Outsourced jobs coming back.

Should I Stay or Should I Go?
Sending jobs offshore to countries like India seemed like a sure bet. Now, some firms are having second thoughts.
Offshore for sure? Businesses are thinking twice about taking the outsourcing plunge
By Brad Stone

April 19 issue - Wesley Bertch admits he fell for offshore outsourcing "hook, line and sinker." So when Bertch, chief techie for Minneapolis-based Life Time Fitness, a health club chain, needed software to evaluate potential new locations for gyms late last year, he looked overseas where he could pay $6 an hour instead of $60 for programmers. He hired a large, reputable Indian outsourcing firm a few months ago, then sat back and watched his troubles mount. Not only did the offshore team produce code that was full of bugs, they ran up big bills working overtime to fix their mistakes. Bertch finally canned the offshore contractors, hired several local programmers and started preaching to industry colleagues that managing such projects across oceans is doomed to failure. His biggest surprise? "I've since talked to scores of my peers, and we are all singing from the same hymn book," Bertch says.

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Until recently, sending jobs overseas seemed like a bulletproof business strategy. By outsourcing routine tech and customer-service jobs to educated, eager workers in countries like India and the Philippines, companies sharply cut costs—savings that outweighed the inevitable negative publicity. The movement has gained such momentum that it's become a big election issue, with candidates sparring over "Benedict Arnold CEOs" and how best to keep jobs in the United States. But many American companies are discovering that sending work to low-wage countries is not as easy or as inexpensive as advertised. In hotspots like Bangalore, wages and real-estate prices are soaring to record levels—though still generally a fraction of U.S. costs—which cuts into potential savings. As U.S. companies move from exporting call centers to outsourcing more complex work like software development, they're finding overseas workers are often ill-equipped to deliver consistent, quality work. The bad experiences are creating a boomerang effect—the return of jobs to the United States—which some have dubbed "onshoring." Analysts at research firm Gartner have declared 2004 the start of the "trough of disillusionment" with offshoring.


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March 5: Outsourcing of jobs overseas can be painful for people losing those jobs. But economists say the long-term effect could be more U.S. jobs. NBC's Andrea Mitchell reports.

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Even with the growing disenchantment, the outsourcing movement won't disappear. IDC Research maintains that offshore spending will quadruple by 2007 as the world's economy becomes increasingly globalized. What is clear is that more and more companies and onetime offshoring advocates are having second thoughts. Rising costs are just one contributing factor. Inside the largest outsourcing firms in Bangalore, up to 40 percent of workers leave each year, lured away by the promise of higher salaries and easier commutes at new jobs. Americans with their "California tans and Silicon Valley Blackberries strapped to their belts'' are routinely charged the highest office rents, says Ravi Chiruvolu of Silicon Valley-based Charter Venture Capital, which helps start-ups locate some offices in low-wage countries. Chiruvolu says he now preaches caution: "I have a lot of doubts about outsourcing I didn't have two years ago."


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In recent months, some big-name companies have lent credence to those concerns. In December investment bank Lehman Brothers yanked back a 20-person help desk set up to solve computer problems for its U.S. workers, citing the need for quick, on-site responses. Last month credit-card firm Capital One pulled out of a contract with a 250-person call center in New Delhi, after workers were caught promising unauthorized lines of credit to potential customers to boost sales. Dell, hearing complaints of thick accents and poor service from customers who were patched through to one Indian tech-support center, has also relocated that office to the United States. The firms each say they are committed to keeping other operations overseas, though. Frances Karamouzis, an analyst at Gartner Research, says the return trips often have more to do with the poor communication and organization on this shore. "Companies are focusing on relentless cost-cutting and are offshoring their problems rather than finding a true business solution."

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Not Outsourced—Yet
So how will U.S. companies control the costs of their offshoring ventures while maintaining quality and tight managerial control? IBM found one answer last week, paying more than $160 million to buy Daksh, one of India's largest technology-services companies, with 6,000 employees. Experts say U.S. companies may also have to lower their expectations about the types of tasks workers overseas can do well. G.V. Dasarthi, a mechanical engineer in India, says that developing new technologies is not yet his country's specialty. He recently wrote an online article arguing that there isn't much support for innovation or creative thinking in India. Its genuine technology prowess, he says, "is being drowned out in the hype that surrounds the outsourcing industry." The hype in the U.S. may die down as more companies figure out what work they can send overseas, and how to manage it from afar. In the meantime, the real innovation seems to be in finding new ways to sell it to an uneasy public. The latest term making its way through corporate America: "right-shoring.''

[Botnst]

Speaking of Indians....

We hire a fair number of coop and intern students where I work. Here's what I've noticed as a general trend. American kids are nice, friendly, very out-going, and enjoy their college years a lot. They are not terribly motivated, don't have much desire for excellence, think menial jobs are demeaning, and rarely work late. If asked to work late, they let me know that its a vast imposition on them, probably violates some rules, and I'm going to owe them, big time.

Kids from India are quiet, (often quite shy), self-effacing, and socially conservative. The are extraordinarily bright and hard-working. They work diligently at every task and make sure it is completed correctly and on time. I have rarely had to ask an Indian student to re-do anything. Thus, I rarely have to ask them to work late.

If not for the immigration issue, I'd hire Indians full-time before I'd hire an American.

That's just in general. There are lots of hard-working and bright American kids. But those Indians--wow.

B

[jpb5151]

Originally posted by Botnst
That's just in general. There are lots of hard-working and bright American kids. But those Indians--wow.

Heehee, and I married one. She's great.

They are very good to do biz with as well, they have a tendency to be honest and up front, and last but not least flexible and open minded to other idea's.

But if the BS detector goes off the deal is dead.

[Lebenz]

I frequently work with folks from India when I'm seeking warranty support on various products. These folks can often understand quickly spoken English (I'm a fast talker), and sometimes even speak English well enough to be understood by me. The large majority of the time, however, the Indian tech support personnel are all but incomprehensible. This has become a large problem. I have on a few occasions been obligated to spend up to 3 hours on the phone to get warranty for a defective hardware product. And failed because a) they are providing a scripted response and don’t really comprehend the problem, or b) I can’t understand what the folks are trying to say. The problem has gotten so bad that I've advised my customers to permit me to replace a component at their (the customer’s) cost rather than tie up hours on the phone to *maybe* get a warranty replacement.

Dell is by-far the worst offender of the tech support industry. I've worked with Dell tech support for over 14 years. In the past they were sharp, reasonable, and always went the extra distance to help. I can tell many good countless stories about them. Now, however, it seems that part of their stratagee of moving tech support to India is to frustrate customers into spending more money rather than properly training their outsourced technicians for warranty support.

One example will demonstrate: A customer got a Dell workstation, which was one of 5 bought at the time. The workstation had a defective CD-RW drive. I spent hours on the phone with Dell tech support in India. The tech support consisted of me doing the same test 3 times. The drive failed all three times. I was obligated to wait on hold for 20 minutes between tests. At the end of this, the technician told me that based on our findings she could not replace the drive(?) But that she would have her supervisor call me right back. After waiting for an hour and getting no call. I called Dell tech support again. I asked to speak to a supervisor. Waited another 20 minutes, repeated the story to him. He finally said that they needed to prove that the CD-RW was really broken. I said that if they’d ship me a replacement, and if it didn’t solve the problem, I’d just buy the replacement and not send the original back. At that point he agreed. All told it was 3.5 hours on the phone and 5 days to replace an $80 part. Oh yeah, it took 5 minutes to swap out the part. It worked.

Microsoft paid support is not far behind Dell. Along with the hard to understand Indian technical outsourcing is an often flippant or dismissive attitude on the part of the tech.

I truly respect that the average person in India spends 16 years in school. I wish this were the norm for the USA population. And to be sure, I have no problem with the people themselves, but they simply don’t have the language skills. Due to this the underlying trend has become one of screwing over customers so that Microsoft, Dell, NetGear, Compaq et al, can save a few more $$. This is counter productive. Many of my customers have turned away from these companies because they can no longer get the support they did previously. Naturally, however, it is all but impossible for a company to turn away from Microsoft......

[mplafleur]

$60/hr? I know a lot of programmers that'd work for less.

I'd take a lot of overtime to amount to anything to worry about. Even if they worked 16 hrs/day, you'd only be paying $12/hr.

Is that story really true?

I know a manager though who has had real problems getting quality stuff on time out of India.

[G-Benz]

I have a friend who is being "leveraged out" in six months. In the meantime, she is training her replacements...a tech support staff from a firm in India that got the outsourcing contract.

What she has experienced to date was that the individuals appear to be sharp, hardworking, and reliable. Her only qualm is that they couldn't think "outside the box". So if a problem came up that didn't have a solution explicitly defined in their training, they had no means of addressing the problem.

Perhaps this is what Lebenz has experienced?

And $60/hr is a contract programmer salary (I remember those days). In-house starting salary IS programmers make about half that...

[mplafleur]

I was a contract programmer for 17 years. $60 is on the high end here. I'd say average is about $45.

I just heard today that in the last year, 200,000 jobs were outsourced from the USA.

I also heard today that foreign coutries outsourced 400,000 jobs to the USA last year.

[Zeitgeist]

...I've worked on several research projects with Indians in the past. They were on the whole extremely nice, intelligent and motivated folks. I've also found that they've been using the funds generated from their casinos to build the health, social and education infrastructure, as well as business-generating capacity of their regions. They're good folks that I'd feel just fine exporting my business with again in the future...

[Lebenz]

Originally posted by G-Benz
I have a friend who is being "leveraged out" in six months. In the meantime, she is training her replacements...a tech support staff from a firm in India that got the outsourcing contract.

What she has experienced to date was that the individuals appear to be sharp, hardworking, and reliable. Her only qualm is that they couldn't think "outside the box". So if a problem came up that didn't have a solution explicitly defined in their training, they had no means of addressing the problem.

Perhaps this is what Lebenz has experienced?

Most of the stuff I call about is component failures. Folks such as Dell have troubleshooting paths for any component. They have been doing it for well over a decade, after all. The problematic calls I've been through with Dell tech support in the last couple of years are due to the "tech" at Dell simply lacking the skill to even identify the problem. Skills come in 2 forms: technical ability, ability to communicate. A notable number of the folks in India I've talked with fail on both fronts. Why they are working in tech support? I can only imagine it's because management doesn't care beyond the dollars they save..... To make a simile, it's not at all unlike MB support in recent years......except MB doesn't have the luxury of hiding behind folks who barely speak English.

[Lebenz]

Originally posted by Zeitgeist
...I've worked on several research projects with Indians in the past. They were on the whole extremely nice, intelligent and motivated folks. I've also found that they've been using the funds generated from their casinos to build the health, social and education infrastructure, as well as business-generating capacity of their regions. They're good folks that I'd feel just fine exporting my business with again in the future...

Z, you been doing a little empirical “research” on how frequently the Muckleshoots use weighted dice, stacked decks? Or perhaps to research the tax free cigz and booze?

[Zeitgeist]

Originally posted by Lebenz
Z, you been doing a little empirical “research” on how frequently the Muckleshoots use weighted dice, stacked decks? Or perhaps to research the tax free cigz and booze?

...strictly scholarly stuff I can assure.

[Botnst]

'Outsourcing good for US economy'
RACHEL KONRAD

AP[ TUESDAY, MARCH 30, 2004 06:19:07 PM ]

SAN JOSE: Outsourcing white-collar jobs to low-wage countries such as India and China has thrown some Americans out of work, but a new report predicts that the trend will ultimately lower inflation, create jobs and boost productivity in the US.

The Information Technology Association of America, in a survey set for release Tuesday, acknowledges that the migration of tech jobs to low-paid foreigners has eliminated 104,000 American jobs so far, nearly 3 percent of the positions in the US tech industry.

Software engineers have been particularly hard hit. Researchers at Global Insight Inc., which prepared the report for the ITAA, predicted that demand for US software engineers would shrink through 2008.

But ITAA leaders emphasized that outsourcing has damaged the job market far less than the dot-com meltdown of early 2000, when Internet startups, telecom companies and other companies eliminated as many as 268,000 positions.

"The myth is that we've started this long decline into the midnight of the technology workforce," ITAA president Harris Miller said. "This report shows that, assuming the recovery continues, the number of IT jobs will actually increase."

[Botnst]

Makes sense to me, VA.