The Pitfalls of Outsourcing

[legion]

It's being called the "Indian Enron".

Satyam, a large firm that does outsourced IT work for many major US companies, is on the brink of death. It was revealed yesterday that they had been falsifying financial reports "for many years" and had far less cash on hand than they claims ($3 billion versus $53 billion). It's unclear if they will be able to meet this month's payroll.

http://tech.yahoo.com/news/pcworld/20090108/tc_pcworld/satyamtriestoreassurecustomersinvestors_1

This is one of the two major dangers of outsourcing I've long spoken about. No one cares about your company as much as you do. Anyone who doesn't work for you will try to do work as quickly and cheaply as possible to minimize their costs as they don't have to deal with the consequences of shoddy work. Also, even "non-core", but necessary functions leave the rest of the busines exposed to disruption if they are to stop because a vendor goes out of business.

[jyl]

No indication that SAY's outsourcing work wasn't being done competently, but agree that its clients now face severe disruption.

[legion]

I've never worked with a single vendor, onshore, offshore, whatever, who's sole motivation was not to get work done quickly and hand it off so they could move on to something else. Quality suffers when one does not have to deal with the consequences of their work.

[widebody911]

Originally Posted by legion

IQuality suffers when one does not have to deal with the consequences of their work.

By the same token, the management in-duh-viduals who initially ordered the outsourcing have probably already collected their bonuses and moved on by now.

[Vipergrün]

The best part about outsourcing is talking to some dood in India named "Jim"....riiiiiigggghhhht

[Shaun @ Tru6]

I could write a book on The Perils of Outsourcing and the Small Business. My SBA contact thinks I should anyway.

[legion]

Originally Posted by widebody911

By the same token, the management in-duh-viduals who initially ordered the outsourcing have probably already collected their bonuses and moved on by now.

No arguments here. I see it as selling the future of your company for short-term gain.

[Aerkuld]

One of the other pitfalls is the one that a company I worked for fell into and it isn't like we couldn't see it coming.

Times were good and it looked like they could make even more money by outsourcing all of the manufacturing work overseas to take advantage of cheap labor. This worked for a while until the oil prices went up and then the exchange rate became less favorable. Of course in the meantime the company sold off the manufacturing equipment. Now it would be cheaper to make the stuff in-house but they haven't got the facility to do so.

Bummer.

[stealthn]

Chris -> Bob, Bob -> Chris, now you've met one

[Dennis Kalma]

I have made the point repeatedly that "outsourcing is abdication of responsibility by incompetent IT management".

You can get some interesting reactions if the comment is made in the presence of some CIO type who just outsourced to someplace without understanding the implications...

Dennis

[HardDrive]

I dunno, I think outsourced customer service sucks. But you can certainly get some deals on external software development. You just need to manage the teams well and check the milestones along the way. Vague promises from an Indian are just was worthless as vague promises from and American. You need to manage them just like onsite employees.

[Jim Richards]

Originally Posted by Vipergrün

The best part about outsourcing is talking to some dood in India named "Jim"....riiiiiigggghhhht

Please, don't make me laugh so hard! I spit curry out my nose all over my screen!