Why do we outsource? By we, I mean they, because it's not my bandwagon.
But it’s big talk in the Information Technology industry: there are magazines and websites devoted to it. Yet it first took hold in other industries and sectors - in the 1980s - and I.T. is a relative latecomer. Remember when corporations and government departments were outsourcing cleaning services? Cleaning wasn’t their core business, and who wants to deal with yet another bolshie workforce, where you can just sign a contract with a service provider? (sidestepping the fact that unions are weak and industrial issues are relatively minor in low-skilled industries like cleaning). The contracting company can do it cheaper with a focus on a single area of expertise, a uniform set of inputs and, let’s face it, a new workforce comprising casual workers with fewer rights than permanents.
The key is that where a given service is easily commodified, it is ripe for outsourcing.
With successes under the belt for the paradigm, managers push the envelope – and will keep on pushing until they overstep, like any management fad. Where returns are neutral, it isn’t really failure and, well, it’s an ideological success. Where returns to outsourcing are negative, that’s when heads roll and services are brought back inhouse. That’s certainly happened in I.T. But the failures have to be quite stark for this to happen, as I doubt there are many full – and honest and independent – cost-benefit analyses done.
Which brings me to India again. Ahh, India. Where the workforce isn’t bolshie – they’re hungry. They’re increasingly skilled, too, which widens the eyes of executives with a sackful of toy fads. If they’re familiar with the technology you’re using, and you can commodify your requirements (a support task here, a project here and a project there), and the labour is much cheaper, and they speak English!, it’s quite tempting.
Anecdotal experience here. I saw this happen at a place I worked. We had a few communication problems, and a few timezone problems, but that wasn’t unheard of in this global organisation. I was a contractor, and so not privy to the cost-benefit studies – if they did any. The quality of output suffered (albeit less than I’d expected), the development capacity suffered, but it was oh so cheap compared to Australian workers.
Now the experience isn’t always going to be that way. The consultants stress that managing the outsourcing is paramount to success, and that as collective experience with the process improves – at both ends – the results will improve. That future tense suggests we’re not out of the woods yet.
But the outsourcing initiative is usually driven by a cost-cutting imperative. Companies that care about quality are certainly more cautious about outsourcing. Personally I don’t think the management expertise is there to be particularly confident about the process even now – except for those areas that were always very commodifiable.
But the ball will keep rolling, and I do see the day when the lower end of I.T. functions are heavily outsourced. H M Winning asks “what will we do then?” [actually, she asks “when will those better jobs show up?”] Well, if we’re the ones performing those tasks, we’ll be making way for a younger generation that’s been trained in other things.
As far as cross-country outsourcing goes, I can’t argue too much in a global sense, as we tend to be crossing to non-OECD countries that could do with the crumbs. So in that sense, it’s a global good. And, HM, when that country is all up to speed, there’s always another waiting in the wings, hungry. And once the world’s fully developed? …go ask Karl Marx. (We certainly won't be around either.)
When will clients really get nervous about sensitive company data and systems going out the door? When there’s a big scandal caused by outsourcing, and not before. Don’t imagine that privacy agreements alone will do the trick. Managers work through fear of the real, not the imaginary, didn’t you know?
Have I broadly answered your questions, HM? (PS on testers: they have little real interest in what they’re testing; only the real business users care. Outsourced testers compound this issue.)