Articles on Software Outsourcing and Offshoring

Outsourcing software development to India has become more and more popular over the last few years, and picked up even more momentum lately. Corporations in the USA has followed this path because a technology worker costs some five times less in India than in the USA.

Motivation for Outsourcing

Corporate executives started seeing software development and support, and the whole of Information Technology as a cost, and not as a strength, nor a differentiator. So they started thinking of it as something they can subcontract, just like security guards, janitorial, landscaping and snow removal.

Objections to Outsourcing

However, this is not always the case, and there are hidden costs, and some pitfalls, such as difference in work culture, communication styles, and time zones, not to mention the long term safety and security concerns of giving everything to a foreign country, and a foreign jurisdicition.

The analogy of janitorial and landscaping is not an accurate one though. The reason being these services, although they are outside the company, they are still within the city or the country. This gives some soft of control, being under the same jurisdiction, and there is no danger of political tensions, wars, or the international scene affecting the service. Moreover, janotorial is a low skill, low risk, and not core to the business. Software and Information Systems in general contain many functions that are vital to the company doing business, and in many cases it is part of the "Intellectual Capital" of the company.

Moreover, it seems that there is little evidence for the huge cost savings that are the main motivation for outsourcing. For example, a Deloitte & Touche study says that 70% of companies had negative experience with outsourcing. Moreover, 44% of companies got no cost savings from doing it.

This may be caused by the fact that growth of outsourcing in India is slowing down, mainly due to labor shortage and wage inflation as a research report by Gartner puts it.

Security and Privacy Issues

An example of security and privacy issues in outsourcing, is that your data is not under your control. Here is an example where data was leaked on the web, from a US outsourcer by an American. While in America local law enforcement can handle such cases fairly quickly, what happens if this is overseas under a foreign jurisdiction? Or if political issues come between USA and India? 

A recent case was when a British tabloid newspaper was able to buy customer data from an Indian IT worker, as reported in the BBC. While there are criminals in every country, the difference is that if a crime occurs in the USA, law enforcement can and will act because it is within the jurisdiction. If a crime involving a country's citizens is committed abroad, they can only file a complain and wait! This was discussed on Slashdot too.

Here are some more cases where there was black mail, and the company preferred to pay the programmer, because the PR cost will be less!

Historical Analogies and Differences

Many see an analogy between manufacturing jobs going offshore over the last few decades, where lots of blue collar jobs were lost to Mexico and South East Asia, and see the software offshoring trend as the pendulum now hitting the white collar sector.

There are some differences though. In the case of Mexico for example, Maquilladoras in the border twin cities were set up to take advantage of the cheap labor. With NAFTA, there is free movement of goods and people across the border in both directions. So an American who is willing to relocate for a job, can do so if they like. However, in the India case, an American cannot go to India, since in one direction, it is free trade, and in the other there is protectionism, where Indian government rules prevent such job seekers from applying (unless their skill is needed).

Canada as an Outsourcing Destination

Surprisingly, Canada is a near shore outsourcing country for the USA. While it cannot compete with cost and salaries of India, it has several advantages, including proximity, closeness in culture and language, stability, quality, and skills.

A PriceWaterhouseCoopers report titled A Fine Balance: The Impact of Offshore IT Services on Canada's IT Landscape details why Canada is a better alternative. Some companies realize this advantage and refuse to do offshore outsourcing to India, as discussed in the IT Manager's Journal article Is Canada the solution for offshore outsourcing-wary U.S. companies?. You can read a discussion on Slashdot of this article, titled: "Why Offshore when Canada is next door?"

Also, here is an article titled Canada as back-door to U.S. software industry and the obligatory Slashdot discussion of it.

What Can Employees Do?

So, what is the solution for people who presently work in technology, and are in the process of phasing out to outsourcers? Here are a few alternatives:

  • While this is not for everyone, some suggest that you start your own company.
  • Change careers if you can. Either within the field (get out of programming, and go into management, design or such), or outside the Software development field altogether.
  • Unionize! Although this has drawbacks, there are some merits to collective bargaining. Employers though are quick to spot this trend and eliminate the proponents among their ranks, and even inform other employers in the industry to effectively blacklist those proposing unionization.
  • Retire (if you can afford it!)

Books on Outsourcing

  • Ed Yourdon, a reknown author in the IT field, has written a book called Outsource: Competing in the Global Productivity Race. You can read the book review and comments on Slashdot.

Articles on Outsourcing

The following is a compilation of some articles and discussions of these articles by the technology community on Slashdot.org.

Slashdot discussions tend to be lively, and heated. Lots of the comments can be childish or off topic, but many comments are really useful and provide a good perspective on the topic discussed. If you find that the number of comments is overwhelming, then change the "threshold" to a higher number that would give a more reasonable number of higher rated comments.

Contents: 

Comments

Offshoring cost advantages in decline

This article in eWeek reports that the cost advantage of offshoring are in decline, as per a report by A.T. Kearney.

The report found that although the wage advantage of offshoring locations for office services is set to last for another 20 years, it is on the decline as offshore wages for IT, business process and call center services have risen. But even under the most aggressive projections of wage inflation and currency appreciation, however, offshore locations will still have the price advantage for the foreseeable future, found the report

--Khalid Baheyeldin

Egypt is the future of software development outsourcing

In a conversation with A. Soliman – R&D director in spectramindtech.com – he clarify that all Egyptian software development outsourcing companies are ready to be the best, and this required more concentration in the next three years.

Egypt is already has worldwide classification as sixth country provides outsourcing services, and is famous of call centers outsourcing, and when we asked Soliman about the applied sciences experiences in Egypt, he answered "Egyptian youth are very connected to modern applied sciences, spectramindtech.com as an example, has large experience in theoretical and applied sciences, and we use it in R&D department to problem solving and optimization of integrated solutions in the field of software development".

Moreover, Soliman thought that Egyptian companies are in the right way to become the future of software development outsourcing, and uncovered that spectramindtech.com directors are studying the idea of constructing Egyptian Software Outsourcing Association to provide more facilities to Egyptian outsourcing companies.