I’ve been seeing a lot of articles recently on outsourcing/insourcing, offshoring/onshoring. There hasn’t been a great deal other than anecdotes and speculative thinking to most of the articles but there is one thought that I’d like to offer on the subject. Moving functions out-of-house and bringing them in-house require different management skills and at least in my experience one team having both sets of skills is rare, indeed.
I’m not a bit surprised if, for example, Ford Motor Company (one of the companies mentioned as starting to onshore some functions that were offshored a half dozen years ago or more) finds that it’s not saving nearly as much money as it thought it would by moving IT, again for example, to India. My off-hand guess is that they didn’t include the additional costs of putting people in India to monitor the situation and report back to Detroit into their calculations when they decided to off-shore in the first place.
Another thing that’s struck me in reading these articles is that labor doesn’t have perfect elasticity. You’d think that people would know that but apparently not.
An anecdote. My wife’s boss’s laptop gave up the ghost in the machine. So she called support. The very nice young gentleman in Mumbai said, “No problem. We can have somebody at your office on July 4 at 11:00 AM.”…. Wife: “I need to speak to your supervisor.” “OK.” Upshot–the wife got the direct number of the local laptop repair folks. When she called them, they, of course, arranged an appropriate time. My wife mentioned the July 4 thing. The lady she was speaking to told her stuff like that happens all the time.
When I was doing tech support (phone) for a major computer manufacturer, the company decided to outsource (is Nova Scotia considered off-shore?) all the hardware tech support. Folks in my area, software, thought this was a very bad thing to do. A lot of the problems that presented as software were really hardware, and vice versa. But with experienced HW engineers at hand, we could just go over and talk the problem through if we suspected hardware. Conversely, they could come over and talk about a problem they were dealing with if they suspected software. All that went by the boards (so to speak) when the outsourcing took place. The standard way of handling a problem under the new regime, for the new HW engineers, was just to throw hardware at it. I, of course, never saw any cost/benefit things, but I never got over the feeling that the company had done a disservice to its customers (not to mention the fired HW engineers).