Are You Still Outsourcing?

Outsourcing Latest news on Satyam Computer Services fraud just can’t keep me from returning back to the same question: why would a big company outsource something like an IT services to foreign country. The main reason I keep hearing is that pricing makes outsourcing offerings irresistible. On top of that it removes the need to manage the projects separately, instead feeding requests into a “black box” and getting a ready product on the other end of it.

Well, for starters, if your only competitive advantage is the price – there will be someone who can offer either a lower price, or more benefits for the same money. Add to that language differences (if you ever had a conversation with a tech support “guru” from India you know what I am talking about). Add time differences – whenever you need an anwers in half-hour, your outsourced tech contacts are out of the office. Add mentality difference – or the way things are made to work by “us” and by “them”.

I am even discounting my own experience of fixing things after outsourced help. Just out of pure observation and reading the news, the margin isn’t all that high – I would estimate the average margin at about $10 ,000 – 15,000 per employee vs. an outsourced consultant. On the other side of the scale we have management nightmares, managers having to travel to forein country every month at company’s expense (and being a high level managers they don’t fly economy class – not that I’m aware of).

So instead of having a little more expensive but more readily available local workers companies sign up for cheap labor from overseas, adding management burden, time differences and misunderstandings to the plate. In the end, the overall cost of the finished project would be same or higher then if a local resources were used. And don’t even start me on the quality of the final product

It’s a rhethorical question, but it needs to be asked: when would American companies realize that they are not that rich to buy cheap things?