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http://www.google.com/url?sa=t&source=web&cd=10&ved=0CEYQFjAJ&url=http%3A%2F%2Fwww.cids.ie%2FDocuments%2FHealthcare_The%2520Hidden%2520Costs%2520of%2520IT%2520O

by kls 16y ago

http://www.google.com/url?sa=t&source=web&cd=10&ved=0CEYQFjAJ&url=http%3A%2F%2Fwww.cids.ie%2FDocuments%2FHealthcare_The%2520Hidden%2520Costs%2520of%2520IT%2520Outsourcing%2520_%2520MIT%2520SLOAN.pdf&ei=LpMwTI2eIYH88Aat9PiZAw&usg=AFQjCNFu6yWBvDegZh8n-JuYfqNZdikEbQ&sig2=U8l9ytBpQFWGnEHEMLdRMA http://www.google.com/url?sa=t&source=web&cd=10&... The above is from MIT Sloan and pretty much sums up the reality of outsourcing. To do it right, it cost as much as onshore development. Outsourcing should be used to find quality people, as they are always in short supply, and not for cost cutting, because the reality is that it is not cheaper. There are also cultural issues to deal with. I was part of a project rescue for a Saudi Banking project, in which it was outsourced to the US. The lending rules where not clearly defined, because the fact that Islamic Law forbids usury. That is pretty much common sense in Islamic Nations. The US developers and Architects where having a hard time grasping the fee schedules and therefore, the project overran and failed. When I was brought on I documented every little detail whether common sense of not and then promptly outsourced the business rule development to Egypt. The project ended up costing 1 1/2 times the budget and that is a pretty familiar story with outsourcing. If macro concepts can be missed due to culture, it does not bode well for the micro ones. You see so much doom and gloom about outsourcing because that is the reality, backed up by countless documented cases, statistics and post mourtums. You hunch is wrong because it is anecdotal.

kranner 16y ago
I'm not sure how long ago this was. Islamic banking is a very well-established field now. http://en.wikipedia.org/wiki/Islamic_banking http://en.wikipedia.org/wiki/Islamic_banking
- kls 16y ago
  I think you are missing the point. US citizens do not, for the most part bank at Islamic banks. Concepts that are common sense to a general population (culture) can be completely foreign to another. This "tribal knowledge" is omitted many times because it is taken for granted that everybody know it.
  - kranner 16y ago
    But in the project you cite, wasn't knowledge of Islamic banking norms 'domain knowledge', rather than a cultural side-issue?
    - kls 16y ago
      No, there where details that where omitted by the Saudi business analyst because it was "common knowledge". For example lets take an ATM machine, it would be like detailing the system and forgetting to mention that the user inserts their bank card to begin. It would be easy to omit that very obvious first step, because everyone (at least in the US) knows that you inset you bank card to begin. I know this is extremely simplified, but the point is there are items that everyone takes for granted as common sense. Some of these common sense items a very cultural in nature.
plinkplonk 16y ago
"To do it right, it cost as much as onshore development. Outsourcing should be used to find quality people, as they are always in short supply, and not for cost cutting, because the reality is that it is not cheaper." This isn't quite true in my experience. You are absolutely right in saying that finding good people should be the primary focus of outsourcing but the fact remains that the cost of living for even a very good person varies quite bit across the world. I have lived in both the United States and in India, and I would charge significantly different rates if I were to take up an outsourcing project today from Bangalore vs from California, say. I know peopel who are outsourcing high quality Ruby On Rails work at 35-50$ hour to small teams of ex ThoughtWorkers (due disclosure: some of my ex colleagues) in Bangalore, who are very very good at what they do (just to give a specific example). They deliberately avoid bottom-of-the-barrel rates, but I'd be very surprised if even those rates were viable in San Fransisco. (Just to be clear I have no intention of doing this kind of work ever again - most outsourced work happens to be crap maintenance-of-terrible-codebases/braindead-cookie-cutter-work people in the West don't want to do. Cleaning up muck gets old very very fast)
- kls 16y ago
  I just linked to a document that says it is true. It is an scholarly article that has been peer reviewed. As well, the cost of living of a developer is irrelevant as documented in the paper. The additional overhead of hiring managers and technical / business experts offsets any reduction is cost due to cost of living that one perceives as a savings. These are the hidden costs that the papers speaks directly too. Sure you can, roll the dice on elance or one of the other freelancing board, work directly with a developer and hope that they get it right, but if a company don't hire project managers to ensure the project hits every micro-milestone and business analyst to document the requirements in extreme detail then that company significantly increases their risk profile. That is the crux of the issue, you get the development work for cheaper but you offset the savings with additional project management and analyst costs because outsourcing causes more oversight and management.

by kls 16y ago

kranner 16y ago

I'm not sure how long ago this was. Islamic banking is a very well-established field now. http://en.wikipedia.org/wiki/Islamic_banking http://en.wikipedia.org/wiki/Islamic_banking

kls 16y ago
I think you are missing the point. US citizens do not, for the most part bank at Islamic banks. Concepts that are common sense to a general population (culture) can be completely foreign to another. This "tribal knowledge" is omitted many times because it is taken for granted that everybody know it.
- kranner 16y ago
  But in the project you cite, wasn't knowledge of Islamic banking norms 'domain knowledge', rather than a cultural side-issue?
  - kls 16y ago
    No, there where details that where omitted by the Saudi business analyst because it was "common knowledge". For example lets take an ATM machine, it would be like detailing the system and forgetting to mention that the user inserts their bank card to begin. It would be easy to omit that very obvious first step, because everyone (at least in the US) knows that you inset you bank card to begin. I know this is extremely simplified, but the point is there are items that everyone takes for granted as common sense. Some of these common sense items a very cultural in nature.

plinkplonk 16y ago

"To do it right, it cost as much as onshore development. Outsourcing should be used to find quality people, as they are always in short supply, and not for cost cutting, because the reality is that it is not cheaper." This isn't quite true in my experience. You are absolutely right in saying that finding good people should be the primary focus of outsourcing but the fact remains that the cost of living for even a very good person varies quite bit across the world. I have lived in both the United States and in India, and I would charge significantly different rates if I were to take up an outsourcing project today from Bangalore vs from California, say. I know peopel who are outsourcing high quality Ruby On Rails work at 35-50$ hour to small teams of ex ThoughtWorkers (due disclosure: some of my ex colleagues) in Bangalore, who are very very good at what they do (just to give a specific example). They deliberately avoid bottom-of-the-barrel rates, but I'd be very surprised if even those rates were viable in San Fransisco. (Just to be clear I have no intention of doing this kind of work ever again - most outsourced work happens to be crap maintenance-of-terrible-codebases/braindead-cookie-cutter-work people in the West don't want to do. Cleaning up muck gets old very very fast)

kls 16y ago
I just linked to a document that says it is true. It is an scholarly article that has been peer reviewed. As well, the cost of living of a developer is irrelevant as documented in the paper. The additional overhead of hiring managers and technical / business experts offsets any reduction is cost due to cost of living that one perceives as a savings. These are the hidden costs that the papers speaks directly too. Sure you can, roll the dice on elance or one of the other freelancing board, work directly with a developer and hope that they get it right, but if a company don't hire project managers to ensure the project hits every micro-milestone and business analyst to document the requirements in extreme detail then that company significantly increases their risk profile. That is the crux of the issue, you get the development work for cheaper but you offset the savings with additional project management and analyst costs because outsourcing causes more oversight and management.