The Old Joel on Software Forum: Part 3 (of 5) - The Hidden Costs of IT Outsourcing

The Hidden Costs of IT Outsourcing

Since offshore outsourcing seems to be such a HOT topic on this forum, I thought some would find the following article interesting:

http://www.businessweek.com:/technology/content/oct2003/tc20031027_9655_tc119.htm

Anonymous
Wednesday, October 29, 2003

Ooops:

http://tinyurl.com/su4v

Anonymous
Wednesday, October 29, 2003

Perhaps I've been caught out by Mr. Goatse a few too many times, but I have far too much paranoia to ever follow a tinyurl.

Dennis Forbes
Wednesday, October 29, 2003

This URL works (maybe it got moved):

http://www.businessweek.com/technology/content/oct2003/tc20031027_9655_tc119.htm

Grumpy Old-Timer
Wednesday, October 29, 2003

Okay, I know I wasn't following the whole URL controversy *real* closely, but was part of the issue that URLs get chopped off after one line? That seems to be what happenned, but like I say, this may be old news.

Anyway, here's the link, broken into two parts, so you can paste them together separately. Isn't that convenient?

http://www.businessweek.com/technology
/content/oct2003/tc20031027

Grumpy Old-Timer
Wednesday, October 29, 2003

Oh, for God's sake...

http://www.businessweek.com/technology/
content/oct2003/
tc20031027_9655_tc119.htm

Grumpy Old-Timer
Wednesday, October 29, 2003

Any thread on outsourcing is not complete till it degenerates into one about the lack of auto-links on the board.

See one below on Hard Times in Banking.... (no point posting url)

btw. Maybe we could get some chaps in India to continually trawl the board and convert all URLs into TinyUrls...

Tapiwa
Wednesday, October 29, 2003

Why the hell doesn't 'Joel, the best programmer, in the world, ever' actually fix this url lunacy (usability, what usability)?

~grumpy

grumpy
Wednesday, October 29, 2003

"Why the hell doesn't 'Joel, the best programmer, in the world, ever' actually fix this url lunacy (usability, what usability)?"

Why don't you start a "GrumpyOnSoftware" and you can autolink to your little heart's desire. Plus, you can write about how that other "OnSoftware" site is crap because it doesn't autolink. Now there you have it, I just gave you two article entries...

Dudey
Wednesday, October 29, 2003

Hey maybe you can start JoelsGroupies.com too ;-)

Wednesday, October 29, 2003

But if he's worried about PageRank issues, why doesn't he just translate the links into links to some redirection page on his site? When the redirection page is called, it could just direct the browser to the linked site in some browser-agnostic-but-invisible-to-google-bot-way. If he really disliked some particular set of websites, he could have his redirection page instead direct the client to some rant about the page in question.

K
Wednesday, October 29, 2003

>>But if he's worried about PageRank issues

Nobody has ever shown where Joel has had any thoughts on this. This is just speculation by people who really don't know and are just trying to come up with a possible reason.

I would _love_ for Joel to address this so people can stop the speculation that seems to be infecting a lot of the threads (like this one).

RocketJeff
Wednesday, October 29, 2003

Back to the topic at hand... the article:

This type of stuff needs to be talked up, so much so that business people (decision makers) take notice.

GiorgioG
Wednesday, October 29, 2003

Business Week is pretty good "talking up."

Wednesday, October 29, 2003

BW tips: choose the cheapest Russian or Indian shop and you'll get burned. Expand by 100 using fillers, graphics and advertising = non-informative BW article.

unCommon sense(TM) tip: choose a reputable outsourcing firm and you can save some money. Get *too greedy*, hire obscure company in Jaisalmer and you will lose money.

Please, stop wasting time and space with the URL discussion.

uncronopio
Wednesday, October 29, 2003

>>BW tips: choose the cheapest Russian or Indian shop and you'll get burned

Hmmmm, I didn't get that from the article at all. The second paragraph says that the Indian outsourcer went $1 million overbudget, while a local software developer estimated he could have done the project for less than $900,000.

Also the article goes on to state that even though offshore outsourcing may initially look cheaper, the "hidden costs" often negate that.

Thursday, October 30, 2003

I think if you took a straw poll from developers a year ago, most of them could have predicted what that BW article mentions.

But yet, upper management has to wait until either the Wall Street Journal does a cover page on it, or until they find out for themselves that the wholesale shipping of their software development to the cheapest bidder in India probably isn't gonna pan out to well.

There are plenty of success stories coming out of India and off-shoring does have it's place. But lately, American companies have been falling over themselves to off-shore whatever they can as quickly as possible without really analyzing the long term costs.

Give it two years and I think the off-shoring landscape wil be vastly different. No doubt it's here to stay, but I think there will be many "Lessons Learned" articles written about it....

Mark Hoffman
Thursday, October 30, 2003

Problem is that it is not in upper management's best interest to admit wrong doing. My experience with F500 companies is to tweak the results until you get the desired answer. Only report what you want. Most CIO's win either way these days with their golden parachutes. At some point, the new CIO will differentiate themselves by insourcing and that last CIO was crazy, what was he thinking. It is all about the bucks, not saving it for the stock holder, but making it for the executives.

ugh!
Thursday, October 30, 2003

"It is all about the bucks, not saving it for the stock holder, but making it for the executives."

Yep. I'm still waiting for the stock holders to wake up and start cracking heads.

HEY STOCKHOLDERS! YOU OWN THESE COMPANIES! START TAKING AWAY INCENTIVES FOR EXECUTIVES TO FAIL! (READ: GOLDEN PARACHUTES) VOTE YOUR OWN POCKET BOOK, NOT THE CEO'S, FOR A CHANGE!

Think anyone heard me?

Jim Rankin
Thursday, October 30, 2003

Large blocks of any company are owned by other wealthy folks who probably are availing themselves of the exact same benefits. Gentlemen's agreement.

Flamebait Sr.
Thursday, October 30, 2003

actually a number of pension funds have woken up as they've lost money. check out the annual proxy statements for big companies--some now have anti-golden parachute provisions.

mb
Thursday, October 30, 2003

Jim - most stockholders are mutual funds. Recently I think the laws changed, but by and large, it's the mutual fund managers that get to vote on issues, not the owners of the mutual fund.

So when a vote comes up on governership of a corporation, it's usually a handful of people - certainly a lot fewer than the total pool of investors - that get to vote on these issues.

www.MarkTAW.com
Thursday, October 30, 2003

Actually, it is the shareholders who are a big part of the impetus for offhshoring, even if they didn't really initiate it. I don't think offshoring is happening so much in private companies. Management came up with the idea of offshoring (or more likely, saw it happening elsewhere), and convinced shareholders it would bring big saving$, so they could use it to justify bigger bonuses.

Management was also sly enough to realize that they could spin the figures to make even failed offshore projects look like they saved money. If a project took 2000 hours offshore at $30/hr, that will be compared against 2000 hours locally in order to compute the savings. That the project would have taken 700 hours locally will be hidden.

They only run into trouble when the system coming back just plain doesn't work, and the defects are too many for the in-house team to quickly fix the code under the radar, or the budget overruns are so dramatic that it becomes difficult to convince people of any actual savings.

T. Norman
Friday, October 31, 2003

"check out the annual proxy statements for big companies--some now have anti-golden parachute provisions."

Yaaaayyy! Score one for enlightened self interest!

Are they also cracking down on lowering the strike price on options? The point is options are only worth something if you make money for the share holders. What's the point in just moving the strike down so that the CEO gets paid for losing the share holders' money?

Still a long way to go in the War on Pointy Hairedness.

Jim Rankin
Friday, October 31, 2003

Check out the story of the ITV merger in the UK and the chap who assumed he'd get to be boss until a bunch of large shareholders decided he was responsible for the ITVDigital mess....

Individual shareholders might not get a voice, but the City is finding it hard to make profits at the moment, and they're starting to not like seeing dividends wander off in the form of parachutes and screwed up business ventures. And the City people own enough of companies to kick them about a bit and their interests lie conveniently in the same direction.

Katie Lucas
Monday, November 3, 2003

digiBlitz Technologies, a total IT solutions provider having its Corporate Head Quarters in Virginia, USA and having offices in Chennai India.

Suresh Balabesigan
Monday, May 24, 2004