[>Htech] Outsourcing is Inevitable (fwd)
Thu, 27 Mar 2003 21:03:26 +0100 (CET)
---------- Forwarded message ----------
Date: Thu, 27 Mar 2003 19:55:04 -0000
From: oxyryxo <email@example.com>
Subject: [>Htech] Outsourcing is Inevitable (fwd)
Like it or not, outsourcing is here -- and hot
Speakers extol its virtues; pickets see it differently
By DAN RICHMAN
SEATTLE POST-INTELLIGENCER REPORTER
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,
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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