Should I Stay or Should I Go?

[1CAV]

Should I Stay or Should I Go?
Sending jobs offshore to countries like India seemed like a sure bet. Now, some firms are having second thoughts.
Offshore for sure? Businesses are thinking twice about taking the outsourcing plunge


By Brad Stone

April 19 issue - Wesley Bertch admits he fell for offshore outsourcing "hook, line and sinker." So when Bertch, chief techie for Minneapolis-based Life Time Fitness, a health club chain, needed software to evaluate potential new locations for gyms late last year, he looked overseas where he could pay $6 an hour instead of $60 for programmers. He hired a large, reputable Indian outsourcing firm a few months ago, then sat back and watched his troubles mount. Not only did the offshore team produce code that was full of bugs, they ran up big bills working overtime to fix their mistakes. Bertch finally canned the offshore contractors, hired several local programmers and started preaching to industry colleagues that managing such projects across oceans is doomed to failure. His biggest surprise? "I've since talked to scores of my peers, and we are all singing from the same hymn book," Bertch says.


Until recently, sending jobs overseas seemed like a bulletproof business strategy. By outsourcing routine tech and customer-service jobs to educated, eager workers in countries like India and the Philippines, companies sharply cut costs—savings that outweighed the inevitable negative publicity. The movement has gained such momentum that it's become a big election issue, with candidates sparring over "Benedict Arnold CEOs" and how best to keep jobs in the United States. But many American companies are discovering that sending work to low-wage countries is not as easy or as inexpensive as advertised. In hotspots like Bangalore, wages and real-estate prices are soaring to record levels—though still generally a fraction of U.S. costs—which cuts into potential savings. As U.S. companies move from exporting call centers to outsourcing more complex work like software development, they're finding overseas workers are often ill-equipped to deliver consistent, quality work. The bad experiences are creating a boomerang effect—the return of jobs to the United States—which some have dubbed "onshoring." Analysts at research firm Gartner have declared 2004 the start of the "trough of disillusionment" with offshoring.

Even with the growing disenchantment, the outsourcing movement won't disappear. IDC Research maintains that offshore spending will quadruple by 2007 as the world's economy becomes increasingly globalized. What is clear is that more and more companies and onetime offshoring advocates are having second thoughts. Rising costs are just one contributing factor. Inside the largest outsourcing firms in Bangalore, up to 40 percent of workers leave each year, lured away by the promise of higher salaries and easier commutes at new jobs. Americans with their "California tans and Silicon Valley Blackberries strapped to their belts'' are routinely charged the highest office rents, says Ravi Chiruvolu of Silicon Valley-based Charter Venture Capital, which helps start-ups locate some offices in low-wage countries. Chiruvolu says he now preaches caution: "I have a lot of doubts about outsourcing I didn't have two years ago."

In recent months, some big-name companies have lent credence to those concerns. In December investment bank Lehman Brothers yanked back a 20-person help desk set up to solve computer problems for its U.S. workers, citing the need for quick, on-site responses. Last month credit-card firm Capital One pulled out of a contract with a 250-person call center in New Delhi, after workers were caught promising unauthorized lines of credit to potential customers to boost sales. Dell, hearing complaints of thick accents and poor service from customers who were patched through to one Indian tech-support center, has also relocated that office to the United States. The firms each say they are committed to keeping other operations overseas, though. Frances Karamouzis, an analyst at Gartner Research, says the return trips often have more to do with the poor communication and organization on this shore. "Companies are focusing on relentless cost-cutting and are offshoring their problems rather than finding a true business solution."

[Hannibal]

How many jobs were outsourced under the Clinton Administration? How many billions of our money alone are used on outsourcing Hollywood movies overseas each year?

[Woodmonkey]

Originally Posted by Hannibal

How many jobs were outsourced under the Clinton Administration? How many billions of our money alone are used on outsourcing Hollywood movies overseas each year?

Very good questions, Jason. It isn't a new problem. The media and Democrats didn't see a problem when Clinton was President...now they do. Go figure.

As for Hollywood, did you forget that they are the elites and above all criticism? If they do it, it must be ok.

[BrianK]

Isn't that article about outsourcing the more knowledge based aspects of the Tech industry? I don't think that portion of the industry is where the real concern is. Data entry of sensative personal infromation whether banking or health related I thought was where the major concern was. When it comes to setting up a program to expand business I have to wonder about a business owner that would look at $6.00 an hour. That old adage "If it sounds to good to be true" should have been in the back of his mind or at least he should have done some due diligence before hand. The best I can offer now is he falls under another old adage. He was "Penny wise & pound foolish"

Forgotten somewhat is clothing & shoe manufacturing. Those account for a lot of jobs no longer here don't they? As for the concern about job loss it I think has come up lately because of the political value.

Sounds good when a politician promises 10 million jobs. If jobs are going off shore now because of wage & competition issues in a global economy what kind of jobs & what will the pay be for those 10 million jobs? Has anyone heard what those jobs will be?

[Snowden]

By 1Cav:

Businesses are thinking twice about taking the outsourcing plunge

You know, if I had a business here, I would worry about security in taking it out of the U.S. We may be somewhat vulnerable here, but overseas? China? Europe? I don't know - but I'd be a bit concerned.

By Hannibal:

How many billions of our money alone are used on outsourcing Hollywood movies overseas each year?

It used to be just a few - but now we need "reality." Never mind that the stories are far from any reality! Remember the few "speghetti westerns?" We laughed; but then it went big time.

Now if only they would leave the movie "stars" over wherever. Then it may be worthwhile.

[RetPara]

Its not just the outsourcing, but the propensity of H1B Visas used to bring in programmers from India, Pakistan, and other 3rd World Countries. This is my personal experience with this...

In January 1999 I was hired by... lets say a naitonal franchise chain that specializes in speedy home delivery... as a Support Analyst for a software suite they were having set up. This software was to handle inventory and order management for their distribution centers. The actual development had been going on for over a year when I was hired. Over 70% of the programmers were H1B's with only a basic knowledge of English. They had been hired and brought into CONUS for this project.

To cut to the chase, ten months later there were only 2 of 20 distrobution centers on-line and there were still serious issues with the system. The Project Manager had left, the VP that had pushed for the project was fired. Almost the entirity of the development staff, along with me, were laid off or terminated. The company had flushed over $5 Million on the project.