[>Htech] Outsourcing is Inevitable (fwd)

Eugen Leitl eugen@leitl.org
Thu, 27 Mar 2003 21:03:26 +0100 (CET)

---------- Forwarded message ----------
Date: Thu, 27 Mar 2003 19:55:04 -0000
From: oxyryxo <oxyryxo@yahoo.com>
Reply-To: transhumantech@yahoogroups.com
To: transhumantech@yahoogroups.com
Subject: [>Htech] Outsourcing is Inevitable (fwd)

Like it or not, outsourcing is here -- and hot
Speakers extol its virtues; pickets see it differently


Two British outsourcing firms yesterday sang the praises of moving 
software development from in-house to India: lower cost, higher 
quality, quicker turnaround, better skills.

And at the same breakfast meeting, sponsored by the Seattle Chamber 
of Commerce, several Seattle-area outsourcers -- which make money 
sending the computer-programming and other tasks of local companies 
to other, more specialized companies, often overseas -- said business 
here is booming.

But outside Rainier Tower, pickets presented another side of the 
issue, arguing that although outsourcing may save a company money, it 
disregards such considerations as a company's obligations to build 
its community and to benefit local workers.

And in time, outsourcing can sap a company of its technical strength 
and expertise by handing too much control and knowledge to 
foreigners, one consultant warned.

Although arguments continue over whether outsourcing does more harm 
or good, one thing is clear: It is hot.

Fully 260 of Fortune 500 companies outsourced some software 
development to India in 1999 and 2000, said Mike Cast, the managing 
director of outsourcing firm Mastek (U.K.) Ltd., London.

This year, 60 percent of companies are outsourcing, and that number 
will increase by 50 percent in the next two years, Cast said, citing 
figures from industry analysts The Gartner Group.

Indians will make $17.6 billion writing outsourced software this 
year, getting far more outsourcing -- nearly 95 percent of the total -
- than any other country, Cast said.

Israel, Singapore and Ireland offer higher-quality work but at higher 
prices, he said, and the Philippines, Hungary and China offer lower 
prices but lower quality.

U.S.-based companies will give India 63 percent of its outsourced 
business. European firms will give it another 26 percent.

Yet the outsourcing market has barely been tapped, said Peter Kelly, 
executive director of U.K.-based Capita Business Services, which both 
consumes and provides outsourcing. Less than 5 percent of the 
software written in Britain is now outsourced, he said.

Attracted to outsourcing by its "flexibility and lack of management 
distraction," Capita "got rid of all our programmers, who didn't 
believe in writing out specs (specifications) beforehand" and 
replaced them with Indian programmers accustomed to using specs, 
Kelly said.

Capita produced software in months that would have taken it two to 
three years using in-house talent, Kelly said. And when the project 
was over, it was easier to "flex," or disengage from, the Indian work 
force, he said.

Outside yesterday's meeting, members of the Washington Alliance for 
Technology, or WashTech, passed out scores of purple fliers decrying 
Mastek's outsourcing as "not only shortsighted and greedy but a stab 
in the back of workers in the Seattle area."

More than 22,000 people have been laid off from Washington high-tech 
jobs in the past three years, so WashTech's Marcus Courtney, who co-
founded the high-tech workers' advocacy group, wondered how 
outsourcing can be justified.

"It is impossible for Americans to compete with salaries as low as 
those paid in India," he said. Those salaries, though often only 
$20,000 to $30,000, put Indian workers among the top ranks of wage 

"If companies just look at their bottom lines, sure, outsourcing 
makes sense," Courtney said. "But that disregards issues like the 
obligation of a company to its workers and its community."

He said Washington residents even pay for the elimination of their 
own jobs by giving tax breaks to local companies that then outsource.

Those aren't the concerns Kelly thinks are most important.

"It's a global marketplace, and you have to compete with everyone 
else," he said. "If your information-technology costs are up and 
others' are down, you'll die."

Margaret Bartley, principal technologist with Medina-based consulting 
firm The Bartley Group, cautioned that outsourcing can cost 
organizations expertise that took years to accumulate. That can 
happen as training overseas programmers becomes more important than 
training local personnel.

In addition, she said, security is threatened when local governments, 
insurers and e-commerce companies send software development abroad, 
because their inner workings are exposed in the details of the 

And she worries that the United States will lose its edge in 
information technology just as it did in heavy industry.

Regardless of such concerns, interest in outsourcing is growing in 
the Seattle area, said Liz Ellingson, an account manager with Seattle-
based outsourcer Congruent Software Inc.

Mani Krish, that company's director and owner, said companies are not 
just interested in saving money but also in splitting development 
between India and Seattle. That way, because of the time difference, 
Seattle-based testers can spend their days testing software the 
Indians wrote 12 hours before, in effect creating a 24-hour workday.

"Like offshore manufacturing, outsourcing is inevitable," said 
Bartley, the consultant. "All we can do is plan for it."


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