in the company rich so you can all drive stylish, happy, appealing, cars like the Ferrari Spider F-1 and still have enough money left over to build an ashram in your back yard.
It's not just a matter of "10 times more productive." It's that the "average productive" developer never hits the high notes that make great software.
Sadly, this doesn't really apply in non-product software development. Internal, in-house software is rarely important enough to justify hiring rock stars. Nobody hires Dolly Parton to sing at weddings. That's why the most satisfying careers, if you're a software developer, are at actual software companies, not doing IT for some bank.
... ... ...
The software marketplace, these days, is something of a winner-take-all system. Nobody else is making money on MP3 players other than Apple. Nobody else makes money on spreadsheets and word processors other than Microsoft, and, yes, I know, they did anti-competitive things to get into that position, but that doesn't change the fact that it's a winner-take-all system.
You can't afford to be number two, or to have a "good enough" product. It has to be remarkably good, by which I mean, so good that people remark about it. The lagniappe that you get from the really, really, really talented software developers is your only hope for remarkableness. It's all in the plan:
Best Working Conditions → Best Programmers → Best Software → Profit!
... ... ...
[Jul 1, 2005] Coding for $15 an hour News.blog CNET News.com
Could a computer coding job paying just $15 per hour signal something's wrong with the tech world?
That relatively measly amount is what's promised in an ad for a "ASP.NET Programmer" on the America's Job Bank site. The job, which calls for "at least 1 year's experience either in school, at work, or a combination of the two," is being offered by employment services company AppleOne, according to the ad.
$15 per hour for a computer programmer makes the position fall below the 10th percentile for the programming occupation both nationally and in California, where the job is said to be located. It's less than what some security guards make.
And it has Kim Berry, president of the Programmers Guild advocacy group, steamed about the way domestic techies have to compete with a greater number of foreign workers. A $15-per-hour coding gig doesn't jibe with the recent expansion of the H-1B guest worker visa program, Berry argued in an email Thursday.
"(Department of Labor) and Congress--under the law of supply and demand, aren't wages supposed to go up when there is a shortage?" Berry wrote. "And if there is not a shortage, why did you recently increase the H-1B quota by another 20,000 foreign workers per year?"
To be fair, one defense of H-1B visas is not linked directly to a shortage of workers. Harris Miller, president of the Information Technology Association of America, has argued that the visas give U.S. companies important access to international talent as they compete globally.
Even so, the ad's wage does make one wonder if guest worker visas and the rise of offshoring are undermining U.S. tech careers--and by extension threatening the country's tech leadership.
[Jul 1, 2005] Of cubicle sex and outsourcing News.blog CNET News.com
We've heard reports that business process outsourcing work in India can be a dead-end job replete with long hours and unpaid overtime. But it seems such workplace woes are being offset to some degree with moments of sexual healing.
A story in the India press today reports that BPO workers are smooching and more in office settings, which have transformed into personal spaces in addition to professional domains. "From making friends to cultivating relationships, BPO units are slowly becoming hubs where inter-personal bonding takes place," the story in The Economic Times says. "And it comes as little surprise that many also give vent to their sexual urges in the office space."
The story says that footage from cameras at a leading Mumbai-based BPO unit showed a couple having sex in an office cubicle.
One source quoted in the story suggested that serving Western customers may be changing the behavior of Indian BPO workers. "Most of us have shed a lot of inhibitions when we come into this sector, trying to fall in step with a different time zone and culture that becomes a part of you," said Nicola D'Costa. "Couples walking with their arms around each other's waist/shoulder or grabbing a quick kiss in vacant corridors does happen."Posted by Ed Frauenheim
[Jun 29, 2005] Gates warns against reliance on outsourcing - Computerworld
Gates, who was speaking at the Nippon Keidanren (Japan Business Federation), Japan's biggest and most influential business group, urged IT companies to beware of outsourcing too much to save costs and to keep their key engineering resources and intellectual property at home.
"If you rely too much on people in other companies and countries ... you are outsourcing your brains, where you are making all the innovation," he said.
... ... ...
At a national level, both the U.S. and Japan need to train more and better engineers if their economies are to stay at the cutting edge of technological innovation, which would create value that helps support both countries' high standards of living, he said.
Gates cast the U.S. and Japan as competing in a global market economy that had grown from about 1 billion people 20 years ago to 4 billion people. In this expanded, increasingly competitive economy, India and China are training engineers who are driving their economies forward, yet Japan and the U.S. aren't keeping up, he said.
"The number of students in engineering and IT is going down. ... Staying ahead means setting a very high bar," Gates said.
[May 24, 2005] Enterprise Systems Who Benefits from Outsourcing Not the Line of Business by Stephen Swoyer
Some business customers are organizing "shadow" IT groups to replace IT resources that have been outsourced
Who benefits from outsourcing? Executives, of course: CEOs at the 50 biggest U.S. outsourcers generally receive more in compensation than do chiefs who are less bullish about outsourcing.
From the perspective of some business constituencies, however, the benefits of outsourcing seem questionable, at best. End users, for example, report having to fight their way through several levels of bureaucratic indirection, and almost all are putting up with longer lag times in response to support calls.
One upshot of end-user frustration with the Brave New World of outsourcing is insurrection of a sort: Mad as hell and not willing to take it anymore, some line-of-businesses are organizing "shadow" IT groups to replace IT resources that have been outsourced, both domestically and internationally.
When IT Isn't a Core Competency
When a new CIO came on board at a major telecommunications carrier and provider of managed network services two years ago, he had surprising news for the company's IT staff: We don't do IT. Information technology is not a core competency, this CIO said, arguing that the money his company was spending on IT could be better invested elsewhere.
Shortly thereafter, the CIO decided to outsource all of his company's IT operations, tapping the services arms of both IBM Corp. and Electronic Data Systems (EDS) Inc. to do the job. He touted projected savings in the neighborhood of $150 million, but assured employees, analysts, shareholders, and others that cutting costs wasn't an "overriding consideration." At the same time, he announced plans to eliminate several hundred IT jobs-although, as it turns out, the company cut between 1,400 and 1,600 IT positions.
Two years later, the telco and network services giant is about to enter the third phase of its lock, stock, and barrel IT outsourcing effort. The results of this move are only now becoming apparent. At least one of the company's biggest business units-the managed network services group-is far from satisfied.
As a result, says a former employee who (along with several hundred of his colleagues) was hired in a similar capacity by IBM Global Services (IGS), these folks are surreptitiously reaching out to former employees at IBM, EDS, and elsewhere. "That's the group that's disregarding the [CIO-driven] initiatives and trying to create its own shadow IT group now," says the IGS pro. "They weren't happy about it from the outset, but the deeper [the company has] gotten into this, the more unhappy they are. I still work with the same people over there, and all I keep hearing is how much they would like to hire most of us back."
What is the managed network services group so upset about? Consider a mundane issue-a production support call to fix a sudden failure in a line-of-business application. Actually, the production support call came not through regular channels-that is, through the IGS ticket system-but directly from the line of business itself, just as it would have before the company's IT operations were outsourced. According to the IGS IT pro, the fix-which required some tinkering at the database level-would have taken all of 30 minutes to implement. Before he could do it, however, he had to get approval from his IGS supervisor, which he assumed would be a mere formality.
"I was told the specific request was something that they had not paid for, something not explicitly covered in the contract, that I was not, under any circumstances, to do anything about it until they paid for it," he reports. The result, he says, was that he didn't receive instructions-through IGS channels-to fix the application until a week later. "It was kind of ridiculous, because this would have taken me thirty minutes at the most to do."
IT in Exile
In some enterprises, there's another kind of shadow IT group, too: IT pros who've survived big lay-offs, often because they're needed to support critical operations that can't be outsourced-yet. In the world of outsourcing, these hardened survivors often become the touchstone for end-user and line-of-business gripes. More often than not, many report, they're forced to pick up the slack for the shortcomings of "green" outsourcing tenderfoots.
Take Don Cave, an IT professional with a prominent global insurance giant, who survived his company's decision to outsource one of its database applications to the Indian subcontinent. In a previous life, the same application was managed by a veteran crew of in-house professionals, says Cave; these days, it's supported by several "green" IT pros.
The result? Cave and his co-workers have been cleaning up after the offshore team for several months now. "We will make it a success, and the company will save millions each year," he says. "As a result, the offshore groups will gain even better understanding of the system and how to modify it successfully. Then they will hold even better cards to back up an increase in cost. Eventually they will become as skilled as our former staff, and probably cost 70 percent with extra overhead for testing and other interfaces."
What stings most, says Cave, is that management is willfully oblivious to this situation. In fact, he says, his company recently concluded a project in conjunction with offshore "experts" that-by any objective criteria-was an abject failure: Not only did it go over budget, but it also resulted in a dissatisfied line-of-business customer. The reaction of company management? Deny there's a problem, Cave says. "Of course dissatisfaction [was] denied, except if the user is asked directly."
Coming Full Circle
Most IT pros hold out hope that company management, intoxicated with the purported cost savings of outsourcing, particularly outsourcing of the offshore variety, will eventually get wise to the inevitable trade-offs. There are some indications this is already happening, actually.
A recent study from professional services giant Deloitte Consulting found that many one-time outsourcers are bringing it all back home, so to speak. The Deloitte study, "Calling a Change in the Outsourcing Market," found that 70 percent of survey participants reported having negative experiences with outsourcing projects. Almost half (44 percent) didn't realize the expected cost savings, and a majority (62 percent) found that outsourcing requires a greater-than-expected degree of management and oversight.
As a result, Deloitte says, fully 25 percent of one-time outsourcers are bringing applications and services back in-house.
The Deloitte study also debunked several other oft-claimed benefits of outsourcing. For example, proponents frequently claim that outsourcing can free up internal company staff to focus on projects that deliver more business bang-for-the-buck; for a majority of respondents (57 percent), this wasn't the case. In fact, because of the increased management overhead associated with the outsourcing model, many companies said this was impossible.
This is far from surprising to most IT pros, of course.
"This project [I'm now on] has been joked about for staying mainframe, but the cost savings over implementing this in 'newer technology' will be in the tens of millions of dollars," says Cave. "If it were the outsourcers alone, they would probably just do as desired by upper management and build a whole new subsystem. But once [management] was presented [with the cost estimates], they realized that the numbers don't lie."
The latest from Paul Craig Roberts Outsourcing: A Greater Threat Than Terrorism
Is offshore outsourcing good or harmful for America?
To convince Americans of outsourcing's benefits, corporate outsourcers sponsor misleading one-sided "studies." Only a small handful of people have looked objectively at the issue. These few, and the large number of Americans whose careers have been destroyed by outsourcing, have a different view of outsourcing's impact. But so far, there has been no debate, just a shouting down of skeptics as "protectionists."
Now comes an important new book, Outsourcing America, published by the American Management Association. The authors, two brothers, Ron and Anil Hira, are experts on the subject. One is a professor at the Rochester Institute of Technology, and the other is professor at Simon Fraser University.
The authors note that despite the enormity of the stakes for all Americans, a state of denial exists among policymakers and outsourcing's corporate champions about the adverse effects on the United States. The Hira brothers succeed in their task of interjecting harsh reality where delusion has ruled.
In what might be an underestimate, a University of California study concludes that 14 million white-collar jobs are vulnerable to being outsourced offshore. These are not only call-center, customer service and back-office jobs, but also information technology, accounting, architecture, advanced engineering design, news reporting, stock analysis, and medical and legal services. The authors note that these are the jobs of the American Dream, the jobs of upward mobility that generate the bulk of the tax revenues that fund our education, health, infrastructure and social security systems.
The loss of these jobs "is fool's gold for companies." Corporate America's short-term mentality, stemming from bonuses tied to quarterly results, is causing U.S. companies to lose not only their best employees-their human capital-but also the consumers who buy their products. Employees displaced by foreigners and left unemployed or in lower-paid work have a reduced presence in the consumer market. They provide fewer retirement savings for new investment.
No-think economists assume that new, better jobs are on the way for displaced Americans, but no economists can identify these jobs. The authors point out that the track record for the re-employment of displaced U.S. workers is abysmal: "The Department of Labor reports that more than one in three workers who are displaced remains unemployed, and many of those who are lucky enough to find jobs take major pay cuts. Many former manufacturing workers who were displaced a decade ago because of manufacturing that went offshore took training courses and found jobs in the information technology sector. They are now facing the unenviable situation of having their second career disappear overseas."
American economists are so inattentive to outsourcing's perils that they fail to realize that the same incentive that leads to the outsourcing of one tradable good or service holds for all tradable goods and services. In the 21st century, the U.S. economy has only been able to create jobs in non-tradable domestic services-the hallmark of a Third World labor force.
Prior to the advent of offshore outsourcing, U.S. employees were shielded against low-wage foreign labor. Americans worked with more capital and better technology, and their higher productivity protected their higher wages.
Outsourcing forces Americans to "compete head-to-head with foreign workers" by "undermining U.S. workers' primary competitive advantage over foreign workers: their physical presence in the United States" and "by providing those overseas workers with the same technologies."
The result is a lose-lose situation for American employees, American businesses, and the American government. Outsourcing has brought about record unemployment in engineering fields and a major drop in university enrollments in technical and scientific disciplines. Even many of the remaining jobs are being filled by lower-paid foreigners brought in on H-1b and L-1 visas. American employees are discharged after being forced to train their foreign replacements.
U.S. corporations justify their offshore operations as essential to gaining a foothold in emerging Asian markets. The Hira brothers believe this is self-delusion. "There is no evidence that they will be able to out-compete local Chinese and Indian companies, who are very rapidly assimilating the technology and know-how from the local U.S. plants. In fact, studies show that Indian IT companies have been consistently out-competing their U.S. counterparts, even in U.S. markets. Thus, it is time for CEOs to start thinking about whether they are fine with their own jobs being outsourced, as well."
The authors note that the national security implications of outsourcing "have been largely ignored."
Outsourcing is rapidly eroding America's superpower status. Beginning in 2002, the United States began running trade deficits in advanced technology products with Asia, Mexico and Ireland. As these countries are not leaders in advanced technology, the deficits obviously stem from U.S. offshore manufacturing. In effect, the United States is giving away its technology, which is rapidly being captured, while U.S. firms reduce themselves to a brand name with a sales force.
In an appendix, the authors provide a devastating expose of the three "studies" that have been used to silence doubts about offshore outsourcing-the Global Insight study (March 2004) for the Information Technology Association of America, the Catherine Mann study (December 2003) for the Institute for International Economics and the McKinsey Global Institute study (August 2003).
The ITAA is a lobbying group for outsourcing. The ITAA spun the results of the study by releasing only the executive summary to reporters who agreed not to seek outside opinion prior to writing their stories.
Mann's study is "an unreasonably optimistic forecast based on faulty logic and a poor understanding of technology and strategy."
The McKinsey report "should be viewed as a self-interested lobbying document that presents an unrealistically optimistic estimate of the impact of offshore outsourcing and an undeveloped and politically unviable solution to the problems they identify."
Outsourcing America is a powerful work. Only fools will continue clinging to the premise that outsourcing is good for America.
COPYRIGHT 2005 CREATORS SYNDICATE INC.
Reversing outsourcing Open Source ZDNet.com
The big driver on insourcing, of course, is exactly the same thing that drove outsourcing: dissatisfaction with IT services. The real outsourcing sales pitch is that it lets senior executives put a positive spin on firing the IT department without forcing them to face their own responsibilities for IT. Insourcing decisions have exactly the same basis: it's just that the target isn't the internal IT group, it's that same group working for the outsourcer.
Thus yesterday's CNET headline: Sears ends $1.6 billion deal with Computer Sciences isn't the first and won't be the last. Fundamentally, most outsourcing contracts substitute tweedle dee for tweedle dum and it should be no surprise, therefore, when interchangeable people and technologies produce interchangeable disasters.
So what can you do? Simple: don't be tweedle dum. Focus on reducing the upward flow of user complaints about the quality of IT support - but remember that expectations set by the perfect systems on television dramas like NCIS, by IBM's ads, or even just the latest oxymoronic Sunday supplement on secure wireless, cannot be met.
One totally cynical option I've been growing fonder of lately plays directly to the biases induced in executives by the contradictions between what they're told by the mass media and what they're told by user management. What I do is argue that adopting open source applications on Unix (usually Linux on x86 or Solaris on SPARC) will produce monetary savings at the cost of some reduction in service quality.
[May 13,2005] America is losing: More phony jobs hype By Paul Craig RobertsCounterPunch Careless journalists and commentators are hyping the 274,000 new April payroll jobs as evidence of the health of the US economy. An examination of the details of the new jobs puts a different view on the matter.
April's job growth is consistent with the depressing pattern of US employment growth in the 21st century: The outsourced US economy can create jobs only in domestic nontradable services.
Of the 274,000 April jobs, 256,000 were in the private or nongovernment sector, and 211,000 of these were in the service sector as follows: 58,000 in leisure and hospitality (primarily restaurants and bars), 47,000 in construction, 29,200 in wholesale and retail trade, 28,000 in health care and social assistance, 17,300 in administrative and support services (primarily temps), 11,700 in transportation and warehousing, 8,800 in real estate. A few scattered jobs in other service categories completes the picture.
Americans regard themselves as "the world's only superpower," but the pattern of American job growth in the 21st century is that of a third world economy. The US economy has ceased to create jobs in high tech sectors and in export and import-competitive sectors. Offshore outsourcing of manufacturing and of engineering and professional services is dismantling the ladders of upward mobility that made the American Dream possible.
Not only is the US economy creating third world jobs, according to analysis by Edwin S. Rubenstein (vdare.com, April 2, 2005), it is creating the jobs for Hispanic immigrants. Rubinstein examined job growth by ethnicity and found that Hispanics (13 percent of the work force) are gaining 60 percent of the new service jobs.
Rubinstein's findings are consistent with the racial composition one observes on construction sites, in fast food restaurants, in waste services and among hospital orderlies.
Until recent years American jobs had nothing to fear from low-wage foreign labor. Americans' high pay reflected their high productivity from working with the most capital and best technology.
The collapse of world socialism and the rise of the high speed Internet forced Americans to compete head to head in the same global labor market with low wage foreign labor working with identical capital and technology. When US and European corporations move their manufacturing, research and development offshore or contract with offshore producers to supply the products and services that they market, the jobs and associated incomes are also transferred abroad.
Americans and Europeans cannot compete in labor markets with Chinese, Indians, and Eastern Europeans, because the cost of living in North America and Europe is so much higher. In addition, there is a vast excess supply of labor in China and India that overhangs the labor markets there and keeps wages low.
The claim by outsourcing's proponents that outsourcing creates new and better jobs for Americans is pure fantasy. This claim can find no support in job and income data. Moreover, the same incentive to outsource that is sending so many jobs abroad applies equally to any new replacement jobs.
The only American jobs that are safe are in domestic nontradable services that cannot be outsourced, and even in these domestic services, such as school teachers and nurses, foreign workers are being imported via work visa programs.
Outsourcing's proponents claim that it benefits corporations and their shareholders. This is true only in the short run. The substitution of foreign labor for American labor allows executives to reduce costs and increase profits, thus producing large bonuses for themselves and capital gains for shareholders. The long run effect, however, is to destroy the US consumer market and to reduce US corporations to a brand name with a sales force selling foreign made products to Americans employed in third world jobs.
Offshore outsourcing is a new phenomenon that has received little attention from economists, who mistakenly view offshore outsourcing as just another manifestation of the beneficial workings of free trade and comparative advantage. In fact, offshore outsourcing is the flow of resources to absolute advantage. Economists have known for two centuries that absolute advantage does not produce mutual gains. Unlike the operation of comparative advantage, absolute advantage produces winners and losers.
China and India are winning. America is losing. It is as simple as that.
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: email@example.com
Reprinted from CounterPunch:
[May 12, 2005] Down on Outsourcing | By Rob Preston
Many of the world's largest organizations are unhappy with their IT and business-process outsourcing engagements, according to "Calling a Change in the Outsourcing Market," a new study by Deloitte Consulting.
Fact is, companies have been falling in and out of love with outsourcing for more than a decade.
In the mid-1990s, New York-based insurer MONY, citing morale and other problems, cut short its seven-year outsourcing contract with Computer Sciences and reassembled its in-house IT organization. Chip maker LSI Logic bailed on a five-year deal with IBM Global Services, lamenting that outsourcing leads to a "dysfunctional" separation of technology and business processes. In 2002, Bank One ended a $2 billion outsourcing agreement with IBM and AT&T, with CEO Jamie Dimon citing the bank's need to "control its own destiny." As president of J.P. Morgan Chase, which acquired Bank One last year, Dimon scuttled a $5 billion outsourcing deal with IBM for similar reasons.
Why the disillusionment? Nearly half of the 25 blue-chip company executives interviewed by Deloitte identified "hidden costs" as the most common problem when managing an outsourcing project. Among other problems: Outsourcers often fail to understand customers' business challenges and respond fast enough to their changing needs; and many customers find that managing the relationship can be just as complicated as running an IT shop.
Sometimes these relationships unravel over time. In a typical case, the customer negotiates a long-term contract with the outsourcer, which throws personnel at the engagement, but the number of bodies never increases because there's no incentive for the vendor. Before the contract matures, the customer's needs have grown tremendously, so the prickly renegotiations begin.
Some 83 percent of the execs surveyed by Deloitte said they have renegotiated outsourcing deals to adjust pricing and factor in changes to the business, technology and regulatory environments. Some 45 percent of the respondents include "gain-sharing" clauses in their outsourcing contracts to keep the vendors on their toes. More than half the respondents have moved from long-term contracts (six to 10 years) to shorter contracts to increase their flexibility and bargaining clout.
In many cases, it's not outsourcing or the vendor that's dysfunctional. Deloitte found that 48 percent of respondents didn't have a methodology for evaluating the business case for outsourcing; 81 percent had limited or no visibility into their vendors' pricing and cost structure; 62 percent underestimated their own management requirements; and 57 percent could not free up internal resources for other projects.
In other words, many customers are ill-prepared to negotiate the contract and manage the relationship, and they're paying the price. But walking away from a bad outsourcing deal isn't cheap either. Some customers have had to cough up tens of millions of dollars to void their long-term contracts, and it's even more costly (and more difficult) to rebuild an in-house operation.
The point here isn't to bash outsourcing, which continues to make sense for many, many companies, especially those with the expertise and foresight to manage these relationships like they run their core operations. IBM didn't amass a $123 billion market cap on the back of a flawed, dysfunctional business model.
The point is that IT strategy, service, development and support isn't a shrink-wrapped product easily transferred from outsourcer to multiple customers. Although vendors and customers may have conflicting agendas, the successful outsourcing engagement is a partnership in an age in which this overused term has lost meaning. Treat outsourcing with the care and feeding that true partnerships demand.
Rob Preston is editor in chief of Network Computing. Write to him at firstname.lastname@example.org.
Letters Economist.com Chris Gentle Deloitte, Director of research London
Activities relocated to India are often portrayed as outsourced call-centre functions. This is a popular misconception. Our research indicates that IT is the cornerstone of offshoring. Staff employed in offshored IT outnumber call-centre staff by ten to one.
Second, labour skills, not volumes, are the key issue. To make offshoring sustainable, firms will have to invest more in management skills. Rather than hopping backwards and forwards on short visits, key management talent (and their families) will have to be relocated to lower-cost markets. And third, the pressure on costs in the West's markets looks set to increase. Services such as banking, insurance and telecoms are very mature. In some cases, the relocation of processing activities into emerging markets will go hand in hand with market-entry strategies. Manufacturing took 20 years to make its operations global. Services are just starting along this path and offshoring is likely to play a profound role in reshaping the operations of its businesses.
Outsourcing requires careful planning - Computerworld
By 2007, global spending on outsourcing will top $50 billion per year, according to market analyst Gartner Inc. But not all of these outsourcing projects will succeed. Many outsourcing projects fall apart because companies fail to consider the costs and complexity that are associated with outsourcing.
Deciding to outsource an IT project is a strategic decision for a company and it's important to not rush headlong into a project without proper planning, said Nick Rossiter, a partner at Mithras Consulting Group, which advises clients on outsourcing-related issues.
In June, Gartner released a report that outlined common pitfalls for companies that outsourced IT services. That report identified five factors that companies often fail to fully consider when deciding whether or not to outsource IT functions: cost, productivity, communications, culture and organizational readiness.
If your company is considering an outsourcing project, Gartner recommended that you start by analyzing the total costs of the project. Don't look just at the difference in labor costs, the report said. Be sure to factor in additional costs for conducting due diligence, communications, oversight, international travel and training, it said.
That's sound advice, according to Rossiter. "These costs can be greater than the cost of labor," he said.
Since outsourcing costs will not be constant during the life of a project, companies should consider the costs for different stages of the project. Since initial costs are generally highest during an outsourcing project, your company may not realize significant cost savings until one or two years after the start of the project, according to the Gartner report.
It's also important to be realistic about the level of productivity that outsourcing providers can offer, Gartner said. Some companies assume that the productivity of an outsourcing partner will match that of internal IT staff: this isn't always the case. In particular, be prepared for lowered productivity during the initial phase of an outsourcing project.
Throughout the life of the outsourcing project, productivity levels may be affected by staff turnover at the outsourcing provider. In these cases, new staff may have to be trained to fully understand the applications they are working with. "They need time to get really efficient" Rossiter said.
Another key factor to consider is whether your company's senior management has bought into the outsourcing project. Support from top executives is "instrumental" in keeping an outsourcing project on track, the report said.
Effective communication between your company and your outsourcing provider are also important to the success of an outsourcing project.
All communication between your company and the outsourcing provider should be documented and made as clear as possible to avoid misunderstandings, Gartner advised. This is particularly important when conveying the technical requirements and business objectives of an outsourcing project. If companies fail to communicate these goals clearly, problems that may arise include lower productivity and increased errors in the project, it said.
Another issue to consider when choosing an outsourcing service provider is culture, which differs from country to country and between companies.
Be sure to consider which cultural issues may affect the working relationship between your company and your outsourcing provider, Gartner said. Seek advice from consultants and consider cultural training when necessary to ensure a smooth working relationship with your partner. In addition, sending internal IT staff overseas to work with the outsourcing provider may help to minimize the risk of cultural issues affecting the success of the outsourcing project.
Rushing into an outsourcing project before you have fully considered all of the factors associated with these kinds of projects can result in additional costs or poor results, Gartner said.
Be sure your company is ready to outsource before taking the plunge. Make sure that internal staff understand the reasons for outsourcing and are supportive of the project. Carefully consider all of the risks and determine how much risk your company is willing to accept. Once you have done this, look for ways to mitigate risks, it said.
Companies should also assess the maturity of their own IT operations before outsourcing, according to Gartner. Some factors to consider are standardized methodologies, project management skills and service-level agreements, among others. Any weakness in these areas may result in lower productivity and a less-than-desirable result, it said.
When considering an outsourcing project, companies are well advised to take their time, considering a range of different geographies and service providers, Rossiter said. India is the best-known outsourcing center and has a large number of experienced outsourcing service providers. But there are other choices, such as China or The Philippines, which have a smaller number of experienced outsourcing providers to choose from, he said.
"Above and beyond that, It depends on the business goal of the client," Rossiter said, noting that many Japanese companies choose to outsource to China because of the close economic relationship between the two countries. Some U.S. companies have also chosen to outsource to China in order to further their business objectives in the country, he said.
When you've settled on a partner, you should consider starting off with a smaller IT project that is not mission-critical before moving on to larger and more important projects. This will allow you and your outsourcing partner to develop a strong working relationship and will minimize the risk of problems, Rossiter said.
If the project goes well, you can pass more projects to the outsourcing service provider, he said.
[May 5, 2005] (COMPUTERWORLD)
Offshore outsourcing by financial services firms will double over the next four years as these companies turn over larger and more strategic parts of their operations to offshore providers, reported market research firm Datamonitor PLC.
Anders Maehre, managing analyst at the London-based company, said financial services firms in the U.S. spent about $590 million on offshore services from third-party outsourcers last year, while their European counterparts spent about $480 million overseas.
But by 2008, Datamonitor expects offshore spending by financial services firms in Europe and the U.S. to nearly double to more than $2 billion, said Maehre. Among the services financial companies will increasingly send offshore are business process functions such as mortgage processing, insurance underwriting and claims processing.
Financial services firms are asking their offshore providers to play an ever larger role in core operations, said Maehre. Providers that were initially tasked to perform specific application and support work, for instance, are now being asked to take over the development area, he said.
In some cases, the rationale behind these expanded outsourcing deals isn't just cost reduction, said Maehre. The move is also seen as an opportunity to improve business processes that companies may be a struggling to fix internally because of political resistance.
Offshore providers are also reacting to customer demand for more extensive services by buying up consulting capability. Last month, two large offshore firms, Satyam Computer Services Ltd. and Cognizant Technology Solutions Corp., each bought consulting companies to better enable them to help companies with strategic IT development.
"We have seen the market evolve, and the expectation of our customers [has] changed dramatically over the last few years," said B. Ramalinga Raju, founder and chairman of Hyderabad, India-based Satyam. "Customers are no longer content with getting the low-end technology services from offshore."
Satyam last month acquired Citisoft PLC, an investment management consultancy, for $23 million, with an additional performance-based payment of up to $15.5 million over a three-year period.
Teaneck, N.J.-based Cognizant acquired Fathom Solutions LLC for $19 million in cash and stock, and a "contingent consideration" of $16 million payable in two years. That firm was founded by former Accenture executives in 1999, and has expertise in financial services and telecommunications.
"We're continuing to move up the value chain in the services that we offer," said Francisco D'Souza, chief operating officer at Cognizant. He said the purchase will better enable his company to give customers "the best of both worlds" -- strong offshore capabilities coupled with consulting services.
The India-based firms are also competing against U.S.-based providers such as IBM and Electronic Data Systems Corp., which have been building up their own offshore centers to add to their existing consulting capabilities, said Maehre.
Eclicktick Consulting: OutsourcingPaperBut bad things happen to good managers too. I just got off the phone with an IT manager. Her complaint: "Things are too complicated. Mainframes are connected to portals. The portal was designed to work with IBM's DB2. We were forced to make it work with Oracle SQL database. My system is always going down." she complained. "The outsourcers don't catch problems fast enough."
And I recently attended a .net conference run by Infoworld, where all the speakers talked glowingly of the ability of Microsoft's new abilities to tie together legacy, web and e-commerce systems.
But like most things in life, complexity costs. A lot. The technocrats talk about Total Cost of Ownership for a system - how much it is going to cost, select, purchase, set up and install, integrate, maintain and replace a system. The sophisticated consultants talk about Total Value of Opportunity or TVO - which forces managers to analyze more than the cost or size of a project.
But what senior managers and those who think strategically care about is: "What impact does all this stuff have on the business and the customer? How do all of these technology decisions add up to make my business better or worse? How do they affect my costs and profits? How does if affect my capabilities and competencies?"
Computer Consultants - How to slow down outsourcing
Law that require that every worker that serves US customers be paid atleast US minimum wage as required by Federal law will slow down outsourcing. Other ideas: http://www.geocities.com/saveusajob...urcing_laws.htm
> Zalek Bloom <ZalekBloom@hotmail.com> wrote in message
> That wouldn't help slow down IT outsourcing, or at least the bulk of
> it, since the Indian IT guys I know tell me their compatriots in India
> make about 20k/yr or around that, well in excess of minimum wage.
What WILL slow down and even stop IT outsourcing is the elimination of IP rents. At present the American OWNERS of the enterprise collect all the rent (return to monopoly ownership privilege) on the software created by the foreign producers. Outside US borders the price of the software is minuscule as pirated copies are easily obtained. Only Americans pay the inflated (rent seeking) prices. Same with pharmaceuticals. Middle class Americans pay the toll as Bill Gates gets richer and richer. If the Indians are as good as the Americans at producing software then why does Bill Gates need to get the rent, and why does software cost so much? It is
my undersatanding that Indian manufacture of pharmaceuticals is much the same kind of deal and if not then the Chinese probably do the pharmaceuticals for sale in places other than the USA. Again: Americans pay all the rent.
The American producer's anger with the Indians taking the jobs is misplaced. The anger should be directed at our own government and its continued reward to rent seekers. If the software were priced exclusive of rent, then we would all (Indians and Americans alike) benefit from the comparative advantage. But as it is, so
called, "free trade" is merely exacerbating wealth disparity in the USA and keeping foreigners from realizing the full return to their efforts.
I can't imagine why the Chinese pay any money to Nike at all. They
have shown they can make tennis shoes. Why not tell Nike to take
http://GreaterVoice.org (a work in progress)
The Trucker <email@example.com> wrote in message news:<firstname.lastname@example.org>...
> beernuts wrote:
> What WILL slow down and even stop IT outsourcing is the elimination
> of IP rents. At present the American OWNERS of the enterprise
> collect all the rent (return to monopoly ownership privilege) on
> the software created by the foreign producers. Outside US borders
> the price of the software is minuscule as pirated copies are easily
> obtained. Only Americans pay the inflated (rent seeking) prices.
> Same with pharmaceuticals. Middle class Americans pay the toll
> as Bill Gates gets richer and richer. If the Indians are as good
> as the Americans at producing software then why does Bill Gates
> need to get the rent, and why does software cost so much? It is
> my undersatanding that Indian manufacture of pharmaceuticals is
> much the same kind of deal and if not then the Chinese probably
> do the pharmaceuticals for sale in places other than the USA.
> Again: Americans pay all the rent.
> The American producer's anger with the Indians taking the jobs is
> misplaced. The anger should be directed at our own government and
> its continued reward to rent seekers. If the software were
> priced exclusive of rent, then we would all (Indians and Americans
> alike) benefit from the comparative advantage. But as it is, so
> called, "free trade" is merely exacerbating wealth disparity in
> the USA and keeping foreigners from realizing the full return to
> their efforts.
I just dont see how that is the problem. Surely the fact that an Indian programmer can live on USD4k/yr means that however low western government taxes are we could not compete down to that level of cost!
Wherever you live in the western world there will be a minimum floor that cannot be lowered. We benefit from clean running water, a low infant mortality, long life expectency etc, these are the things we are paying for. If we want to compete at their level we will have to forego those advantages. Do you suggest we do that?
The real question we sould be asking is is it right (in the moral sense perhaps) that globalisation allows companies to exploit the developing countries lack of infrastructure & cost base for their own
(greedy) ends? Before anyone suggests that we are helping the poor I ask you this: are you happy to donate your job to India and then live on the breadline yourself so that another family can be wealthy in
India? I'm damn sure I didn't volunteer.
> I can't imagine why the Chinese pay any money to Nike at all. They
> have shown they can make tennis shoes. Why not tell Nike to take
> a hike?
Ian Illy wrote:
> The Trucker <email@example.com> wrote in message
> I just dont see how that is the problem. Surely the fact that an
> Indian programmer can live on USD4k/yr means that however low western
> government taxes are we could not compete down to that level of cost!
But that is not the point even though I disagree with your claim. My point was that comparative advantage (even taking advantage of overpopulation in less developed societies) S HOULD make prices retreat to a level that makes it possible for people to work much less or (as you would have it) get paid a lot less and still have
the SAME or even a better standard of living. But the delivery of rent to the owners of the IP rights takes this away. The producers are ripped off by the rentiers.
> Wherever you live in the western world there will be a minimum floor
> that cannot be lowered.
The Bush Regime is fighting real hard to lower it. The Republicans are rent seekers. They really want a very wealthy nobility through inheritance that tells us all how to run our lives. They are truly anti-democracy
and anti-freedom as they do not believe that the common people are capable of deducing and subscribing to a morality that is beneficial to the ascent of man. It is a self fulfilling prophecy in that the uninformed and misinformed are robbed of any means of self determination.
> We benefit from clean running water, a low
> infant mortality, long life expectency etc, these are the things we
> are paying for. If we want to compete at their level we will have to
> forego those advantages. Do you suggest we do that?
No. I'm actually suggesting a return to a much more progressive income tax here in the USA, and a dramatic reduction in FICA tax. This should allow us to recoup much more of the rent and at the same time decrease direct wage costs here in the USA. Some form of National Health Insurance to supplant the patchwork
employer insurance system would also dramatically reduce the wage costs here in the USA and provide for better worker mobility as a means to keep employers in line. Ye ole "take that job and shove it" deal.
> The real question we sould be asking is is it right (in the moral
> sense perhaps) that globalisation allows companies to exploit the
> developing countries lack of infrastructure & cost base for their own
> (greedy) ends?
No. And that is why it is imperative to capture that economic rent (the proceeds of the exploitation) for the good of the people here in the USA. This will serve to marginally increase job opportunities here in the USA while not destroying the Indian economy. Comparative advantage will still remain while the rip off goes away.
> Before anyone suggests that we are helping the poor I
> ask you this: are you happy to donate your job to India and then live
> on the breadline yourself so that another family can be wealthy in
> India? I'm damn sure I didn't volunteer.
I was a heterogeneous systems administrator and damned good at what I did. I was also a software configuration specialist and networking know it all. I watched two Indians screw with a database installation
for two weeks before the management gave up and allowed me to show them how to do it. I now drive a truck for a living but I like it better than all the crap I had to put up with from the Republican Business types. I make less dough but I really see a lot of this country. I live in the truck and pay rent to no one. Of course Bush is doing all he can to allow Mexican nationals to operate and live in the trucks and take that job away too.
http://GreaterVoice.org (a work in progress)
[May 4, 2005] Information Week/Editor's Note: Outsourcing, Caps, And A Ship Of Fools
There has been much kvetching lately about the need to find more qualified IT workers, led by none other than Microsoft CEO Bill Gates and his homeboys. Also in the news, at least two efforts to address the issue: On the one hand, we have Congress approving what amounts to an additional 20,000 H-1B visas, as long as the holders earned a master's degree or higher from an American university (and this matters why??); on the other, we have a very clever attempt to take advantage of both the upside and downsides of outsourcing via a can't-miss marketing ploy--the Love, er Code Boat.
After years of corporate downsizing, merger-induced layoffs, and wholesale outsourcing of IT departments, it just seems incongruous to me that if a shortage of IT labor exists, it's as big as we're led to believe. For one thing, technology companies, which tend to employ a lot of technologists, are still laying off broad swaths of people. For another, the size of this alleged shortage is darn hard to pin down. A couple of years ago, I led a team of reporters in an attempt to ferret out some cold, hard statistics in a bid to look into the urban myths of outsourcing. It quickly became clear that the government was not anxious to keep close track of this issue. We found few useful statistics and very little effort to track the size of the IT worker market. Outside the government we found mostly two camps, each with extremist views and self-serving statistics. It's no surprise, really. This is an emotional issue. People's livelihoods are at stake, as are corporate IT investments.
Read more about Microsoft's hiring woes and the Love Boat of programming, the SeaCode concept, by reading my blog.
[Apr 23, 2005] Independent/Disillusionment puts outsourcing into reverse By Julia Kollewe
Many large companies that outsourced information technology and other services are bringing operations back in-house after failing to achieve desired cost savings, says a new global study by Deloitte.
The research found that the tide is turning, with almost three-quarters of companies questioned experiencing significant problems with outsourcing projects, and 44 per cent not seeing any cost savings materialising. A quarter of companies have brought functions back in-house after realising that they could be managed better and more cheaply internally. Chris Loughran, a consulting partner with Deloitte, said that of the three areas usually outsourced - IT, finance and human resources - companies were generally most satisfied with the outsourcing of HR services. He said companies were going through a learning process and now realising that they were better off keeping some functions in-house.
Mr Loughran also highlighted the "fundamental difference" between outsourcing manufacturing and outsourcing services. "Negotiating for the purchase of a product is far easier - because it is tangible - than for the purchase of a service," he said. "Getting that specified service that you want is quite challenging." Many of the companies questioned found that outsourcing can introduce unexpected complexity, add cost and require more management attention.
The study questioned executives from 25 of the world's biggest companies with more than $50bn (£27bn) of services outsourced, including a number of UK and European companies. Other recent research from KPMG and the Confederation of British Industry showed that almost one-third of businesses in London are relocating support operations outside Britain, with financial and back-office positions the most popular to relocate. Many banks and insurers, led by HSBC and Aviva, have offshored thousands of call-centre jobs.
Recent scandals have highlighted the risks. Capital One, the credit card company, had to cancel a telemarketing deal with an Indian call centre company when it discovered that workers had misled customers with spurious offers of credit.
Bandwagon of offshoring
The banking giant HSBC and Britain's largest insurer, Aviva, have been leading the way in offshoring thousands of call-centre jobs to India.
Other banks and insurers have followed suit, such as Lloyds TSB and Prudential. But some UK financial institutions have resisted the temptation to offshore jobs, including the Royal Bank of Scotland, Legal & General, Alliance & Leicester and the Cooperative Bank.
RBS highlighted the fact that it was not offshoring any jobs at its annual meeting on Wednesday, and its definite policy not to do so also featured in TV advertising for its NatWest subsidiary last year.
[Apr 06, 2005]Partnering the Destruction of the American Economy By Paul Craig Roberts, CounterPunchThe Job Arbitragers
Sarasota, Florida -- In March the US economy created a paltry 111,000 private sector jobs, half the expected amount. Following a well-established pattern, US job growth was concentrated in domestic services: waitresses and bartenders, construction, administrative and waste services, and health care and social assistance.
In the 21st century the US economy has ceased to create jobs in knowledge industries or information technology (IT). It has been a long time since any jobs were created in export and import-competitive sectors.
The Bureau of Labor Statistics forecasts no change in the new pattern of US payroll job growth. Outsourcing and offshore production have reduced the need for American engineers, scientists, designers, accountants, stock analysts, and other professional skills. A college degree is no longer a ticket to upward mobility for Americans.
Nandan Nilekani is CEO of Infosys, an Indian software development firm. In an interview with New Scientist (Feb 19, 2005), he noted that outsourcing is causing American students to "stop studying technical subjects. They are already becoming wary of gong into a field which will be 'Bangalored' tomorrow."
Bangalore is India's Silicon Valley. A 21st century creation of outsourcing, Bangalore is a new R&D home for Hewlett-Packard, GE, Google, Cisco, Intel, Sun Microsystems, Motorola, and Microsoft. The New Scientist reports: "The concentration of high-tech companies in the city is unparalleled almost anywhere in the world. At last count, Bangalore had more than 150,000 software engineers."
Meanwhile American software engineers go begging for employment, with several hundred thousand unemployed. I know engineers in their thirties with excellent experience who have been out of work since their jobs were outsourced four or five years ago. One is moving to Thailand to take a job in an outsourcing operation at $875 a month.
A country that permits its manufacturing and its technical and scientific professions to wither away is a country on a path to the Third World. The mark of a Third World country is a labor force employed in domestic services.
Many Americans and almost every economist and policymaker do not see the peril. They confuse outsourcing with free trade, and they have been taught that free trade is always beneficial.
Outsourcing is labor arbitrage. Cheaper foreign labor is being substituted for more expensive First World labor. Higher productivity no longer protects the wages and salaries of First World employees from cheap foreign labor. Political change in Asia has made it easy to move First World capital and technology to cheap labor, and the Internet has made it easy to move cheap labor to First World capital and technology. When working with First World capital and technology, foreign labor is just as productive-and a lot cheaper.
This is a new development. It is not a development covered by the case for free trade.
Outsourcing's apologists claim that it will create new jobs for Americans, but there is no sign of these jobs in the payroll jobs data. Moreover, it doesn't require much thought to see that the same incentive to outsource would apply to any such new jobs. By definition, outsourcing is the substitution of foreign labor for domestic labor. It is impossible for a process that replaces domestic employees with foreigners to create jobs for domestic labor.
Now biotech and pharmaceutical jobs and innovation itself are being moved offshore. The Boston Globe reports that Indian chemists with Ph.D. degrees work for one-fifth the pay of US chemists. American chemists cannot give up 80% of their pay to meet the competition and still pay their bills. Rising interest rates will make it difficult enough for Americans to make their mortgage payments, and the dollar's declining exchange value will raise the prices of the goods and services that have been moved offshore.
Americans are unaware of the difficult adjustments that are coming their way. By the time Americans catch on to outsourcing, its proponents will have changed its name to "strategic sourcing" or "partnering."
Corporations, economists, and politician have written off American labor. No end of the job drought is in sight.
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions. He can be reached at: firstname.lastname@example.org
Exclusive: Gartner Predicts Huge Increase In Offshore Outsourcing By 2015
Report to be released next week says 30% of IT jobs in developed countries will be "offshored" by 2015.
A leading industry research firm says in an upcoming report that the number of information technology jobs outsourced to low-cost countries such as India and China is just a trickle compared with what's going to happen over the next 10 years.
Gartner says less than 5% of IT jobs in the United States and other developed countries are currently "offshored." By 2015, however, that number will rise to 30%. "It's a tectonic shift," says Gartner analyst Frances Karamouzis, the report's author. The figures cover work that will be exported not only from the United States but from other developed countries as well.
.. ... ... ...
Despite the magnitude of the shift, Karamouzis says she doesn't believe offshoring will result in a net loss of IT jobs in the United States. "There are a lot of people who are currently programmers who could transition to higher-level positions where you need to be close to the customer," she says.
Other observers see a similar shift occurring but believe the process will take longer. Cindy Shaw, an analyst at Moors & Cabot, says she also believes 30% of IT jobs will ultimately move offshore, "but it's going to take 20 to 25 years, not 10," she says. Last year, Forrester Research analyst John McCarthy said 3.4 million U.S. services jobs--including a number of IT-related positions--would move offshore by 2015. According to the Information Technology Association of America, there are about 10.4 million IT professionals employed in the United States.
[Nov 4, 2005] U.S. Senate approves H-1B visa increase - Computerworld
The H-1B increase passed as part of a large budget bill aimed at reducing the U.S. government budget deficit. A House version of the budget bill does not include the increase, and the full House may vote on that bill as early as next week. Negotiators would have to iron out differences between the two measures before a compromise bill would go to President George W. Bush for his signature.
Technology trade groups have called for an increase in the cap, saying they can't find enough workers with specialized skills. Backers of higher limits say H-1B visas help U.S. tech companies attract the best talent, and the Information Technology Association of America (ITAA) praised the Senate for raising the H-1B cap.
"The Senate has grabbed the opportunity to make a real difference for America's high tech future," ITAA President Harris Miller said in a statement. "Recapturing these visas will give an immediate boost to U.S. competitiveness in overseas markets."
An earlier proposal in the Senate Judiciary Committee would have recaptured up to 60,000 extra visas a year, but Sen. Dianne Feinstein, (D-Calif.), pushed for a smaller increase. She expressed concern about the effect on U.S. jobs, including on tech workers.
The Senate bill includes an additional $500 application fee for the recaptured visas, and it would impose an additional $750 fee on L-1 visa applications. L-1 visas are used by IT vendors and other companies to hire executive-level workers from overseas. The House version of the budget bill increases the L-1 fee by $1,500.
The House bill "provides no relief to firms and other organizations in need of recruiting talent globally," said Jeff Lande, a senior vice president at the ITAA.
Technology worker organizations, including the Institute of Electrical and Electronics Engineers-USA (IEEE-USA), have opposed increases in H-1B limits. U.S. IT and electrotechnology professionals saw a 1.5% decrease in their salaries in 2003, the first decrease since the IEEE-USA began surveying members in 1972, the group said in December.
The ITAA continues to "undercut U.S. software workers" by calling for more H-1B visas, said Ron Hira, chairman of the IEEE-USA's research and development policy committee. Hira compared the hiring of H-1B workers to the practice of companies "dumping" products into another country by charging less than they do in their home country.
A recent study, "The Bottom of the Pay Scale: Wages for H-1B Computer Programmers -- F.Y. 2004," by Programmers Guild board member John Miano, found that H-1B workers in computer jobs were paid an average of $13,000 less than U.S. workers in the same jobs.
When the company hired a new CEO, he secretly decided to hire an IT consulting firm to analyze our systems, document the infrastructure, and make recommendations for future support. And when I say "secretly," I mean secretly. He certainly never asked for advice. As soon as Joe went on vacation, the consulting firm swooped down on us. I was ordered to assist them by providing passwords and answering questions. Actually, I was pleased with the prospect of having a reliable IT staff that could handle our infrastructure and equipment.
The consulting firm spent a week on-site and later sent over its final proposal. The new CEO graciously let me review it. (Read: He needed someone to translate the document.) I was baffled to discover that it made references to equipment that didn't exist on our network. I also found one odd technical phrase that I had never run across.
So I Googled the phrase, hoping to find a definition ... and shortly thereafter I found myself reading a document that seemed remarkably similar to the report just provided to us by the consulting firm. Upon closer examination, it became apparent that the consulting firm had simply taken this document and changed a few names and phrases to make it apply to our business. Whole sections had been lifted word-for-word from the original and dropped into "our" analysis/proposal, creating references to equipment we didn't have. Whoa!
APRIL 07, 2005 < (IDG NEWS SERVICE) BANGALORE, India -- Former employees of a call center in Pune, India, were arrested this week on charges of defrauding four Citibank account holders in New York, to the tune of $300,000, a police official said.
The three former employees of Mphasis BPO, the business process outsourcing operation of Bangalore software and services company Mphasis BFL Group, are charged with collecting and misusing account information from customers they dealt with as part of their work at the call center, according to Sanjay Jadhav, chief of the cybercrime cell of the Pune police.
"Either in goodwill or on false pretenses, they also obtained the [personal identification numbers] from these account holders in the course of their work," Jadhav said. The three former employees and their accomplices then used the services of SWIFT (Society for Worldwide Interbank Financial Telecommunication) to transfer funds from these accounts to their own accounts and fake accounts that were created for this purpose in Pune, he added.
Mphasis officials declined to comment on the matter. The Pune operation of the company runs a call center for New York-based Citibank N.A., a subsidiary of Citigroup Inc.
The police acted on a complaint from Citibank, which was alerted when account holders noticed suspicious transactions in their accounts, Jadhav said. Citibank officials weren't immediately available for comment.
Police arrested 12 people, three of whom were employees of Mphasis BPO in Pune until December last year. When they quit their jobs, the three employees carried with them the details of the four accounts and used a number of subterfuges, including false e-mail accounts and account details to transfer funds into accounts in Pune, Jadhav said. "We caught one of them on Monday when he came to a bank in Pune to inquire about one of the accounts," Jadhav said. "After that, we were able to arrest the others."
The outsourcing of call center and other business processes from the U.S. and the U.K. to Indian companies has been criticized by many organizations, including U.S and U.K. workers' unions, which complain that members are losing jobs as a result of offshore outsourcing. One of the key issues that has been raised is the danger of data theft and misuse.
The threat of data theft and misuse is no higher in India than in other countries, including the U.S., according to the National Association of Software and Service Companies in Delhi. The organization maintains that Indian outsourcing companies have adequate security systems in place.
According to that report, over the next 50 years, Brazil, Russia, India and China-the BRIC economies-could become a much larger force in the world economy. In 2003, the Chinese economy grew at an annual rate of 9% and the Indian economy grew at a rate of 8%, compared with 3% to 4% growth in the Western world.
"BRIC nations represent future markets for just about any company in the West," Rajvanshi says.
"And businesses that have the foresight and vision to perceive this--and have ongoing and existing relationships with the BRIC nations--will be in the best position to reap the rewards."
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Hardly a day goes by when i don't get a call or e-mail from an overseas company offering outsourced IT services, particularly software development. Just today, an e-mail popped into my inbox that read: "Would you like to save up to 80 percent on your software development costs?" The e-mail went on to tout the highly intelligent labor force in China and how this particular firm's software development processes "ensure delivery of high quality software on time and within budget." Sounds great, but I don't think any such guarantees exist in the real world, regardless of where the development work is done.
Any successful software project I've worked on has shared two qualities: a high degree of direct interaction between the development team and the end-users, and a high degree of agility in the team's methodology. The not-so-successful projects have been of the "deliver the spec and we'll crank out the code" variety - the kinds of projects typically associated with overseas outsourcing. You might be able to offshore if you are a commercial software vendor with a dedicated product manager. But I have my doubts about this approach in corporate IT, where the core business isn't software development and specs are always in flux.
Whenever I hear about any new way to make software development an order of magnitude easier, cheaper, faster, or better, I'm reminded of Frederick Brooks' essay "No Silver Bullet: Essence and Accidents of Software Engineering." Most, if not all, of what Brooks wrote in 1986 in his paper rings true today. Brooks insists that software development is difficult, and no tool, approach, or methodology can fundamentally change that:
"The essence of a software entity is a construct of interlocking concepts: data sets, relationships among data items, algorithms, and invocations of functions. This essence is abstract in that such a conceptual construct is the same under many different representations. It is nonetheless highly precise and richly detailed.
"The hard part of building software to be the specification, design, and testing of this conceptual construct, not the labor of representing it and testing the fidelity of the representation. We still make syntax errors, to be sure; but they are fuzz compared with the conceptual errors in most systems.
"If this is true, building software will always be hard. There is inherently no silver bullet."
I think overseas outsourcing of software development is simply the latest silver bullet. If you accept Brooks' assertion that building software is inherently difficult, adding cultural and time zone differences seems daunting. Compare Brooks' words to the conventional business wisdom about IT jobs headed overseas in a recent Economist piece: "The bulk of [IT job] exports will not be the high-flying jobs of IT consultants, but the mind-numbing functions of code-writing." The idea that building software is "just writing code" oddly persists in many business circles. This is misguided and is sure to lead to pain and frustration for any company that rushes into overseas outsourcing.
After all these years, Brooks' writing stands the test of time. Will the present conventional wisdom in the business press about the viability and ease of outsourcing "mind-numbing" code-writing seem relevant or visionary 18 years from now? I doubt it.