Would you buy a car that was ten times cheaper then same model elsewhere but gave you twice as many problems?
Thats the dilema the companies face when the outsource things… the cheaper programming labor in India is about 1/10 (and we are talking the brightest minds here) of what we have here but the code may not be as well written. For companies that are public thats a HUGE cost savings - they can literally cut their R&D workforce by 50-75% and still produce the same amount of work. The only issue is the quality. Imagine if you could get a Honda Accord for under $2,500 but you knew it would be more expensive to maintain.
Right now if i was an American I would be very worried about all jobs overseas but as along as public companies are dominated by their stock prices and consumers are willing to buy the $2,500 Honda Accord rather then the $25,000 version then no amount of political wrangling is going to change that.
^ this is the reason why you are not in the decision making capacity.
You comment, "public companies are dominated by stock prices.." is a clear example of that naaivete. What the hell would theyt be dominated by if not shareholder value creation?
If quality was such a constraint you wouldn't have double digit growth in Outsourcing for the last few years and which has continued to grow. Companies outsource not only for cost reasons. There are BCP/DR issues, access to markets, improvement in quality (How many develoment centers are CMM 5 certified in the states). BPO adds, the flavor of flexibility in volumes and the corresponding investment in infra and people.
Mckinsey released a recent report which suggested that for every dollar going offshore, the outsourcer gets back 60 cents in process, quality, productivity and other benefits. Which are then reinvested into the American economy. A lot more than if you were paying ridiculous amounts of money to a Java programmer onshore like we saw a few years ago.
Which brings up another point. In terms of globalization and access to free markets, labor and capital, the salaries enjoyed by techies were over the top and out of synch with the economics of the game. If a computer engineer thinks they deserve to make $100/hr then are on crack.
Bottom line is how much companies save, it has very little to do with talent. Brilliant minds are cheaper to hire in India then in the US - and thats a fact like it or not.
Although quality of code I am not so sure, because I have heard atleast 2 local proj managers gripe about code quality in India and in some instances there have been language barriers.
I got no probs with Indian IT folks, I actually have worked with many in my past 12 yrs in IT, some of the dudes are down right brilliant and some are barely above average.
I think this very phenomenon happened in UAE also where folks from India offered(still are offering) to work for one forth for what you would pay any other person. The choice then becomes quite clear.
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You comment, "public companies are dominated by stock prices.." is a clear example of that naaivete. What the hell would theyt be dominated by if not shareholder value creation?
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I meant short term shareholder value. month to monty- Q to Q. Agreeing that in this competitive world that is almost essential but thats not the point I was raising.
Firstly there ARE quality issue be they do to management or other problems but as I said it does not mean you pay overall as much as you would before but you may have more quality issues. Yes yes mats we have all those certifications just like we have all those "Certified" java programmers.
When the consumer is looking for cheaper products and is driving the market towards it, why should they turn around and argue that none of the work should go over seas. I mean if they are not willing to paythe price then why bother about it.
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In terms of globalization and access to free markets, labor and capital, the salaries enjoyed by techies were over the top and out of synch with the economics of the game. If a computer engineer thinks they deserve to make $100/hr then are on crack.
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LOL isnt that the same with the financial markets. I mean what are CEO, IB and financial analyst paid compared to the rest of the world.
HMCQ, what exactly do you want to discuss? I have personally done over 20 large outsourcing deal from an advisory, buyer, vendor perspective. I can tell you it is never about one factor over the other. Short term shareholder value? what the hell is that?...Any outsourcing deal is always a longterm strategy. There are no short term benefits. The end of the day, it helps improve your WACC and therefore the EVA. SO it is a sound business strategy. Those idiots who complain on whether they get bad code or whether they can't understand the programmers are from another generation, and frankly are more worried about their menail project manager jobs than what benefits a company.
Sending a project offshore to be developed makes no business sense. But having your entire development done offshore does. No one blackboxes anything anymore.
As far as quality issues? You should actually go visit HBS/Wharton/Stanford/C. MEllon where there are case studies presented by the like of Wipro, Infosys, GE, Amex on offshoring. At these schools they teach best business practices not lamentations of has beens in the IT and business worlds.
Wipro, Cognizant, Syntel, Infosys are rated among the top 100 companies of growth around the world by Business 2.0 this year. Just as there are IIT grads, there are IIM driving the management change. So there are no worries about management re: offshore outsourcing.
Offshoring as a political tool will be around until the next election. But there is already enough steam in the industry to make this a non-issue. the Mckinsey example was one such indicator.
When is the impact of outsourcing most felt? Short term or long term? The strategies are long term indeed yet the greatest impacts are meant to be short term.
Anyway you are gonna continue to hammer on about Quality and so on and I dont want to argue with you today MATSUI. So as I said before my posting this here was about the political issues and why they wont work cause of the economics unless the consumer behaviour changes and not whether India produces the best code/$.
HMCQ darling...your questions are muddled. On one hand you are saying the $2500 car has defects (which I am refuting) and ont eh other hand you are saying that consumers don't care about the defects. So if the consumers don;t care about the (perceived) defects then why the need ot post a thread on that?
As far as your question re: political issues...there are many...long term deflation, loss of white collar jobs, globalization, these are all political fodder. Pick one...
US workers concerned are valid. But in the greater scheme of things, the US cannot go around promoting Globalization and free trade and at the same time be protectionist. We just saw the farm subsidies cause a big stalemate in Cancun. We also saw a leveling of the field in Biotech and pharma..so it is a matter of how the politicians play along this road. Because with or without them, the jobs are going. Remember a while back I posted something on Eq research.....JP Morgan is keenly interested. :)
Even when dealing with the same company, code quality can vary extensively.
On my project, we're using contractors from a major Indian company. Several of my colleagues have worked with the firm before on a range of different technological platforms and have been genuinely pleased with the results.
On the other hand, I'm finding that they are repeatedly sending us badly written and untested code that has been severely retarding the progress of the work.
On a number of occasions, the contractors have even come back to me to ask technical questions, such as "What is the code that I need to write in order to do......"
The chief problem that I'm finding is the fundamental change in the mindset developed by education between the West and the East.
In the West, you may not neccessarily be taught as much detail, but education is designed to equip you with a flexible mind that can think outside the box and see problems before they happen. In the East, the emphasis on memorisation of huge volumes of knowledge means that my contractors know a lot about the technology, but they think on rails. They severely lack creativity and fail to identify problems before they occur.
The number of cases where project managers (both the senior project manager and the junior project managers working under him) on my team have reviewed the code, then phoned up India to report a problem that the code would case, only to recieve an "Oooooooooooooooooooooooh" in reply, is staggering.
^ maybe the two bit hacks in your company shouyld comeup with some standards and draft SLA's around them to make sure that the vendor is performing. THis is outsourcing 101. But you are just out of school. I don;t expect you to understand.
From the service provider's pov there's no dilemna. Companies that want to outsource looking for 95% cost savings will have a lot more than a dilemna to resolve.
And morally speaking, there's no dilemna either. Each country exports what they have a surplus of to import what they're short in. Masala Dosals for McDonald is how it is