A recent article in the Washington Post raises several questions regarding offshoring, this is not political or have anything to do with party partisanship.Clarification Disclaimer:The views expressed in this newsletter are not to be intended as a political statement and should not be interpreted as such. , This correspondence is not intended to disparage any country or culture. The sole purpose is to convey my 16 years experience with issues resulting from offshoring. This newsletter refers only to outsourcing software development. My firm hires and sponsors employees from emerging countries. They are amazing employees when effectively managed. I am also referring to software development, not customer support call centers.
The Article Link
Senate GOP blocks bill that would promote less outsourcing -... http://www.washingtonpost.com/wp-dyn/content/article/2010/09/28/AR2010092802768.html
By Lori Montgomery Tuesday, September 28, 2010; 11:53 PM washingtonpost.comThe latest jobs bill from Senate Democrats - a plan to punish firms that ship jobs overseas - failed to clear a key procedural hurdle Tuesday after even some Democrats complained that the measure would hamper the ability of U.S. companies to compete in foreign markets.
The Disadvantages of Offshoring:The disadvantages far outweigh the advantages of offshoring software development. What on paper often seems cost-effective and feasible, entails many costs that do not surface until a year or two later. Reversing, such a process will incur additional exponential costs.
The Article Link
Senate GOP blocks bill that would promote less outsourcing -... http://www.washingtonpost.com/wp-dyn/content/article/2010/09/28/AR2010092802768.html
By Lori Montgomery Tuesday, September 28, 2010; 11:53 PM washingtonpost.comThe latest jobs bill from Senate Democrats - a plan to punish firms that ship jobs overseas - failed to clear a key procedural hurdle Tuesday after even some Democrats complained that the measure would hamper the ability of U.S. companies to compete in foreign markets.
The Disadvantages of Offshoring:The disadvantages far outweigh the advantages of offshoring software development. What on paper often seems cost-effective and feasible, entails many costs that do not surface until a year or two later. Reversing, such a process will incur additional exponential costs.
Examples are: legal costs, lost opportunity cost, repetitive attempts before getting it correct, delay costs, employee turnover costs, the offshore employee’s lack of understanding the US business culture, and the greatest cost: the practice not providing motivation for the next generation to develop these skill sets.
With a huge margin, the majority of US domestic software development companies will always have a clear and better understanding of the nuances of a business process or function as compared to an offshore firm. When a highly sensitive and sophisticated business function or algorithm requiring very special and multi-skilled handling is outsourced to a foreign location and the first language of that nation is different from the nation which outsources the function, more often than not it leads to quality issues. Unrealized costs are expended in an attempt to correct the errors. This may require several rounds of corrections over an extended time. This generates lost opportunity costs. With the initial costs, the cost of correction and the lost opportunity costs, the total expenditure usually far surpasses the cost of the development if done stateside the first time.
There are several communication and continuity disadvantages in offshoring. Offshore companies have a much higher turnover than those in the US. In offshoring processes, the jobs are highly monotonous and this often leads to employee discontent. This is a huge contributor to the high turnover rate. My experience concludes that more often than not there will constantly be new teams assigned to your company’s system, each likely lacking the proper historical continuity turnover communication knowledge of your business protocols and culture.
Security: - I do not put great value on what offshore companies sign, promise or claim. No one reading this can truly believe that their data is secure. All it takes is one person with an 8gig thumb drive, to download four million bank account numbers, complete with their routing numbers and associated credit card information along with all US sensitive data. The culprit can then sell this information in blocks of 1,000 to several hundred identity theft professionals. Of course this threat applies here as well. But!? What recourse do we have with offshore companies? How do we justify the cost to investigate what happened on the other side of the world? Face it, our hands have been and are be tied in these cases. In June 2010, I saw a piece on “60 Minutes” called “Cyber War: Sabotaging the System...” http://www.cbsnews.com/stories/2009/11/06/60minutes/main5555565.shtml where 60 Minutes spoke about cyber hacking into US banks from foreign countries on a daily basis. This was extremely incorrect and disturbing. As a fan of 60 Minutes I am surprised they did not report the obvious:
THE US BANKS ARE OFFSHORING US BANKING SOFTWARE DEVELOPMENT
No one needs to be a professional hacker if they have access; we are giving them the key! And now this the cost of constantly monitoring and reconciling these security breaches has added additional costs to an already inflated expenditure..
Social Responsibility: - When off shoring is employed, which means outsourcing a process to a foreign location, it results in reduction of employment avenues in the nation from where the function is outsourced. This is counterproductive to the business that is offshoring. In simpler terms, in the past ten years we clearly have a shortage of engineers and software developers in this country. Why? Where is the motivation for US students to study a field that in their mind will offer little to no opportunity? Simple answer: because US businesses are offshoring these very critical skills.
With that said, realize that no original idea has ever come from these offshore countries. For example: Oracle, Microsoft, iPhone, Yahoo and Google were all created in the US. SAP, one of major competitors is from Germany, Sun Systems is from England. Again, I have to reiterate my disclaimer, I am not here trying to disparage any country nor do I believe that off shoring should be banned. I just hope that American executives reflect on the decisions that they make and realize the long term ripple effects. We are in a global economy and global competition for market share. So why give away one of our most precious resources-intellectual property- to anyone that promises to save us a dime?
This week we witness out president visit India and China, two very critical and important trading allies to US. I am glad to see that he is there increasing our relationship. I am also glad when I hear news like India & Boeing enter into a “100 million dollar MRO JV project . Here is an example where we can have good business relations, without giving away our intellectual property or US jobs, and have mutual trade relations.
H1 Sponsorship: Good or Bad?:– I will admit that in 2001 I was wrongly opposed to H1 sponsorship. I analyzed it superficially and did not look at all the factors on process and macro economic effects. By 2003 when ASI grew and the demand for qualified developers became scarce I seriously considered the H1 route.
Since I personally interview my staff, I was taken back a bit by these very elaborate resumes from developers with less than five years experience, that averaged four pages; some were seven pages long and extremely verbose. On all developer interviews I ask the candidate to bring in sample code that they have created, because writing code is more of a creative process as opposed to technical. I can go on for pages with excuses and stories I was told. One person stands out, a very qualified and advanced programmer with a platinum resume and a little arrogance. More than likely many that interview him do not know code, so he felt overly confident when meeting. When he displayed his sample code before me, within 2 minutes of scanning it I found it to be good but not efficient. I asked him why he wrote three algorithms consuming about 250 lines of code, when he could have written a single global call procedure algorithm using about 50 lines of code that would be quicker and more reliable. He responded without hesitation, “The client will never know”. Needless to say the interview was over.
In the end, I sponsored and hired several H1 employees and found them to be amazing, steady developers that have a huge desire to learn and be challenged. Why is this better than Off Shoring! Because rather than taking away from our economy these H1 employees pay US taxes. They operate under US laws and standards of security and in most cases take a true concern for the client when they meet them. They take greater pride in the work that they do, no different than our migrated forefathers that came here to the US.
Due to the current economy many of these H1 sponsorships are not being renewed and after years of training and working here in the US, these people are being forced to return to their country of origin. We then end up off shoring to the same countries because those workers are no longer here. A paradox, isn’t it? Once again my beloved country missed seeing the center sweet spot, and chose to go from one extreme to another.
Two months after I wrote this article; in November 2010 when the WikiLeaks situation arose; I received many correspondences, mostly agreeing with me and some strongly disagreeing. Let me clarify, this is not about politics or nationalism, this is about keeping the global trade at a balance and not the US not giving away our intellectual property while leaving us venerable for an economic coup.Many readers seem to think I focus on India and there is much merit to that. Taking into account the B.R.I.C. global focus group (Brazil, Russia, India & China), India is by far the US’s best and largest true democratic emerging country and India is where any US company should be setting their sights for trade. But with that do not give away our country or compromise our middle class for the sake of an easy short lived dollar. I gave an example on how Boeing & India have a 100 million dollar MRO Project, which is outstanding for both countries and does not take away from the US, but rather adds to both countries.
Ford is also in this elite intelligent business group with the “Ford Fiesta" , so far over 50,000 cars have been sold in India. But what makes this so ideal, it was designed from scratch offshore with Indian & Ford engineers, manufactured over in India with some key parts made here in the US. This is good global trading, and both countries will keep to their part, because both need each other.
Executives need to learn that this is not the case with Financial Software, or Banking Systems, they need to learn the many different nuances, risks and use extreme caution when offshoring our banking systems, because it looks good on paper.
I hope that this correspondence helps senior executives consider where off shoring is feasible and where it is not. We have to stop going to extremes and find that acceptable sweet spot where everyone wins.
THE US BANKS ARE OFFSHORING US BANKING SOFTWARE DEVELOPMENT
No one needs to be a professional hacker if they have access; we are giving them the key! And now this the cost of constantly monitoring and reconciling these security breaches has added additional costs to an already inflated expenditure..Social Responsibility: - When off shoring is employed, which means outsourcing a process to a foreign location, it results in reduction of employment avenues in the nation from where the function is outsourced. This is counterproductive to the business that is offshoring. In simpler terms, in the past ten years we clearly have a shortage of engineers and software developers in this country. Why? Where is the motivation for US students to study a field that in their mind will offer little to no opportunity? Simple answer: because US businesses are offshoring these very critical skills.
With that said, realize that no original idea has ever come from these offshore countries. For example: Oracle, Microsoft, iPhone, Yahoo and Google were all created in the US. SAP, one of major competitors is from Germany, Sun Systems is from England. Again, I have to reiterate my disclaimer, I am not here trying to disparage any country nor do I believe that off shoring should be banned. I just hope that American executives reflect on the decisions that they make and realize the long term ripple effects. We are in a global economy and global competition for market share. So why give away one of our most precious resources-intellectual property- to anyone that promises to save us a dime?
This week we witness out president visit India and China, two very critical and important trading allies to US. I am glad to see that he is there increasing our relationship. I am also glad when I hear news like India & Boeing enter into a “100 million dollar MRO JV project . Here is an example where we can have good business relations, without giving away our intellectual property or US jobs, and have mutual trade relations.
H1 Sponsorship: Good or Bad?:– I will admit that in 2001 I was wrongly opposed to H1 sponsorship. I analyzed it superficially and did not look at all the factors on process and macro economic effects. By 2003 when ASI grew and the demand for qualified developers became scarce I seriously considered the H1 route.
Since I personally interview my staff, I was taken back a bit by these very elaborate resumes from developers with less than five years experience, that averaged four pages; some were seven pages long and extremely verbose. On all developer interviews I ask the candidate to bring in sample code that they have created, because writing code is more of a creative process as opposed to technical. I can go on for pages with excuses and stories I was told. One person stands out, a very qualified and advanced programmer with a platinum resume and a little arrogance. More than likely many that interview him do not know code, so he felt overly confident when meeting. When he displayed his sample code before me, within 2 minutes of scanning it I found it to be good but not efficient. I asked him why he wrote three algorithms consuming about 250 lines of code, when he could have written a single global call procedure algorithm using about 50 lines of code that would be quicker and more reliable. He responded without hesitation, “The client will never know”. Needless to say the interview was over.
In the end, I sponsored and hired several H1 employees and found them to be amazing, steady developers that have a huge desire to learn and be challenged. Why is this better than Off Shoring! Because rather than taking away from our economy these H1 employees pay US taxes. They operate under US laws and standards of security and in most cases take a true concern for the client when they meet them. They take greater pride in the work that they do, no different than our migrated forefathers that came here to the US.
Due to the current economy many of these H1 sponsorships are not being renewed and after years of training and working here in the US, these people are being forced to return to their country of origin. We then end up off shoring to the same countries because those workers are no longer here. A paradox, isn’t it? Once again my beloved country missed seeing the center sweet spot, and chose to go from one extreme to another.
Two months after I wrote this article; in November 2010 when the WikiLeaks situation arose; I received many correspondences, mostly agreeing with me and some strongly disagreeing. Let me clarify, this is not about politics or nationalism, this is about keeping the global trade at a balance and not the US not giving away our intellectual property while leaving us venerable for an economic coup.Many readers seem to think I focus on India and there is much merit to that. Taking into account the B.R.I.C. global focus group (Brazil, Russia, India & China), India is by far the US’s best and largest true democratic emerging country and India is where any US company should be setting their sights for trade. But with that do not give away our country or compromise our middle class for the sake of an easy short lived dollar. I gave an example on how Boeing & India have a 100 million dollar MRO Project, which is outstanding for both countries and does not take away from the US, but rather adds to both countries.
Ford is also in this elite intelligent business group with the “Ford Fiesta" , so far over 50,000 cars have been sold in India. But what makes this so ideal, it was designed from scratch offshore with Indian & Ford engineers, manufactured over in India with some key parts made here in the US. This is good global trading, and both countries will keep to their part, because both need each other. I realize I touched on some sensitive ground that could be misinterpret, but I hope that the reader will see this is one person’s observation, a person with an open mind that understands that this is a global economy and it is in the best interest of the US and our foreign business partners to learn and grow together, but we see where we may over shoot a good idea and where it is beneficial for both countries for many years to come.
Executives need to learn that this is not the case with Financial Software, or Banking Systems, they need to learn the many different nuances, risks and use extreme caution when offshoring our banking systems, because it looks good on paper.
I hope that this correspondence helps senior executives consider where off shoring is feasible and where it is not. We have to stop going to extremes and find that acceptable sweet spot where everyone wins.
