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Would you consider the "O" word?

Suppose, you lose your job (God forbid -- or maybe you are already unemployed), and you decide to start your own software or services company. As a businessman and as a proprietor who is liable to his/her employees, would you consider outsourcing in order to cut costs and stay in the market? I would like to know an honest answer.

Mumbaiya
Friday, October 24, 2003

What is the benefit for my employees if I don't outsource and everybody else does, and my company goes down because of too high costs, and I then have to fire them anyway?

I guess the answer would be "Yes".

But note that this is under the assumption that outsourcing indeed _does_ cut costs (everything considered), and that price is the single most important factor for my customers.

Martin A. Boegelund
Friday, October 24, 2003

I've outsourced many many things:

- janitorial services
- accounting
- legal services
- advertising campaigns
- cabinetmaking
- property management

I've also outsourced programming to the extent that I invest in components and libraries when it makes sense.

But my core competancy is development. You never ever ever outsource your core competancy unless you are pathetically stupid.

Dennis Atkins
Friday, October 24, 2003

I totally agree with both posters above.

I would do whatever it takes to keep my business competitive; up to and including outsourcing, even to Mars.

Tapiwa
Friday, October 24, 2003

IMHO the most important thing is not to out-source your core business. Anything else is fine.

Tim H
Friday, October 24, 2003

How can your core competancy _be_ your core competancy if you outsource it?
Outsourcing your core competancy is not only stupid, it's IMHO impossible according to the definitions I use.

Martin A. Boegelund
Friday, October 24, 2003

It's not unheard of for certain companies that primarily do development to outsource it. You are correct that once they do that, development can no longer be their competancy. It's like holding four aces and putting three of the aces down and drawing new cards. Maybe you'll get lucky with something new  but it's more likely you'll soon be out of the game.

Dennis Atkins
Friday, October 24, 2003

I have essentially already done that. I quit my job in June, and started my own company.  I'm not very good artist, so I get my wife and her brother to do my designs/images while I do the programming.  So far it's been working great.

I know from experience not to outsource development - when the developer is not as good, the end product is crap.

nathan
Friday, October 24, 2003

Dennis Atkins - Well put!

m
Friday, October 24, 2003

No.

At least not in the way that "outsourcing" is typically talked about here - namely sending software development overseas.

Like others have said, my hypothetical company is a software company.  I intend to hire the smallest possible group of very, very good programmers.  I intend to work very closely with them.  Those things just aren't reasonable if my programmers are people I've never met in places I've never been.

David
Friday, October 24, 2003


No.

Personally, my belief is that outsourcing is a fundamentally desperate move taken by CEO's who do not know how to solve their organizations problems. Instead, they offload it to someone else. Why they believe that these "someone elses" have any better chance of fixing their problems than themselves is a mystery to me, but CEO's are not always chosen for their brains.

Time will tell, of course, but right now I would be tempted to short sell any company that announces they are outsourcing.

anon
Friday, October 24, 2003

Offshore outsourcing happens for pretty much the same reason mass layoffs happen -- illusions of savings.  Create illusions of savings, and you can obtain support for getting a larger bonus.

When you lay off somebody who costs $70K to employ, you almost certainly aren't saving a net of of $70K, because they probably were providing some value that was greater than $0. But that's how they calculate their savings when they do layoffs, by counting the full employment cost.

Similarly, offshore outsourcing allows management to create illusions of cost savings by doing simplistic comparisons between the per hour rates.  An offshore programmer is $X/hr cheaper than a local one, so multiply X by the number of programmers outsourced and that's your savings.  No accounting for the extra work on the local side to provide extensively detailed specs and manage the communication, or crappy code coming back, or large amounts of back-and-forth rework because they don't understand your business.

Still, if I ran a business that needed a big one-off project that would have to be outsourced *somewhere* whether it is to a company 10 miles or 10,000 miles away, I might consider offshore vendors among the bidders. They would be scrutinized for reputation and quality, just like any other vendor, not just their apparent cost.  But using offshorers to replace employees?  No way.  They may be cheaper than getting consultants from a Big 5 firm at $200/hr, but they're not going to be cheaper than my own staff, if all net costs are honestly considered.

T. Norman
Friday, October 24, 2003

What most of you are saying today is probably what the clothing industry was saying when they started moving production to the far east. Same for the shoe makers losing jobs to Mexico..... I could go on.

!!Accept the inevitable!!

Unless your job is protected by some legal statute, or unless you physically need to be on site, all jobs will tend to the lowest cost country.

I can just imagine some cobbler who had gone through X years as an apprentice declaring that it was sacrilige to have some unskilled China man try to do his job.

They probably waxed lyrical about the shoddy quality, and workmanship of these "Made in Taiwan" shoes. Did their jobs survive. Hell no.

How many folk here will pay £500+ for a pair of bespoke (made on Jermyn St, London) pair of shoes, when they can get a £50 pair, (made in Taiwan) that suits their needs adequately.

For some reason, a lot of computer industry folk feel that just because the job is 'skilled', it can't be outsourced. They are graduates of MIT and Stanford after all, and the software they create has better UI than anything coming out of India. The cobbler at some point too felt that he was a skilled worker. After all, he did 10 years as an apprentice, learning the ropes, and that shoe that he can make will be a much better fit than anything out of China.

True, some companies will get burned in the process, and lose money. A lot of them though, will successfully outsource. Some of them will move entire sectors of the industry offshore.  Data capturing anyone??

You have two choices, either move up to the high end of the market (think bespoke clothing), or get a job that requires your physical presence (plumber).

Hell, even these chaps will use tools, and parts made in the lowest-bidder countries.

Tapiwa
Friday, October 24, 2003

"How many folk here will pay £500+ for a pair of bespoke (made on Jermyn St, London) pair of shoes, when they can get a £50 pair, (made in Taiwan) that suits their needs adequately."

I don't know, but I sure would want them as my customers.

Jim Rankin
Friday, October 24, 2003

I buy Italian shoes.  The costs aren't that much more and the quality is at least double that of most Asian imports.  The extra 20-50% is money well spent. 

No one here has mentioned the fact that freaking Levis' 501s aren't made in the US.  That blows my mind.  If you truly are against outsourcing, try buying a pair of jeans made in the US. 

It is nearly impossible.  About the only thing I would wear that are made in the US are Lucky Brand, and they are $85/pair. 

Give me my old made in the US of A 505s for $40, and I'm buying.  I practically puked when I heard that Levi had finally pulled out of N. America production.  I had buying their jeans forever out of principle and for the quality, but now I can't find a pair of American made Levis.  I think that is sick. 

I also buy shirts (business casual type) that are hand made in San Francisco of top materials for often LESS than designer Asian made imports. 

I also drive an American made car.  Quality is great...

Put your money with your mouth is or stop your whining. 

Italian shoes
Friday, October 24, 2003

If I was looking at a business plan and it said the company did "development" I'd never give them a dime (assuming I had one).  Your core compentency isn't development, it's development of some sort or another for some range of foci. I don't see any reason why you shouldn't be able to outsource certain modules that someone else is probably a lot better at than you.

Not that I'm gung ho about outsourcing.  The biggest problem with outsourcing development is that the average quality of code out in the wild is pretty poor.  There is a lot of risk in the control you are giving up outsourcing.  I barely trust most of the commercial components on the market.  You also have to have a carefully constructed contract and a good flow of communication; and a very solid specification doesn't hurt either.

If I was going to outsource, I don't think saving money would be my top priority.  Domain knowledge would probably be the most important factor.  But I'm not sure the market is in such condition that you can easily find experts.  That is what consultants are supposed to be for, and how often does that work out well?

Keith Wright
Friday, October 24, 2003

I have bought American made Levis all my life. they cost about $45 here, whilst made elsewhere genuine Levis cost $15 upwards depending on where they are made. False ones cost a lot less.

There was a definite difference in quality, and above all fit. Presumably the same shops I use will now have "made for America" Levis, but I think the decision could backfire as Levis foreign clientele who have been paying top prices start to wonder why they shouldn't pay a load less for the gray market stuff made in the same countries.

For shoes I buy Sebagos. They last, and can be repaired. There are probably better Italian ones but the Italians are experts are hiding shoddy workmanship (they will put false stitches on the soles to make you think they are stitched to the uppers instead of glued). Spanish shoes are definitely better for the price, but because of disastrous marketing in the 70's and 80's they only export the rubbish, and leave the best stuff for internal sale. (same thing with cava).

Hong Kong is considered to be the best place in the world to get hand made shoes, but the problem is that they will be made for warmer climes than much of North America.

I may add that I don't think anything of this has anthing whatsoever to do with software, but I didn't change the subject :)

Stephen Jones
Friday, October 24, 2003

For a  software developer, offshoring provides no benefits. You will never get the quality you need at a price you can pay, if you can get it at all. Your role would have to change from development to contract management, and you would risk having your business taken from you.

The arguments about protecting employees are ridiculous PR lines from the offshorers.

If you seriously wanted to join the offshoring revolution, the opportunities are these:

1. explicitly become a contract manager and poach business from the people currently doing this, who are generally business people without any development insight

2. get a job with an offshorer

3. target the jobs botched by offshoring or in trouble and charge well for it


Saturday, October 25, 2003

Let's repharase the question.

If you had a software development business that was successful enough for you to need to hire employees, would you be prepared to hire employees with whom you sole means of contact would be electronic - email, IM. Netmeeting and Teleconferencing, and secondly, if so, would you give a monkey's toss if they resided in a different country to you?

I think the answer to the first question would be, only if I could not find or afford to pay somebody who would work onsite at least a day or two a week, and then only if I could parcel the work out so that we didn't waste too much time with communcation problems. And the answer to the second question would be no.

With a large firm the answer to the first question is likely to be yes, because their larger size means a much more detailed specification would work, and so there is the possibility of serious cost savings.

Stephen Jones
Saturday, October 25, 2003

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