OUTSOURCING: GOOD or BAD

[kirylm]

Wanted to hear what people think about the Outsourcing: is it helping the economy? is it helping companies to produce better products and services? .. or is it the other way around?

 

[alain]

what kind of outsourcing? I have had good and bad experiences with IT outsourcing

 

[kirylm]

in general, even though for me IT outsourcing is most relevant. Can you share you 'good' experiences? Because i am dealing with it as well for the past 3 years, and my experiences were mostly 'bad'. Of course there are differences between different companies... just curious to hear yours.

 

[alain]

Good: As long as the task is trivial and you clearly detail what needs to be done for every case. It was great. We figure this out after we ran into problems when they didn't know what to do in different situations. I thought they could diagnose a problem but I was sadly mistaken so we used them just to monitor things. At another company we got really lucky and we got a great guy working in a project.

Bad: They lie, to your face. They tell you they know something and they don't. The promise all the time and never deliver. It isn't that they deliver late, no. They don't deliver. Usually zero domain knowledge. I got really frustrated and recommend not to oursource anything. This is the reason I haven't dealt with outsourcing for the last 5 year (thank god!).

BTW, it changes from country to country. The places I worked for outsourced mainly to three countries:

- Singapore: I dealt with a team of 3 people. They were very good. Great communication skills. Problem solvers and thinkers
- China: They were good for the most part as long as you didn't have to talk to them on the phone
- India: the worse by FAR. We dealt with 3 companies mainly Syntel, Tata and Wipro. We got good people out of Syntel after we decided to interview them personally and only hire jr consultants. Everytime we wanted a Sr person and they sent an "expert", it was a disaster.

 

[D C]

I would say Good and Bad as well. Good because it helps to create entrepreneurship which in turn drives the economy, but Bad because it sends domestic Labor cashflows to another country (albeit a smaller percentage).

 

[alain]

I would say Good and Bad as well. Good because it helps to create entrepreneurship which in turn drives the economy, but Bad because it sends domestic Labor cashflows to another country (albeit a smaller percentage).

This is all subjective. Have you dealt with outsourcing? What's your experience?

 

[KaiRu]

Wanted to hear what people think about the Outsourcing: is it helping the economy? is it helping companies to produce better products and services? .. or is it the other way around?

All above is just some humble opinion from my past observations.

I've been on both sides. The problem with outsourcing is that some companies don't understand how to deal with it. For them it's just the way to reduce costs but in reality it's a completely different way to run your business and there are so many ways to do it - from a simple staffing to a request for expertise.

The typical way of thinking:
1. Business process is crap in my company
2. I can use outsourcers or I need to spend some effor and $$$ to enhance the processes in my company (hire, fire, promote, close, open, integrate, decommit etc..)
3. Outsourcing looks cheaper. Lets try it.
4. Oh .. somehow things don't work me. I'm not quite sure why - is it because my company isn't mature enough to manage and iteract people from over the world (no documentation, no policies .. there is just nothing for successful outsourcing) or is it because outsourcer is crap.
5. I can't blame myself so ...

Of course outsourcers are not angels too and they have their own interest in how to get more $$$ from you. Therefore companies should consider outsourcing only if they are mature enough and cost cut is one the goals (not a single one). Other goals can be:
- entering another market
- diversification
- support can be closer to a clients
- you need tech specialists only once for a single task and you don't want to hire them forever
- you need some expertise for a short time from a specialists in this domain
- etc.

 

[Daniel Duffy]

In general, bad.

When you outsource manufacturing, design, R&D soon follow, is what I have seen, starting around the late 80's.

 

[kirylm]

I would say Good and Bad as well. Good because it helps to create entrepreneurship which in turn drives the economy, but Bad because it sends domestic Labor cashflows to another country (albeit a smaller percentage).

Create entrepreneurship? Meaning you have an idea, but when you want to implement it, you outsource?
You use cheap labor in one market to "save on costs", but then you sell your product "expensive" in another market?
How does this benefit the economy? On a small scale this might benefit you [owner of idea], on a larger scale it will benefit company's management elite.

 

[kirylm]

All above is just some humble opinion from my past observations.

Of course outsourcers are not angels too and they have their own interest in how to get more $$$ from you. Therefore companies should consider outsourcing only if they are mature enough and cost cut is one the goals (not a single one). Other goals can be:
- entering another market
- diversification
- support can be closer to a clients
- you need tech specialists only once for a single task and you don't want to hire them forever
- you need some expertise for a short time from a specialists in this domain
- etc.

i agree about entering new market, but i don't agree simply manufacturing in one market and selling in another

 

[KaiRu]

i agree about entering new market, but i don't agree simply manufacturing in one market and selling in another

I don't quite understand the bolded part - you don't agree with what exactly? That this schema exists, that it works or something else ?

 

[kirylm]

I don't quite understand the bolded part - you don't agree with what exactly? That this schema exists, that it works or something else ?

I have an idea for the product. I want to save on costs, so I outsource labor to, for example, Ukraine. Assuming this is something of use internationally, can you sell it for the same price in Ukraine as you sell it in the US? Most likely, no. This is because the entire price scale on products is different. So this looks kinda unfair to me, you use labor that is priced in one market, but price your product in another market. I think this should not be allowed. I mean, i know this is all tricky stuff.. and most likely this entire thing with "globalization" will stick around...

 

[bansalmohit]

I learned in my Macroeconomic 101 that outsourcing is a result of competitive advantage which is result of globalization and intense competition. hence it is good. The best and the cheapest should get the work done

 

[SYau]

Our company provides outsourcing for Human Resource (pension administration, etc) and it is profitable for my company because companies are looking to reduce work force and we provide a good, perhaps even better, alternative to what they have in house (our call center have extra redundancy). We save them money and they are (ususally) happy.

 

[Zeuge]

So this looks kinda unfair to me, you use labor that is priced in one market, but price your product in another market. I think this should not be allowed.

Without this "unfair" practice, the Western standard of living would be substantially lower. Sure, the market price of this overseas-manufactured good in the West is higher, but it is quite a bit lower than what it would be were it produced in the West. Use American labor to produce iPads, and suddenly they cost you $5,000+ each.

 

[bigbadwolf]

Without this "unfair" practice, the Western standard of living would be substantially lower. Sure, the market price of this overseas-manufactured good in the West is higher, but it is quite a bit lower than what it would be were it produced in the West. Use American labor to produce iPads, and suddenly they cost you $5,000+ each.

But then American labor might have the money to buy these products. It's no good if something that costs $100 on the local market because it's indigenously produced has its manufacture offshored and then sold for $80 on the local market if those who were previously buying it are now out of work. Something Henry Ford realised decades ago but which American companies seem not to care about anymore.

 

[D C]

This is all subjective. Have you dealt with outsourcing? What's your experience?

Yup, I've worked on a global team - saw an entire floor cut by 2/3 and jobs sent to B'ham and India. My experience was actually very good. Workers in Mumbai were very helpful, but I agree that they didn't ever say they "didn't know something"...which meant it always took longer to hear back from them.

 

[D C]

Create entrepreneurship? Meaning you have an idea, but when you want to implement it, you outsource?
You use cheap labor in one market to "save on costs", but then you sell your product "expensive" in another market?

I didn't say 'outsourcing creates entrepreneurship' I said it helps the process along. If you have an idea and no money, outsourcing for cheap labor can help your idea come to life.

On a small scale this might benefit you [owner of idea], on a larger scale it will benefit company's management elite.

Please explain.

 

[Zeuge]

It's no good if something that costs $100 on the local market because it's indigenously produced has its manufacture offshored and then sold for $80 on the local market if those who were previously buying it are now out of work.

There are always winners and losers. The people who formerly worked in the now-outsourced industry are hurt, but practically everyone else benefits. The net benefit to people outside that particular industry is usually far greater than the net loss to the people now unemployed. I would argue that as a society we have a duty to people who lose jobs due to outsourcing, because we are in a way benefiting at their expense.

 

[MSFHQ]

Outsourcing is good when you look at things from a global perspective. From a US or whatever nation is getting work take from, it is a bad thing. People need to realize that as countries develop and production shifts from unskilled to skilled, basic production will move to cheaper areas. The US has been changing its economy for the past 30+ years. Unfortunately, there will always be a group of people who ignore the information at their finger tips and then blame someone or something else when reality slaps them in the face.