Andrew makes a lot of good points (as usual). Having been through a full scope inititiative, I don't disagree with any of them.
Unless I have overlooked it in this thread, we've missed another form of outsourcing. SaaS, cloud computing (fill in buzz word of the week). So people who use Postini are outsourcing just that piece. Many outsource BCP facilities. So that is another tier of outsourcing and one that doesn't have the stigma related to the word. Kevin On Wed, Oct 14, 2009 at 10:49 AM, Andrew S. Baker <[email protected]> wrote: > Congrats, Sherry. :) > > Let me attempt to provide you with some answers regarding different > outsourcing arrangements that I have seen or experienced. Please note that > some of these perceptions or observations do not bear out entirely as > planned in implementations, because many organizations simply outsource > their existing chaos, in which case both parties lose. > > > *What is the economic justification given for outsourcing? >> * > > > There are several economic justifications that can be given for > outsourcing. > > - Flat monthly costs vs variable costs > - Elimination of costs pertaining to training on new systems or > technologies > - Reduction or elimination of costs related to non-core processes > - Cost of staff, including people redundancy > > If an organization has not kept up on technologies relevant to their > industry, they will often find it more expensive to train existing staff and > get them up to speed on the new technologies before they can implement > them. Also, they may have escalating costs related to functions such as a > 24x7 help desk, where they would pay a lot less by outsourcing to someone > who can obtain far greater economies of scale. DataCenter hosting is one > form of outsourcing that is deemed very acceptable to all parties concerned, > and addresses economies of scale for power, bandwidth, cooling and space. > And for staff, in many cases. > > > *Where is the outsourcing taking place? (Obviously, I'm focusing on the >> IT field, specifically technical support)* >> > > There are many destinations for outsourcing. From the US perspective, > there are on-shore options, near-shore options (Mexico, Canada), and > off-shore (Eastern Europe, India, China). > > India is still the superpower in this category, but China and Eastern > Europe are looking to gain that status in the near-term. Various South > American countries are also vying for recognition here, even Costa Rica, > which is not really known for low staffing costs. > > If you look at Help Desk / Call Center support, the first cost benefit is > realized by not having to pay for each individual call center staffer (and, > hopefully, their backup). Also, infrastructure costs associated with the > call center, such as power, additional phone system or phone lines (or > phone system features), bandwidth, can be minimized. Costs associated > with training will go up, depending on what is turned over to the > outsourcer, but usually, these costs are seen as less than ongoing in-house > staff training. > > > *What types of jobs are these workers performing?* >> > > The following job functions are prevalent in outsourcing models: > > - Call Center / Help Desk > - Desktop Support (onsite or remote assistance) > - Systems & Networking Support (onsite or remote assistance) > - Application Development (remote) > - Network Security (local equipment, with remote monitoring/management) > - Systems Hosting (remote) > - Application Hosting (remote) > > Desktop and Systems Support tends to be near-shore more often than not, > particularly in smaller deals. In larger deals, all of it can be very > remote, with some local Desktop Support presence, usually from existing > staff that have been turned over to the outsourcer. > > > *What is the benefit to the business? To foreign workers?* >> > > The benefit to the business is cost stabilization. Deterministic costs are > the holy grail of every finance department. And it gives more flexibility > for ongoing pricing. There are less laws associated with altering a vendor > service contract than with terminating staff or messing around with employee > benefits. This is true even in "at will" employment scenarios. > > If done well, outsourcing can add new capabilities to an organization that > could not afford to pay for enough existing staff to become proficient with > that technology. And it allows an organization to pay for more staffing > redundancy than if they staffed locally. They contract to obtain year round > staffing at a particular level, and the vendor absorbs the costs of > vacations, sickness, training and other time off. > > Another option is when you're dealing with obsolete technology, and can't > find any employees that either know it or want to stick with it. That's a > good reason to outsource the whole thing if you cannot get rid of the > technology in question in a timely fashion. > > The benefits to foreign workers? That is less clear. For some, especially > in India and China, it can represent an opportunity for income that exceeds > the norm for their population. It can also give them skills needed to > compete if they come to the US with H1-B visas (or the equivalent for > Western Europe). Beyond that, I haven't seen any good material that > suggests what the benefits for foreign workers in an off-shore model. > > Just one note, to reiterate an earlier point -- In many complex outsourcing > arrangements, companies don't get the full ROI that they projected because > of the following items that I will just highlight... > > - They underestimate what work is being accomplished by the existing > staff, and contract for less than what they really need > - The outsourcer is not readily able to deal with the nuances of their > particular business, and some agility is lost, or requires additional costs > to remediate > - They outsource extreme chaos, which results in the outsourcer failing > to make the SLA or the outsourcer raising costs to compensate > - They underestimate the level of staff turnover at the outsourcer, > which can happen in the highly competitive Indian outsourcer industry > - They underestimate language and time barriers which make coordination > far more difficult > - They experience more turnover than expected from their former > in-house staff, and this undermines the initial knowledge transfer > > > There are actually times where outsourcing works, and where it makes sense > to consider or pursue, but all too often, greed and incompetence get in the > way. > > *ASB *(My XeeSM Profile) <http://xeesm.com/AndrewBaker> > *Providing Competitive Advantage through Effective IT Leadership* > > > > On Tue, Oct 13, 2009 at 8:57 PM, Sherry Abercrombie > <[email protected]>wrote: > >> Guys and gals, >> >> I've returned to college this fall after about 15 years to finally finish >> up a degree I started on about 25 years ago. One of my classes this >> semester is Macro Economics. Last night my professor gave us an essay >> question for a test next Monday that is potentially 50% or more of our test >> grade. The topic is on outsourcing and I wanted to toss this out for >> discussion, input, personal experiences etc etc. The questions I have to >> answer are: >> >> What is the economic justification given for outsourcing? >> Where is the outsourcing taking place? (Obviously, I'm focusing on the IT >> field, specifically technical support) >> What types of jobs are these workers performing? >> What is the benefit to the business? To foreign workers? >> >> I talked with my professor and told her what approach I wanted to take, >> from the end user perspective, and that I had experienced the tech support >> being outsourced. She liked that idea a lot. Obviously, I will be looking >> for other news articles to support my essay. What I'm looking for is >> thoughts, opinions, personal experiences from an end user perspective, has >> anyone here been outsourced? What was that like? I'm just taking an >> informal poll from a group of my peers that I know has had personal >> experience in some way with this subject. >> >> Try to keep it on topic, I did get Stu's OK before sending this, so a big >> Thanks Stu for the use of these lists to help with my exam. >> -- >> Sherry Abercrombie >> >> "Any sufficiently advanced technology is indistinguishable from magic." >> Arthur C. Clarke >> Sent from Haltom City, TX, United States >> >> >> >> >> >> > > > > > ~ Finally, powerful endpoint security that ISN'T a resource hog! ~ ~ <http://www.sunbeltsoftware.com/Business/VIPRE-Enterprise/> ~
