back to article Outsourcing suddenly less popular

Demand for outsourcing has fallen as global economic troubles hit the outsourcing industry, according to research produced by an outsourcing consultancy. Its advisors expect demand to increase early this year, the company said. Outsourcing consultancy EquaTerra asked its advisors whether demand was increasing for outsourcing …

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Flame

Now theres a suprise...

Outsourcing Consultancy predit a rise in outsourcing.

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Thumb Down

Do companies still think outsourcing is actually cheaper...

...I thought they'd realised that although the cost per man day is cheaper, it takes 3-4 times longer to get anything done, and at half the quality...

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Unhappy

What?

Does this article mean to imply that someone, somewhere has actually managed to get value from an off-shoring deal as opposed to the usual much higher actual costs (although conveniently on a different bit of the balance sheet), slower responses, and really upset customers (both external and internal)?

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Flame

One would think

That these companies should have realized that saving a buck does not equate to making two... Removing money from the economy you do business in has a negative return in the long run. May be once we are out of this 3rd ring of hell we call the "recession" these companies will realize just what exactly it means to be socioeconomically conscious. I for one will not do business with them.

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Anonymous Coward

satyam

This news should help them with their recovery then. That's a relief.

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Is it possible

that this reduction has something to do with the Satyam fiasco? Very likely, a lot of companies over here are wondering how many Satyams there are over there. The general perception that you get what you pay for might also have a tiny bit to do with it.

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Anonymous Coward

Everything is outsourced

Even a perm job is outsourcing to a company, offshoring is the problem because there different rules apply to taxation and to standard of living, because of protectionism at another level.

The depression is going to bring it home to companies. You have to be crazy to be looking for a job in today's economic downturn, it will just end up costing you money in transport and time. Instead more people will become active at a political level, and part of that huge number will be looking for companies that off shore at the time of economic collapse, and then probably publicising the fact, that will cause local consumption of that company's product to fall.

A modern depression is going to be very hard for a government or major company to remain under the radar, every move is going to be scrutinized, and hotly debated, that's really what government's and corps fear in a depression, them coming under the microscope.

Demonstrations have already hit the UK, Greece and France and they are only set to get larger.

Massive protectionism is the order of the day, and that will see economies becoming self sufficient. The longer it takes to put in economic defence policies, the harder a country will be hit and the longer it will take to recover. I am betting Labour go the opposite way, and just watch us spiral further down. It is time to get our own countries in order, every other country is going that way.

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Anonymous Coward

I for one

have never seen an outsourcing deal save money. Normally, it's other reasons / agendas that push them on through (e.g. senior managers saying 'it isn't "core business" to have IT people - as if it is "core business" to have executives...)

AC because my core business is working, not posting comments.

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Paris Hilton

Exchange rates

Let's not forget the effect of exchange rates here - any budgeting a year ago based on USD~GBP exchange rate of anywhere between 1.5 and 2.0 will be wondering why they bothered!

(Paris - cos even sh'e worked out it's best to be in the UK right now given exchange rates)

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Flame

Honestly, I'm not that impressed

Oh dear, the same old tired "outsourcing to save money" and "outsourcing=move your s**t to India". When will folks learn.

Outsourcing DOES work (I've seen it) when it's not done solely to save money, but also because the IT (or whatever) isn't 'core' to the business - it's just another service you need, like office cleaning, catering, etc. The companies that understand this probably do make small savings, they get on with their business and leave the outsourcer to do theirs.

In addition you'll probably find that the contracts, projects, etc in those companies are reasonably well defined so there's nothing major to 'fall inbetween the cracks' - which is where the expense comes from. Like someone I know said "a project's success is inversely proportional to the number of meetings you need to hold about it!". If you don't believe me - look at government outsourcing - not that many successes, and surely all outsourcing companies can't be a bunch of weenies (if that was the case then surely word would get around and they'd be out of business?), in which case the finger of blame has to point to the customer.

UK businesses can't seem to grasp this - dive in expecting their IT to suddenly cost 50% of what it was (usually with the same folks doing it) and insist on delivering specs written on elastic and meddling in the details (micromanagement will NOT save you money you twit!)

Meanwhile, the big outsourcers (IBM, HP etc) seem equally blinkered with the "we need to move everything to India", like this is some kind of magic bullet to save heaps of cash. It ain't, and in a lot of cases I've seen the service to customers hits the skids, (e.g. customer hacked off because their only contact is on the phone with someone with English as a third language - great to explain technical problems to...NOT!); you royally hack off your existing (loyal) local workforce (who probably were delivering a good service to that customer); and you're going to look like a donkey's rear when the costs in India etc go stratospheric (Economics 101 - something called the law of supply and demand). And don't get me started on the xenophic element...

I've seen other reports that say that the costs of offshore outsourcing are going to increase more than the 'onshore' costs. In which case surely these selfsame offshoring outsourcers are going to have to bring those jobs back. And when that does I'll LMFAO.

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Anonymous Coward

i was recently involved in a quote

we quoted £80,000 to develop a piece of software, but we couldn't meet the delivery date unless we dropped all of our other projects. it's an internal company it department, so that was a possibility

the outsourcing company that we work with quoted 4 times that, and where we'd had 2 developers and a tech lead down for the work, they had 2 project managers, 2 coordinators, 2 senior developers and 6 developers down, plus support from one of our developers and tech lead.

I have no idea how even the stupidest manager can still think it's cheaper to outsource than to hire the one extra person that would have allowed us to do it, it's not like we're short enough on work that we'd have to let them go again after the project. we set up the outsourcing contract ourselves as we have 17 man-years worth of work this year and 4 people to do it.

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Comanies are starting to ask...

.....whether is better to hire a competent employee here or 3 marginal ones in India for the same price.

They do have competent guys in India, but they are paid Western salaries by Google and Microsoft.

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Anonymous Coward

Why offshoring

Our company recently started outsourcing and here are some of the reasons I could gather.

1. It's NOT cost. Our outsourcing firm "works in pairs so that if one leaves the knowledge is still there." That and taking at least twice as long pretty much negates the cost factor except for

2. Protection from non-pay based employee costs like unemployment, workman's comp, taxes, unions (rare in IT), and the big one, lawsuits. All those government induced programs to protect the employee are now working against them.

3. Kickbacks. This was uncovered in the Satyam collapse. It seemed common practice for Satyam to give execs kickbacks for using their services. I would find it hard to believe they are the only one.

4. Ineptitude. On the project management and planning level and on the development level. Hiring good techs is hard to do when you aren't a tech. Furthermore, you aren't gonna get a good, experienced technical person for $30k USD a year, no matter how many you interview. If you are gonna have crappy IT, might as well pay less for it.

5. The bottom line for the next few quarters. Yes folks, the quality, long term drive of the 90s has gone out the window. Since the .com boom and everyone going public, execs now have shareholders to deal with. Outsource your stuff. It will save you money now and it will be a few years (hopefully) before the quality in your product begins to show up. Since the bottom line looks good now, it makes you look good. When your product stops selling because it's now crap, blame something else.

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Flame

@vinyl1

"They do have competent guys in India, but they are paid Western salaries by Google and Microsoft."

Ding! Ding! Ding!

We have a winner!

At present, I'm with an outsource company that is ready to kick all of our jobs to India - even though the group lead over there says there is no staff there who can do our jobs. However, don't let the lure of cheaper labor get in the way of a bad idea!

So quality is going to suffer. Project turn around? Timely fixing of issues? Good luck with all that.

(AC - for obvious reasons)

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Anonymous Coward

"Demand" is the wrong word in this article

Tolerance is closer to the mark.

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Anonymous Coward

@ OmniCitadel

I think that it's time we realized that almost every western company, of any size, is managed (and that is no longer the appropriate term) by a bunch of incompetent f***s.

Maybe I'm slow, but I have only recently realized this. This makes politicians even worse as those stupid, greedy, bastards and bitches, don't get paid nearly as well as there business counterparts and so are, generally, of much lower quality.

No wonder none of them can see the big picture and that the Western (First World) is being run into the ground for the sake of political correctness, and a blindingly good case of greed.

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RW
Flame

These statistics suck

"38 per cent of [EquaTerra's advisors] said in the last quarter of 2008 that [demand for outsourcing was increasing] a fall of five per cent from the preceding quarter."

There is so much wrong with taking the quoted statement as indicative of much of anything at all I hardly know where to start.

So last year 43% said demand was increasing, this year 38%. How many said "no change"? And how many of these "advisors" are there, and just what are their qualifications to speak on the subject?

Show me hard dollar (or pound) figures that demonstrate that the total value of new outsourcing contracts is significantly less than the total value of ones that have been allowed to lapse with the work repatriated. Then you have some meaningful information that can be called "fact" instead of unsubstantiated opinion".

As it is, all we've got is an indirect indication that may be nothing more than a statistical fluctuation in how well everyone's magic 8-balls are working.

I for one sure wouldn't base any business decision on lame reports like this one.

I think very highly of El Reg, but in this case, I must sadly pronounce "fail".

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Anonymous Coward

Outing the outsourcers?

At least a few organisations have a policy of not outsourcing when redundancies or lay offs are afoot.

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Woah !

>but India will retain its lead in the near future due to its many advantages, including language, talent and experience,

I cant and wont decry Indian talent but language ?? With all due respect to the people of India, one of the reasons I loathe using some of our tech help systems is because they dont understand me or I dont understand them ! I have seen experienced people spend more time on a job trying to muddle through rather than phone India. Yeah, great cost saving.

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