End in sight for IT jobs outsourcing massacre The offshoring of IT work to developing countries has been very popular with accountants looking to cut costs, but the limits are being reached of what jobs can conceivably be sent overseas. Research by The Hackett Group estimates that of the 8.2 million business service jobs available in the US and Europe in 2002, only around …
Left the jobs here, the knock on effects of the jobs would be a better economy. People who earn money spend it.
Instead to save a a few pence they move the jobs abroad. We lose out in tax revenue, jobs, with a Hugh knock on effect, we lose skills.
What clever accountants there are.
Management & Accountants are short-termist at best. They see the upfront cost of outsourcing and go "Kerching" - Savings. They are not recognising what actually happens.
The management where i work like this and perpetuate lies to justify the reasons.
1 - the skills are not in the UK to do this work - er we managed fine for the last 30 years and there wont be any skills left if you keep firing them all
2 - The quality is good - Absolute crap. The developers cut-n-paste existing code and do the bare minimum to satisfy the requirements. no quality at all. If it weren;t for the remainder of the on shore staff correcting the sloppy code we would have killed our buisness by now (soon there wont be any left to do that so it; be fun to see)
3 - They are protecting staff from future redundancy, What by firing them now?
Every single outsourced function has resulted in a worse, but cheaper (at least on paper) service. What happens is the remaining onshore staff spend more time and therefore cost on correcting these deficiencies. Making them look even more expensive and ripe for further offshoring.
As for skills and quality, maybe some of the offshoring partners can provide that - but we haven;t signed up to those. EG a database issue - very poor poerformance suddenly rose it;s head, our DBA service is now offshored and so a ticket was raised. After three days of investigation (still within the negotiated SLA!?!) nothing had improved. "Investigations were ongoing". One of the onshore guys decided to google it, found a possible solution and mail it to them. Lo and behold the error was fixed. Our guy would have done it himself but his access was removed as part of offshoring.
How is that good value for money?
Anonymous coward as I still want to hold onto my job for as long as it is in the UK
The short-termism shown by management and accountants only reflects the pressure from shareholders demanding year-by-year dividends and EPS growth. Were the owners of a company to think beyond the next 4 quarters and invest for such, they'd find themselves in a much better position in their home markets.
we recently outsourced app development to a well known Indian company. During the outsourcing process serious mistakes were made:
1. The CIO and senior managers, assumed that we would get the same level of service as the reference customers we spoke to. Wrong! the reference customers were much bigger companies than us and much more valuable as customers
2. level and quantity of skilled technical resources available from the supplier were pretty much taken on face value. Again, probably due to our size the resources, even if available, have not been put on to our account in several key areas.
Our applications were mainly bespoke complex Oracle client server apps. They were poorly documented (how unusual) and often depended on key developers who had been with the company for years. these were mostly made redundant and have been replaced with on-shore teams from India backed up by an offshore technical development team in India (overall numbers considerably higher than before). The onshore team members rotate (BTW how do they get visas, they aren't doing jobs that cannot be filled by local resources?). Overall they have next to no business knowledge, a superficial understanding of the applications and frankly, limited technical ability. To such an extent that we have had to introduce a technical design and QA role in-house which regularly picks up howling errors and lack of compliance to standards.
End result: Productivity down, probably around 80% in the first year, leading to a slowdown in delivery to the business for which we, the hapless remnants of a once highly competent IT dept, get the blame. Quality as measured by testing defects and production incidents has gone through the floor. Additionally, the lure offered by the supplier of access to Innovation and Industrial technical 'thought leadership' has proved to be a chimaera. So is the decision being reconsidered? Of course not. Although we have delivered crap we have delivered it more cheaply. the CIO and his senior managers, and the CEO have basically staked their reputations on this as a brilliant profit enhancing wheeze, and have got far too much to lose. Time for a new job, methinks, Oh I forgot there aren't any.
Anonymous for obvious reasons
That is one option. There is another.
The logic in the article assumes offshoring jobs - it does not assume offshoring whole chunks of companies along with the tax breaks from non-repatriated income.
IMO classic offshoring as such has stopped long ago. We are already in the time when the CIO and all of his deputies are being given marching orders (or a pink slip) to move to the new business unit offshore. IT business unit in India, Manufacturing BU in China, Accounting in Prague a lone CEO with some marketing in a large corner office in US and voila - here is your modern globalized corporation. Want examples? Do not think they are necessary - just look around.
Not to mention that the so-called 'emerging markets' aren't (yet) filled with enough 'consumers' to replace revenue from western consumerism. Only a small fraction of chinese ppl work in these factories and their income isn't high enough (yet) to purchase the products they make.
It's a bubble and it will burst!
Although listening to the reports from the 2008 Olympics where they were interviewing Chinese school children (8 - 12 yrs ?) on BBC R4 they should be wiping the floor with Indian call centres any time soon (also comprehension of spoken English was pretty good - try that when someone won't break a script to understand what you are saying !)
Claiming back mis sold payment protection on a loan, one particular UK bank is using an off shore call centre where taking even the basic details is extremely difficult.
It is not that the person cannot speak English, they can, but one problem is the heavy accented English.
The other is that the delicate nuances in our language, the way we say things, not the language we speak is so different from the stiff text book stuff they have learned.
Please if you are Indian don't introduce yourself as Bob, or Roy or Mike or Jim, I find that insulting and it is demeaning for you.
I dont get your example, why is a bank claiming back mis-sold ppi - arnt they the ones getting claimed from?
If I was the one doing the claiming, one of my priorities when choosing which shifty scumbag ambulance chasing lawyer to use would be to get one capable of taking my name on the first attempt!
Spot on. The Indians generally speak perfect English, but their accents are incredibly hard to follow sometimes. English for them has also evolved in a completely different way from us since we left 65 years ago.
Indian IT staff are also pretty badly treated. That guy you think is terrible is probably an expert in Exchange or SQL but they've been told by management to be a Unix admin. They don't have a culture where they say "No, I don't have those skills". They'll just do it anyway, do a crap job, and pretend it's done properly, or try and hide somewhere. Saying no just doesn't happen. Not just in IT either. It's just a different culture and one which is quite incompatible with ours, despite the common language.
If I were an Indian I'd rather work in government or the railways. Much more comfortable places to work,
Would face a PR nightmare? They would only then experience a breakdown in trust between them and their employers? I think somebody should start talking to the poor sods presently working at the coalface. They might then discover that this lack of trust and a desire to get the hell out it it is a widespread condition today, never mind at some stage in the future. Costing cutting? That's simply a question of who gets cut. Doing things smarter, being genuinely innovative to grow a business and improve profitability - that is way to much like intellectual heavy lifting for The Directorati. Attempting to take that route might expose their total inadequacy, people might see that the managerial emperor is mother naked.
When Henry Ford introduced the $5/day pay rate for his employees nearly a century ago, the accountants and Wall Street wizards were apoplectic at the horrid waste of money. What the crazy old fox did was create an almost-assured market for his products ensuring growth in good times and survival in bad times.
Too bad businesses today (including Henry's company) have forgotten that lesson.
As a matter of fact, the fairly new mgmt of Ford Motors 'woke up and smelled the coffee' about five years ago and 1) started to create quality products; 2) stopped trying to squeeze employees for the bottom line; and 3) declined to screw their vendors (did NOT file for bankruptcy). As a result, the firm actually shot to profitability, scooped up market share, won customer & employee loyalty, produced quality products and paid for some of my major remodeling projects when I sold some of those $2 shares of stock ( I bought in '09). For the record, I am VERY happy with the Ford Ranger pickup truck I bought last year -- first Ford I have owned in 40 years. :-)
When I worked for an American motor company it was widely held that union-related costs took over $1,000 profit out of each vehicle sold compared to what the Japanese competition could make... and note that's Japanese manufacturers, not some cheap-ass sweatshop. $1,000 a unit in an industry where coming up with a way to save $1 a unit makes you a hero, is a lot.
Now don't get me wrong, I'm pro-union and pro-workers'-rights, but some of the stuff the US unions had negotiated was plain ridiculous.
AC@08:53
Not only that, but a lot of the costs are for retirees who, however you slice it, are not producing today and are not helping the bottom line.
Back in 2007 the UAW and GM were negotiating a new contract. 48% of the UAW members in Indiana were retired AND voted on the contract. So you can guess how much retiree benefits got reduced.
Ah now! That sounds more like the story of BMC to me. What we had there was a management made up of wet-behind-the-ears business graduates doing the "I'm the big boss" bit and screwing the workers. The workers assumed the other extreme, driving their union to strike at the drop of a hat, all against a historic backdrop of corporate and governmental mismanagement. The result? Well, bits of BMC still haunt various niches of the industry but all under the auspices of other companies, but to all intents and purposes, BMC (or Leyland, Rover or whatever else it called itself over the years since it was first pulled, kicking and screaming, into being) it is gone.
The moral of that story, and one that Ford seems to have taken to heart, is that it takes two sides to make an argument.
My company did some work for Ford, so I spent a couple of years going backwards and forwards between the UK and Detroit. To get me a PC so I could do some work, we had to wait until everyone had gone home and then sneak it in. Moving and installing PCs was a unionised job, and doing a union member's job would have involved disciplinary action against the Ford guys I was working with. Never mind that it'd take a fortnight for them to do it, by which time I'd be back in Blighty.
LOL, wouldn't ever put those two concepts in the same sentence.
Henry Ford was the pioneer of mass production; also known as herald for the death of quality. His process championed the reduction of products to the cheapest possible way of making them.
Many automobile manufacturers from the past until today copy that ethos, sacrificing the user experience in favour of saving minuscule amounts at all stages of the process from procurement through to finishing.
This is the attitude which has led to the "throw-away" consumerist culture that we have today, which therefore makes it difficult in general to buy products that are not an utter shambles. It's worth mentioning the considerable environmental damage this contributes to, as well.
I would recommend the reading of "Zen and the Art of Motorcycle Maintenance" and "Brave New World" for those who might not identify with the above observations.
1) Clearly you missed the point: well-paid employees purchase the company's products assuring a built-in market. Slashing pay and off-shoring work does not achieve said end.
2) As a reitiree of said company (30-and-out) and former IT supervisor who maintains contact with several still-active colleagues, I can assure you the current management is no better than previous management in recognizing that point although the stockholders are doing much better.
*Salaried* retirees and employees are continuing to receive de facto pay cuts through rapidly-increasing "co-pays" for benefits leaving less and less available funds with which to purchase new vehicles every very few years.
IT in particular employs just a small fraction of the people it did just a few years ago. Most IT jobs have been outsourced or off-shored and those who remain mostly write specifications and coordinate the work of the "English-speaking" off-shored sweatshops. Of course, most of the toadies and sycophants remain.
Even in the union-represented ranks, new-hires only receive half the pay and few of benefits of their higher-seniority co-workers.
Morale among the "worker bees" (as opposed to upper management and institutional stockholders) has never been lower in the 40+ years since I started there.
Offshoring works if your general concern is finding the best talent. I don't mind competing against the world on skills. The problem is off shoring isn't about finding the best. It's about saving the most money. Therefore a lot of off shoring is shit. I've seen it in previous employers.
The best way to avoid off shoring is to work for start-ups and smaller companies rather than large companies full of unskilled MBAs.
What would also help is if companies were held responsible for poor software. They're rarely not. What is the punishment for producing shit? You probably won't get taken to court, consumers find it hard enough to get their money back on software and chances are they'll buy it anyway because patents have helped kill competiton.
"Offshoring works... I don't mind competing against the world on skills"
However, if those with the skills/knowhow are getting laid off and leave the industry, then the overall skill level will go down, knowhow will be lost and ultimately there won't be enough of 'you' to compete.
How could we be world class production engineering experts if we don't make anything? Even if you are an expert who can compete - if you aren't in the game then your its a matter of time before you get overtaken - even if only by virtue of the sheer numbers of competitors.
Sure thre will be some jobs left behind, like window washers, but who will be able to afford them?
"Offshoring works if your general concern is finding the best talent. I don't mind competing against the world on skills. "
Except you're not - you're competing against the world on cost of your salary. If you reckon you can live on the 5 quid a day they earn in china or india then good luck!
I agree totally. We may be expensive but we get the job done. If you can speak to the business, understand technology and are presentable then you really don't have anything to worry about.
A case in point:
We recently asked an off-shore team-member to add 3 columns to a grid in one of our applications. After 7 days - and hand-holding - we got back broken code. We then spent 3 hours doing the job ourselves. This is not a one-off issue; this is about average of my experience of working with off-shore development teams.
So yes, off-shore developers are maybe between 2 and 5 times cheaper than us. I'd love to see some charts showing comparative work-rates against cost.
And as to the "highly skilled" off-shore developers argument, I just don't buy it. The best ones are already earning lots in the US (because they can). Those that aren't there are in the UK, then Dubai and Singapore.
"We recently asked an off-shore team-member to add 3 columns to a grid in one of our applications. After 7 days - and hand-holding - we got back broken code. We then spent 3 hours doing the job ourselves. This is not a one-off issue; this is about average of my experience of working with off-shore development teams."
This is where it is time to start collecting evidence. *track* the faults, the delays and most of all the additional *costs* of fixing their faults.
You only fight this ground on the benefits of in-sourcing and the fact that it is (when *everything* is accounted for) cheaper.
Their outsourcer is 1/3 the hourly rate of a local specialist. Whoopee. When they spend 3x the time to still *fail* to carry out the task they are not.
The last two banks I have worked for (including where I am now), put much of the IT work "offshore". This seems to mean, importing the Indian workers here, in large numbers, theoretically for limited periods of one or two years each, practically many staying for several years and the better ones getting residence permits and staying, a very few as permanent staff. (I live in a financially successful, middle European country).
The jobs covered now include programming, architects and endless IT admin. types, managing the paperwork associated with the managêment systems their company sold to us and so on.
I gather too, that even for those few really "offshore", the total cost can be more than employing a local worker (local, in this context, I use to include anywhere in Europe). I am sure that paying the consultancy company supplying the staff, the expenses of getting them here, tickets for home leave, accommodation, visa costs, lawyers and HR to manage the visa process, health insurance (directly or through their employer), loss of skills from local resources and so on must add up to a tidy bill. Added to all this, of course, is the cost of supervision, acclimatising them to the local culture, the local working place, systems and customs.
It is also noticeable that the sheer numbers of such workers seem to be greater than the former numbers of local employees for the same job; then of course their is the lack of continuity as well as variable skill, knowledge and experience levels. Of course, some of them are very good; a lot are very "average"; most are decent people.
Language: actually, their spoken English is often better than my Americnised countrymen's lingo; their writing skills are not as good, though again my under-educated, increasingly-Americanised compatriots are going down hill fast.
Also in the UK we have the scandal of "intra company transfers", ie. large coorporations importing their Indian workers to the uk (but still paying them Indian wages - kerching!!) to replace Uk staff. Regulations were recently tightened but are half-heatedly enforced, as with many laws governing large companies, so tha scandal continues.
I too have experienced something like that, made redundant and told that part of our redundancy payment is dependant on the ‘successful handover’ of our work to some Indians who are expected to learn everything you have learned in the past 15 years in just 3 weeks.
I have seen a case where a team of 8 very experienced mainframe programmers, each of them with 15-30 years experience, a total of 216 years experience between them, were expected to handover their project to a team of 5 Indian programmers who had just graduated from college and had little or no experience of mainframes. 2 of them took up jobs with a different company within 1 month of returning to India.
That’s how off-shoring saves money.
They won't have to. Once the factories are established, and the skill base is there, there are plenty of intelligent Chinese business people who could easily do the management jobs. Then our local "executives" will find themselves managing the shell of a company that is easily outcompeted by the foreign competitors they created. Poetic justice, really.
Easy - make outsourcing difficult
o The Government should make off-shored work non tax deductible.
o Visas should be limited to a week to make it more difficult to offshore.
o All government work should be done in the UK.
This benefits the country as opposed to the company for the following reasons.
o Income stays in the UK.
o Market forces will take effect and companies will be forced to train staff
o Increased employment reduces unemployment spending costs (lower taxes)
o Increased employment increases spending on the local economy (more employment)
o Political stability.- high unemployment and poor prospects leads to radical governments
Hard to see how a 54% drop in jobs is good news - particularly since the decline ain't over yet.
Plus, this completely ignores the feeback loop that has already happened in manufacturing: it's now pretty much impossible to pull manufacturing back from China because the supply chain infrastructure in the West is gone.
Similarly, with such a rapidly contracting IT job market, people will no longer be training to join it, people who have been pushed out can't keep skills up-to-date and waddyaknow: in 5 years time there's a skills shortage that forces companies to out source further.
Plus, you have to wonder at the sense of transfering all understanding of your critical systems to a supplier. It'll take maybe three of four years for anybody with a grasp of the systems to be squeezed out of your company then basically, you're the supplier's bi-atch: you really think they're going to be help you switch to a cheaper competitor?
Then there's the question of 'suppliers' turning into competitors - e.g. HTC, Samsung etc. You're basically paying them to learn everything you do so they can then do it cheaper.
I mean, I all for helping the poor, but handing your entire economy to them just to save a few pennies, seems a tad over enthusiastic.
Free market capitalism does not exist like that. It is "restricted capitalism" carried out under a large system of rules. The issue is about what the rules should be and who should benefit from them. In the UK, the rules are usually couched so as to benefit those at the very very top - heads of big coorporations, government minsters and senior civil servants, at the expense of everyone else.
There are reasons for the recent boosts to Nissan in Sunderland and Glaxo Smithkline in Ulverston. As the need for agility increases, local supply chains start to make more sense. I read somewhere recently that manufacturing costs in the UK and India (think it was India) are on a par. I do know that small companies in the US are finding it more efficient to have the manufacturer just down the road rather than on the other side of the world. Vetoing the new item shape in person *before* the factory churns out 10,000 of them (and charges you for it) makes a difference.
Companies offshore for a number of reasons, it might be cost, reducing their overall cost of doing business, it maybe to take advantage of skills pools which they cannot obtain or afford in their home country, it might also be because they have global aspirations and need to support a global workforce and positioning in India makes sense as it overlaps the european and asian working days.
But the majority have gone for cost reasons, so what will happen in the next 10 years or so will be those very same offshored activities will move to the next low cost country, be that Africa, South America or even back to the UK if this recession continues for much longer.
But we should be focussing on our ability to attract high quality jobs to the UK in manufacturing, engineering, science and technology. Where real money is made. Apple does not manufacture much in the US but it sure does employ a lot of engineers and scientists and it sure does make a heck of a lot of money.
"attract high quality jobs to the UK" - thats all right for me and you.
But what about all those guys with 2 CSEs I imagine there are more of them than you and me. We need jobs for those too. Simply paying more tax to subsidize their enforced idleness is unsustainable...
We need high, medium and loads of low level jobs in all sorts of industries. If we are lucky we will get world class at a few of them too...
Our utilities owned by the French, Germans and Dutch. Our cars made by the Japanese. Our computers made in China and supported from India. Our food from all over the place. Our telly mostly from the US...
This state of affairs dates back to when Maggie Scratcher insisted that we do away with penalties for imports to "even up the playing field". The trouble was that the playing field didn't become even. There were still industries and services that go a lot of help in their home lands, and suddenly we opened our entire market to an influx of asset stripping companies, bolstered by their own home advantages that we no longer had.
This latest round, the so-called "offshoring", is tantamount to sweat shop politics, but it all works out the same way. We do NOTHING to save our own industries beyond paying the CEOs and shareholders fat bundles to screw us over.
Could the last person turn the light off before leaving?
"Instead to save a a few pence they move the jobs abroad. We lose out in tax revenue, jobs, with a Hugh knock on effect, we lose skills."
I guess that only really effects you though if you live in or care about the country you do business in. However if say you are the owner of a large corp who has shifted all the profits to a wife who lives in a tax haven and spent years avoiding paying tax in your country, why should you care? After all you're loaded enough that petty things like health cuts etc arent goin to bother you. The only time it will really bother you is if the country is so badly effected they can't afford your services*.
*I know that in this case actually having a strong economy should mean your company makes more profit, but businesses if they were farmers they would still be practicing slash and burn agriculture rather than looking after their fields.
This is why BT and Talk Talk rank the highest for Poor customer service - lots of offshore call centre staff ( veer from the script at your peril!). Santander brought the off shore jobs back to the Uk due to poor service. There are many solutions :- when you call a call centre ask to be put through to your home country, Buy local services. Many textile businesses that were lost have started to come back as the costs of shipping stuff round the world - has increased due to the oil price, now makes more economic sense to bring it back - and good.
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...and let them get a taste of their own medicine.
Fyi I left a Big 4 Consultancy a few years ago due to this. It just became too much and I didn't want to be a part of the brain-/skills-/job-drain. On what will our chaps and chapesses cut their teeth, and what happens when the off-shore country gets too expensive (which they already were for the various reasons mentioned in others' posts)? We will be over a barrel. Yes, offshoring will become offshore-squared/-cubed as it rotates around the various countries (India, China, Russia, Poland...) but, at some stage, this chain will snap and we will have no one with those skills.
So, back to my initial point, off-shore the bean-counters and we might actually be able to put some value back into our businesses while they are occupied elsewhere. And it would also be fun to see CFOs etc deal with the crap quality return from offshore deliverables.
... the people in 'the West' receiving calls from 'the East' are those who are unemployed, or now have 'value added' jobs that pay less, that means that they can't no longer afford the products that are being offered to them by the people to whom they lost their jobs, by the people who have taken them....
With another few million jobs about to outsourced, this may not be that far away...
Oh and lending money to those who can't afford what's being offered, I don't think they do that any more, or do they?
In the mean time, those senior enough, or those who just have money, well no problem for them, as ever.
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