Are Off-Shore IT Outsourcing Savings Worth the Cost?

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Hardly a day goes by when we don’t hear about another major corporation experiencing another major computer failure, from utilities which grossly overbilled to banks which foreclosed on the wrong properties, web sites which sold items at a major loss to customers billed for services they never requested to confidential information accidentally being made public. With all the strides made in technology – better programming languages and more robust databases, how does this occur?

In my opinion this happened when project managers decided the goal of IT is to save money. Whether or not the application actually worked became secondary. Rather than pay local, experienced programmers to develop the system, it is cheaper to hire offshore programmers. Who interviewed these programmers and made certain they had the qualifications? How experienced are they? The goal of their managers is also to save money, which means hiring at the lowest cost. Even if they are experienced, how easy is it to create a system when they can’t even meet with the users directly and ask questions? They are working off specifications (if they are lucky enough to get any) created by someone thousands of miles away to whom they often never speak.

Have you ever played the game of telephone where someone whispers a phrase to the next person and it gets passed down the line until it reaches the twentieth person? Wasn’t it hysterical to hear that last person utter something so completely different than what was said? If that can happen to a single phrase uttered in a single room, imagine what can happen to complex specifications passed across the globe. And there are many more risks. Valuable business knowledge is lost to outside developers instead of being passed on to company employees. Many offshore sites have no disaster recovery plans. Surprisingly, even when it works, the savings is only about 15% during the first few years.

Why would an IT manager feel that a 15% possible savings is worth risking a 100% possible loss? Because he can tell his superiors “instead of paying local, experienced developers a million dollars to produce this, I paid an offshore team a half million.” He then gets a bonus for “saving” a half million dollars. Somehow no one notices that due to cost overruns, he only saved fifty thousand (if that) and the application doesn’t work. During a ten-year period at one major television company, I watched this same process repeated over and over. By the time I left, they were on their fourth rewrite of the same payroll program from yet another outside vendor, being done in a different programming language and database than the previous three. As I said in one meeting, “I don’t recall our users requesting that we replace a lousy ASP application with a lousy Java one.”

This is further compounded by the second “saving” – eliminating key positions. There was a time no major system was implemented without a business/system analyst. This was the person who met with the users, documented the requirement in English, obtained sign-off, then translated those documents to pseudocode or flowchats so the programmers could follow it. It was the BA/SA’s job to make sure that all necessary functions are included, that what was produced matched what was requested and that it worked. Today companies “save” money by having the programmer talk directly to the users. Very often documentation isn’t done until after the system has been developed. Very often what is produced doesn’t match what was requested. And when the same person who produced the system is also tasked with testing and approving it, it’s the users who end up discovering the bugs. And often it’s the customers, when they’re overbilled, wrongfully foreclosed, or their confidential information becomes public.

Imagine buying an empty lot and a bunch of bricks, then hiring someone and saying, “Grab some bricks and build me a house over here.” Everyone knows a three hundred thousand dollar house requires an architect and plans. So why do company believe a million dollar system doesn’t require an analyst and documentation?

Hwew are some extra resources you may want to check out:

 

Izzy Goodman is President of Complete Computer Services, a consulting firm in Far Rockaway, NY offering web design and SEO and sales of ink cartridges and laser toner. A computer consultant for over 30 years, he has written articles for numerous IT publications, many of which can be found at www.ccs-digital.com.

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