Posts Tagged ‘IT’

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So, I did a little research…

Definition: “Sourcing is the act through which work is contracted or delegated to an external or internal entity that could be physically located anywhere. Sourcing encompasses various in-sourcing and outsourcing arrangements such as offshore outsourcing, captive offshoring, nearshoring and onshoring.”

Ilan Oshiri and Julia Kotlarsky, 2009

We love a quiet inoffensive family man come rebel hero story, don’t we? 

Bob was a model employee, the star programmer at an American infrastructure company. His resourcefulness and social fetishes should have blessed him with both a pay rise and a swift elevation to senior management – but Bob got the sack – he outsourced his six-figure salary job to a Chinese software company for a fifth of his annual pay.

So… Where’s the moral upshot? Are all efforts not equal? Was Bob not right to attain a nice, clean division of labour, a creative and lucrative variation? Was his employer right to sack him on the grounds of salary arbitrage? Were they in-fact both right? Does innovative thinking pay, or does it not?

So many questions… Here is the Utopian, opinion-based answer: Tim Ferriss and his book: ‘The Four-Hour Workweek’, an anthology that promises near-infinite leisure time by checking e-mail once daily and outsourcing chores to “virtual assistants” based in ‘the world’s workshop’, China/Vietnam/the Philippines/#hungrypoliteExcel-proficientIndianarmys.

‘The Four-Hour Workweek’ supports Oscar Wilde’s philosophy: “Anyone who lives within their means suffers from a lack of imagination.” Attempting to infuse the world with knowledge of ‘life design’; the idea that rather than shrinking from the world that you live in, you can avail yourself of the labours of commerce by harnessing mobility facility and outsourcing.

There are people that do Bob’s tendentious job for a living. Bob isn’t the first, nor will he be the last to attempt the absurdly practicable. By the end of 2009, IT outsourcing revenues exceeded US$ 250 billion. The IT racket weren’t the first with the wherewithal for loot, business processing outsourcing revenues were more than US$ 140 billion in the same year with a 2012 growth rate up 23%.

The Handbook of Global Outsourcing and Offshoring by Ilan Oshiri and Julia Kotlarsky is an encyclopedic ledger of outsourcing and offshoring facts, stats and outsourcing/offshoring syndicates – a dutiful naming and shaming of the most dexterouscompanies on the planet.

How do they do it? Well, according to Ilan Oshiri and Julia Kotlarsky – they “assess the impacts of global sourcing on business;” then, they; “assess the risks and benefits for the firm from engaging in sourcing activities;” following that, they say it is important to; “devise a plan to outsource a system or a process from a client viewpoint;” and another plan for the business of offering services to the vendor, then to ensure sustainability in each outsourcing relationship.

It isn’t so cut and dry according to the IT Outsourcing Statistics 2012/2013 for the US and Canada: Outsourcing application development still costs more for 46%, about the same for 29%, and less for 25% of organisations compared to performing the same work in-house.  So, is it about creativity?

Let’s have a look at the practicalities of outsourcing: How do suppliers supposedly innovate, improve quality and cut costs for large corporate enterprises? If they do, how do we measure it? By regular reviews of the bottom line – or – by accepting industry outsourcing at face value?

The cost experience success rate is pretty low. Only 54% of organisations experience the same or lower costs with outsourcing than when performing the same function in-house.

As to service experience; organisations that outsource application development find that the outsourcing service experience is worse for 22%, the same for 58%, and better for 19% of organisations than when they are performing the same service in-house, making the percentage of organisations experiencing the same or better service with outsourcing application development at a mere 77%.

Worth the risk? It depends on your sector: Manufacturers have a 68% outsource rate. Government and education organisations are average at 64%; financial services organisations sit at around 57% and professional, technical and health services stand at 55%, which is slightly below average. It all depends on size of course, because small and midsize organisations are found to outsource at lower frequencies than large organisations.

As we learn from past mistakes, outsourcing services seems to be the way forward in 2013. It isn’t always the ideal option and can cause conflict if entered into without knowledge of the risks. Companies often squeeze their force contractors into cutting corners; sometimes vendors overpromise, but fail to deliver and it’s common for poorly written contracts to cause trade disputes.

Eight years ago, Boeing decided to hire contractors to do most of the work in the manufacturing of a new 787 Dreamliner. Some of the parts did not fit together and some of the sub-contractors failed to deliver their components on time.

The maturation of outsourcing, globalisation, an abundance of offshore providers and the improving economy are creating more opportunities for organisations of all sizes. Small and midsize businesses are now able to leverage outside service providers. Companies are forming relationships with several outsourcers and signing shorter contracts than they would have done a few years ago.

The Isle of Man Government document ‘Guidance Note on Outsourcing – 2012 review final’ outlines warnings to businesses considering extending their outsource workforce and advocates that licence holders conduct functions in house, so far as is practicable.

“…outsourcing brings a number of risks, which the business must manage. These include:

  • Reliance on the provider, including loss of in-house capability and the need to have a recovery plan in the event of a breakdown of the outsourcing relationship;
  • Loss of control of data and consequent risks to data security;
  • Remoteness of the outsourced function from decision making; and
  • Potential difficulties in monitoring and intervening in standards of service.”

(Guidance Note on Outsourcing – 2012 review final, P. 2)

* This report on outsourcing was outsourced to an Island journalist, who isn’t micromanaged by her publisher.

 “The future is here. It’s just not widely distributed yet.” – William Gibson, author of “Neuromancer”; coined term “cyberspace” in 1984.