back to article IT JOB OUTSOURCING: Will it ever END?

HL Mencken once told us that in a democracy the electorate should get what they voted for – and good and hard too. So, on that basis, I present to you a piece on outsourcing, as requested by one Gordon 10. The commenter in question wrote: What would be really nice is [an article] on the race to the bottom on labour …

  1. Anonymous Coward
    Anonymous Coward

    Relative

    "**Running a global monopoly is actually less profitable than you might think it would be."

    So we talking Alan Sugar rich as opposed to Ellison rich then?

    :)

    1. Tim Worstal

      Re: Relative

      I'd have made more working for Sugar as an apprentice....

      The global marketplace, turnover in total, was around $2 million a year back then. Sure, there was a trading margin but not a huge one.

      1. I ain't Spartacus Gold badge
        Happy

        Re: Relative

        Tim,

        Couldn't you at least have had a statue of yourself made out of scandium...

        1. Tim Worstal

          Re: Relative

          At $8,000 a kg for the metal it would have to be a pretty small statue. And Sc oxidises quickly (ie, minutes and hours) on exposure to atmosphere. Turns a very pretty shade of pink in fact. So it would not only be a very small statue, it would be one extant for a brief period of time, too.

          1. Anonymous Coward
            Pint

            Re: Relative

            Well, given that, you could still make one, but it would be performance art.

          2. I ain't Spartacus Gold badge

            Re: Relative

            Tim,

            I don't see the problem with oxidisation. So your statue turns a nice pink colour. Lovely.

            Obviously the price is a bit more of an issue. But if you're going to be the global scandium monopolist, then you need to make a dramatic gesture. Lowering the price might create more demand, so it's up to you to go and find more sources of the stuff. Then turn it into a nice statue, laugh your diabolical laugh... Profit.

          3. Mayhem

            Re: Relative

            Turns a very pretty shade of pink in fact

            Typical english - gets sunburn the moment you put it outside!

        2. John Brown (no body) Silver badge
          Coat

          Re: Relative

          "a statue of yourself made out of scandium."

          I thought they used that to make trucks.

  2. Cipher
    Pint

    After last week...

    ...wherein attacks and attempts to pigeonhole your politics played out in the " About that self-professed rational liberalism" thread, you deftly pivoted this week with a " plutocratic bloodsucking capitalist bastards" reference or two...

    Well played Mr. Worstall, well played...

    1. Tim Worstal

      Re: After last week...

      Well, quite. Us rational liberals aren't particularly in favour of capitalists nor even of capitalism. We're hugely, massively, in favour of markets: largely because they're the best ways of limiting the capitalists bastard's attempt to gouge us.

      1. John Sanders
        Facepalm

        Re: After last week...

        You keep using that word. I do not think it means what you think it means.

        1. I ain't Spartacus Gold badge
          Facepalm

          Re: After last week...

          John Sanders,

          Which word?

        2. Cipher
          FAIL

          Re: After last week...

          John Sanders:

          Undefined parameter, does not parse...

  3. Ironclad

    Perhaps sooner for IT.

    Those same companies who have outsourced to cheaper locations are now the ones bleating about a skills shortage in the UK

    http://www.theregister.co.uk/2014/09/05/it_engineering_skills_shortage_uk/

    To some extent they are reaping the results of outsourcing. The move to offshore entry level coding tasks to cheaper locations reduces vacancies in the UK for the IT grads and others that will become the highly skilled engineers of the future.

    With the tightening of visa regulations on temporary workers in the UK, perhaps the realisation will dawn that maintaining at least some development in the UK will provide skilled engineers further down the line.

    1. HollyHopDrive

      Re: Perhaps sooner for IT.

      Or they will carry on regardless. I am currently contracting for a very large bank who are continuing their relentless task of moving all tech work off shore. Apparently its been a huge success and lots of back patting on a good job well done. Let's keep going.

      Doesn't explain why I've got a contract with a department doing tech work off radar because of repeatedly failed attempts by the off shore tech boys. So far I've achieved more in a few months than a whole team of offshorians for a year. (Not blowing my own trumpet but its really not a high bar to jump)

      Problem is success is measured in money saved not projects delivered or lost opportunity.

      As I've said before it costs a lot less to deliver nothing.

      1. Novex

        Re: Perhaps sooner for IT.

        It doesn't always cost more to outsource overseas. A small local team on local daily rates can produce a better result faster and cheaper, when the outsource option is going to a larger supplier with a set-in-stone process in place that they don't want to change, and so charge a bomb and a half for development that doesn't fit their development model. A case of the tail wagging the dog.

      2. LucreLout

        Re: Perhaps sooner for IT.

        Problem is success is measured in money saved not projects delivered or lost opportunity.

        ^^^^ This, so very much this.

        My CEO has convinced himself that cost is the battelground for the next decade. The problem with that, of course, is with everyone targetting a higher RoE by eliminating costs, growth is flatlining or going into reverse while we persue efficiency.

        Efficiency is good. I like it a lot. But on a macro economic scale, unless someone goes for growth, the whole world stagnates. Someone has to pay for the excess labour that now sit idle, needing housing, feeding etc etc.

        1. Anonymous Coward
          Anonymous Coward

          Re: Perhaps sooner for IT.

          This is a common problem in British companies, I refer to it as "board room fairy tales", basically it always go's that there is a magical company in a land far far away where everyone is an IT guru and will work for the same wage as the cleaner.

          Problem is most outsourcers are chancers, always have been, in the 90's we had some in the UK, and the staff they would supply appeared to have come from the local labour exchange and knew next to nothing about IT, then the year 2000 bug stuff came up and companies turned to India to take up the slack, thats when they realised you could hire dirt cheap out there so the Indian outsourcing companies grew and prospered.

          Every country has a skill pyramid, the guys at the top get poached by the large IT companies who have spotters at Universities, you never see these guys, the brighter ones down the scale are also smart enough to go abroad and get work under there own steam which means the average outsourcer (who is also looking to pay peanuts offshore) gets whats left.

          1. Anonymous Coward
            Anonymous Coward

            Re: Perhaps sooner for IT.

            Also meant to say...(sorry got dragged out for a pint) these projects are usually propped up by some hard pressed middle manager using his much reduced UK staff, who will fix or in many cases totally rewite the crap the totally green graduate (or alleged graduate) either on-shored or off-shored outsource staff produced in order to make this stuff work, the CIO genius will then move on with a large bonus for delivering with cost savings to do the same at some other poor unsuspecting company, having only ever heard "Yes sir it's all working perfectly, no problems at all"

    2. LucreLout

      Re: Perhaps sooner for IT.

      Those same companies who have outsourced to cheaper locations are now the ones bleating about a skills shortage in the UK

      Agreed. Funny how everyone in IT saw that coming but nobody in accounts or management apparently did.

      With the tightening of visa regulations on temporary workers in the UK, perhaps the realisation will dawn that maintaining at least some development in the UK will provide skilled engineers further down the line.

      Sadly, it won't. As a colleague of mine (If you're reading this I sit to your left) is fond of saying "If you stand the empire state building next to the grand canyon, both look flat from high enough up". From the point of view of those high enough up the corporate ladder to influence the decision to outsource, it's been a screaming success, because they simply don't see the carnage that ensues on the ground floor, at the coalface.

    3. Anonymous Coward
      Anonymous Coward

      Re: Perhaps sooner for IT.

      Ah, the mythical skills shortage in IT

      The problem is that a huge number of companies are incredibly AGEIST. Anyone over 40 is unemployable despite the years of experience they have builtup

      Anyone over 60 is in the 'You can't be serious' bracket. That includes me and I don't want career progressino and all that crap yet you still have to go through it and tick the little boxes (provided you can get a job that is)

      Roll on retirement that what I say.

      Anon just in case a have to get another job before I retire.

      1. Anonymous Coward
        Anonymous Coward

        Re: Perhaps sooner for IT.

        The problem is that a huge number of companies are incredibly AGEIST. Anyone over 40 is unemployable despite the years of experience they have builtup

        I'm just about to join that camp. Still have a job with a large employer, but the simple fact is that I look older than I am, a lot older. And I'm right on the tip of turning 40.

        Being able to retrain into new skills or hold my own at a technical test have never really worried me, as I can train / practice / already know how to do those things. What I can't do, is get younger (no thanks - I'm really not starting dying my hair).

        Anyone over 60 is in the 'You can't be serious' bracket. That includes me and I don't want career progressino and all that crap yet you still have to go through it and tick the little boxes (provided you can get a job that is)

        Just the thought of that fills me with dread. Funny how age of IT staff isn't one of the diversity boxes these corporates insist upon ticking. I had planned to retire by 50, but successive governments have raided my pension and changed the law such that I must now work an extra 7 years, with nobody providing input on how I should be expected to make that happen with all the offshoring and agism that's rife.

        1. I ain't Spartacus Gold badge

          Re: Perhaps sooner for IT.

          I had planned to retire by 50, but successive governments have raided my pension and changed the law such that I must now work an extra 7 years, with nobody providing input on how I should be expected to make that happen with all the offshoring and agism that's rife.

          Remember that social change is slow. When I was born in the early 70s, the average bloke was expected to live to about 76. So they'd be retired for 10 years. Now, forty years later, the average bloke from my cohort is expected to reach their mid 90s. That's an extra twenty years of life expectancy just magically appeared. And the expected pension has gone from 10 to 30 years!

          Society just isn't good at coping with massively disruptive changes like this. And people don't want politicians who say, "you're going to have to work 10-15 years longer or double your pension savings". They want politicians who are going to pay for the pensions they feel they've earned.

          It's going to be very difficult to earn enough in a 45 year career to pay for a pension that's getting increasingly close to the same length of time. But we all grew up with the expectations that our parents' generation had about life. And so we have struggled to change what we grew up "knowing" about when we should retire, and when people get "old". Hence we still seem to be stuck with this bizarre ageism, at the same time that we're all thinking we're going to have to work until we're older, and we've supposedly got shortages of young people to keep the economy running. The obvious answer being employ and train people who are older, as they're going to live, and be healthy, longer.

          How long until society catches up? Attitudes have barely changed in my experience. Yet these demographic changes are huge. I guess it's because people don't talk about this sort of long-term stuff much.

          1. a pressbutton

            Re: Perhaps sooner for IT.

            it isn't difficult, if you want a pension for about the same amount of time as you earn that is about the same as your (post contribution salary) , you just have to save about half your salary for the whole of your life.

            I don't know anyone who is doing this.

            1. Anonymous Coward
              Anonymous Coward

              Tragedy of the commons

              Even if it was conclusively proven to everyone's satisfaction that offshoring lower skilled IT work removes the ladder by which local lower skilled IT workers learn on the job and eventually become higher skilled IT workers, it wouldn't stop offshoring.

              Every company acting in their own self interest would continue to offshore if they believe it saves them money, because the benefit from a larger pool of higher skilled IT workers in the future don't accrue exclusively to them, but to all companies in their country. In fact, having spent less due to offshoring, their competitors could afford to outbid them for the talents of their (formerly) lower skilled workers when they become higher skilled!

            2. J.G.Harston Silver badge

              Re: Perhaps sooner for IT.

              In my last long-term full-time job I was putting 25% of my income into my pension, in the face of everybody else putting 6% in theirs. I could only presume they were only planning to live for one year when retired for every 16 years they'd worked.

          2. J.G.Harston Silver badge

            Re: Perhaps sooner for IT.

            "It's going to be very difficult to earn enough in a 45 year career to pay for a pension"

            Especially when people are only prepared to get off their arses and actually pay you to work for only 15 of those 45 years.

          3. Denarius
            Meh

            Re: Perhaps sooner for IT.

            <tin hat>. Why do you think ebola has become popular ? And pensions and health care under bean counter attack while the top yourself now enthusiasts are increasing in stridency and publicity? Somewhere, some think tank decided upping death rate was a good thing. With the OMG, we all gonna die/terrorists are coming/environmental collapse/Carrington event Mk2/FUD of week, a few more people will be scared into dying, or eventually welcome some bureaucratic organisation to arrange it. It all fits the pattern !! Why not just bring back smoking ads for cigarettes with asbestos filters.<\tin hat>

            I!Spartacus final para seems right. The expectations about aging have changed in some areas, but not in employment capabilities. I have noticed agism disguised as efficiency in my IT work, but also that those who can handle contracting seem to have bad patches but mostly do OK to very well. There needs to be changes in working life expectations, coupled with a change in expectations. Simplest solution might simply be to mandate all HR staff be over 65.

    4. Tom 38

      Re: Perhaps sooner for IT.

      Those same companies who have outsourced to cheaper locations are now the ones bleating about a skills shortage in the UK

      There is not a skills shortage in IT - this is the biggest load of bollocks ever sent up the flagpole. That article asked a bunch of C-levels whether they had problems attracting and retaining staff of sufficient skills, and they all said they did.

      This does not mean there is a "skills shortage". They can't attract people of the requisite skill because they don't pay enough, and whenever they hire someone incompetent and make them competent, they aren't paying enough for that competency and so the employee goes somewhere else where they are valued.

      There is no problem with finding people with the right skills, you just have to pay them appropriately.

      1. Anonymous Coward
        Anonymous Coward

        Re: Perhaps sooner for IT.

        I agree. It ought to be mandatory in a news article when an employers organisation bleats about a skills shortage to point out that what they really mean is "We can't get anyone to do the job for the measly salary we pay".

        You'd have thought that companies - who deal with markets and supply and demand and price EVERY DAY - would have made the simple mental leap from 'We can't find anyone who will do X for price Y' to 'Let's pay more than Y'.

      2. Anonymous Coward
        Anonymous Coward

        Re: Perhaps sooner for IT.

        Tom 38 wrote:

        "There is no problem with finding people with the right skills, you just have to pay them appropriately."

        ^^^^^^ So very much this.

        I jumped ship from my old employer after many years, to go contracting. I've been doing that now for the last four or five years yet still I get almost daily offers of permanent employment doing exactly what I do today for less than 1/3 of the salary I was earning ten years ago.

        Needless to say ... I think I'll be contracting for many, many more years at this rate.

    5. Anonymous Coward
      Anonymous Coward

      Re: Perhaps sooner for IT.

      They've been bleating about a skills shortage for decades.

  4. Anonymous Coward
    Anonymous Coward

    'It's obvious that we should split some work with people from outside our household, outside the village... but there's no obvious point short of the entirety of humanity at which we should stop doing so.'

    I wouldn't argue that there's an 'obvious point short of the entirety of humanity' but I do think that this issue is modellable in the same way any other macroeconomic problem is (ie. we can try and kid ourselves that we understand before reality shows us different).

    Weighed against the measurable benefits of specialisation I think the costs fall into three broad categories:

    1) Supply insecurity

    whatever you think of the common agriculatural policy and the propping up by most countries of their national defence industries the basic theoretical rationale is to ensure that some capabilities are at hand if a war breaks out or a source of supply (like the glue factory for DRAM) suffers a shock.

    2) Transport costs

    on an overall level it's somewhat inefficient to get all of our manufactured stuff boated over from China, but the inefficiency is masked by the artificial cost differences caused by national wealth and employment standards legislation. I'd think someone could knock up a model on how the benefits of specialisation are balanced by the costs of transportation using the same kind of model that decides how many airport hubs or fried chicken restaurants we should have.

    3) Information assyemetry

    Extreme specialisation doesn't just create the risk of a supply shock, it also creates the risk that the specialists might not have your best interest at heart. Having access to enough of the right knowledge/oversight to keep your specialists honest gets more expensive and complicated the more specialised an economy becomes (with exotic derivatives as the most recent and probably the most disruptive example).

    I envisage a model in which greater specialisation is countered by increasing costs from the 3 factors above until an inflection point is reached at which more specialisation is an overall cost rather than benefit. I wouldn't have a clue where to start doing that, but it doesn't feel more difficult than trying to predict the weather or the UK's growth next quarter.

    Separately, the idea that by 2090 or so (or at any point) wealth differences will balance themselves doesn't seem plausible.

    Although our economic growth has got less resource intensive over time and there is genuine growth in the efficiency with which we use fossil fuels and minerals in advanced economies I think the quantity and type of growth which would be required to get countries like Mongolia (for eg.) from where they are even to where China is now (which remain a ways off the western expectation) would put such a strain on those primary resources that prices would trend upwards and act as a drag on living standards that no technological advances could keep pace with.

    Obviously that could cause living standards to level out at a standard below the west now enjoys through the above method, but I think we'd see wars and other shocks which stall globalisation before we saw that process progress too far. Bright and energetic people in poor countries doing the work that used to be done by less bright or less energetic people in rich countries has been a big driver for growth, but it's partly been maintained by the fiction Japan and then China created through lending vast sums back to the west to prop up living standards. That's created an imbalance that's gradually starting to be noticed by people whose pay is going up more slowly than their cost of living.

    1. I ain't Spartacus Gold badge

      Remember the caveat on equalisation was that it would be more like pre-industrial revolution equality. Where no part of the world was more than say 5 times better off than any other. As opposed to the 50 times that happened over the preceeding couple of centuries.

      This rought equality might mean the average wage in every country being no lower than say $5k - $10k, in today's prices. Which is achieveable much more easily than getting every country in the world up to Western standards of living. That's what, Western living standards from the 50s and 60s?

      At which point transport and set-up costs come into things at least as much as wage costs. But specialisation is likely to happen, at least in some industries. Take Silicon Valley for example. Wages can be incredibly high there, even compared to just moving down the road within California, or to another state. But there's an infrastructure of universities, lawyers, venture capitalists and specialist services. Plus people who've done it before, and an expectation that you can start your own company. Or London and insurance. Or Malaysia and hard disk manufacture.

      It doesn't mean you'll necessarily end up with just one place in the whole world where an industry specialises. But it might be just a few areas, and so everyone else will outsource to one of those.

    2. Chris Miller

      Transport costs

      The biggest (and rather undersung) revolution in the last 50 years of doing stuff by manipulating atoms rather than bits, has been the plummeting cost of bulk transport. You might be amazed (though you really shouldn't be, if you think about it) at the actual cost of shipping a container full of (say) plastic ducks from China to Europe. This also applies to bulk transport of heavier and less costly commodities such as coal - which is essentially why there are no deep mines left in Western Europe (assuming you don't count Poland).

      1. Anonymous Coward
        Anonymous Coward

        Re: Transport costs

        "on an overall level it's somewhat inefficient to get all of our manufactured stuff boated over from China"

        Container shipping has made long distance bulk shipping very economical. The biggest part of the cost now is the "last mile" local delivery.

      2. Anonymous Coward
        Anonymous Coward

        Re: Transport costs

        It's true, and if transport costs weren't a small part of the equation then globalisation would be patchier and slower and we'd have fewer plastic ducks.

        I am interested, though, to know how far the benefits of specialism between two otherwise equal economies would justify transport costs and how far globalisation is driven by political environment arbitrage. If the latter plays a big role then that feels like an inefficiency at the world economy level (not that anyone who matters would care).

        1. I ain't Spartacus Gold badge

          Re: Transport costs

          Remember that Germany is the world's second biggest exporter of stuff, and yet has some of the highest environmental and employment standards.

          I suspect that economies of scale and the network effects of having an industry in once place, and therefore support services, hit the law of diminishing returns at a certain point. So any reasonably sized industry is able to have more than one base of operations, without much loss in efficiency.

          The relevant factors are changing so fast that it's hard to keep track. Cost of dealing with difficult governments, wages, transport, environmental standards, availability of sufficiently educated staff etc.

          Remember though that not everything is transported. People always sneer at the services sector. I guess because they think of waiters and call centres. But services can also be incredibly high value. I speak to building design people in the Middle East all the time, even though our company is based in South East England. This is because most of their architecture and building engineering is done by British and American companies. They've even outsoursed the building regulations. I don't think the Saudis or UAE even bother with building regs, they simply specify on the contract that the building conform to US or UK regs, depending on the company that gets the job. To my eternal shame, I did some of the design for one the Eurovision venues...

    3. John Sanders
      Mushroom

      You make one one terrible mistake

      ""that no technological advances could keep pace with.""

      70 years is a way too-long period of time to predict what would happen.

      I would not bet against human ingenuity.

      Plenty of times it was predicted in the past that we would perish or will not be able to produce enough for everybody.

      Enough of that old tired argument.

      1. Bernard

        Re: You make one one terrible mistake

        Hmm, I'm certainly not claiming that human ingenuity is done or that everything is downhill from here. You're right that those sentiments are kind of a secular version of the 'end of the world is nigh' thinking and are consistently wrong.

        However, another common error is to see short-term and narrow trends and project their general equivalent into the future at a similar rate. Lots of people thought that we'd be colonising mars by now and that the end of the Cold War meant a triumph of liberal democracy as well as the Dow 36000 and 'New economic paradigm' claims made during the first dot com bubble.

        Similarly it's worth noting that the dramatic gains in food productivity haven't eliminated hunger but allowed the population to expand until a proportion of the much larger group are still living subsistence lifestyles or worse. The idea that human ingenuity will not only maintain current growth to support a population predicted to peak at 9 billion but also accelerate and even out the proceeds of that growth so that everyone is living a western lifestyle looks too much of a stretch to me.

        1. Denarius
          IT Angle

          Re: You make one one terrible mistake

          @Bernard. Possibly, but we are at a unique time in whats left of human history. Assuming the future at least resembles the present (for sake of argument) it seems that natural population increase will level off due to rising living standards, which seem to be the most effective voluntary birth control developed yet. I know this has been disputed, but at no time in history have population increases trended down and become negative in many developed countries without a Maunder Minimum, seasoned with a plague or two and the next round of barbarian invasions. In short, a global good standard of living that is sustainable seems possible if energy costs are not made obscenely expensive.What does this mean for networking and computers ? The 1950s with Jetsons type 3D TV and video phones managed by an Orwellian Staasi ?

  5. Brewster's Angle Grinder Silver badge

    If robot factories becomes more efficient than human labour, then convergence will never happen. And I'd expect that would happen sooner than 2080 (some commentards have suggested we're already at that point).

    1. monkeyfish

      The counter argument to this is that it is much more difficult and expensive to build a machine to churn out something new than it is to get a person to build something new. Since the design of our tat has to change constantly in order that we buy the new tat instead of keeping the old tat, it still cheaper to get humans to do it. Even if you say that 3D printing will spit it all out, someone is still going to need to assemble all the pieces together, and that someone will be in the poorest/cheapest place possible.

      1. LucreLout

        The counter argument to this is that it is much more difficult and expensive to build a machine to churn out something new than it is to get a person to build something new.

        I agree with that, for now. What happens when Google or one of the others cracks AI proper though? No reason it can't churn out ebndless permutations of a concept, or even create new concepts entirely. Best case you need a panel of human clicking voting buttons on an endless product parade of sh*t they might like to buy.

        The problem isn't what to do with people when you've replaced them all with machines. The problem is what will the people replaced by machines do when they outnumber those that haven't? A quantum leap forward, skipping over the transition from competition for resources to post-scarcity of everything, might end peacefully, but it is about as likely to happen as me being offered a 3-way with Kylie Minogue and Nicole Kidman.

      2. Brewster's Angle Grinder Silver badge

        "...someone is still going to need to assemble all the pieces together...."

        We've had assembly line robots for years. The topish google link (no affiliation) gushes about them:

        "Assembly is an essential industrial task - one that robots are well-suited to perform. Not only do robots possess the precision, tirelessness, consistency, and speed necessary for work on an assembly line, but used robots are extremely affordable....Assembly line robots save workers from drudgery and repetitive movement injury/fatigue. With used robots working the assembly lines, companies can elevate their workers to more challenging positions. Robots provide a dependable, quick production force that works without wasting product or taking breaks. This saves money and time - generating even greater ROI....Today's assembly lines handle a variety of different products and short runs, requiring a lot of flexibility. Robots meet these challenges with vision technology and quick reprogramming capabilities."

  6. Anonymous Coward
    Anonymous Coward

    Has anyone here ever known an IT Outsourcing project to go well?

    By 'well' I mean the project saves money over a period greater than one financial year, frees up the right people to do the right work, and provides an obvious increase in quality and delivery rate. I don't mean 'well' as in managers getting big bonuses and indulging in mutual back-slapping whilst the company slides into oblivion.

    1. Anonymous Coward
      Anonymous Coward

      No AC, I haven't heard of one, but then the problem is your definitions. The people like you or I that share your first definition don't get to influence the offshoring. The people that do get to influence it use your second definition of success.

      Given the government told my generation that IT was the future, that we should study it, we should work in it, and all would be well. Forget about ships, or coal. Forget about welding cars together. Do this instead.... Well, yeah, I did. So where's the backstop? How much longer can things decay before the government and regulators enforce a certain amount of onshore hiring for critical industries - I'm looking at you RBS, we all know the computer that snafu'd was in the UK, but the offshorian fecking it up wasn't, which is why you, and by extension we, had a problem.

    2. Anonymous Coward
      Anonymous Coward

      It depends how narrowly you cast your net.

      I've seen lots of smaller organisations outsource non-core IT stuff like desktop and server management, email and application support pretty successfully. The owner is usually the business manager and he knows exactly how much hassle he's prepared to put up with to keep costs down and so hires and monitors his IT firm accordingly.

      I've also seen lots of larger organisations outsource single applications or straightforward measurable tasks like desktop support. The success here usually depends on how well responsibility is aligned with power. If the manager who decides on the scope of works and the vendor bears no responsibility for the results then things usually go badly. If things are well aligned then divesting non-core tasks usually yields modest benefits.

      If you're just talking about the big bang 'let's ship the whole IT back office to IBM' type outsource then the risks are much higher, though the principle is the same. Companies and executives that want outsourcing to yield immediate and giant cost savings are more or less setting themselves up for failure. Clever and cynical executives take the big bonus then run before things go bad. Stupid ones bask in the short-term glory and then throw mud at the staff they still have. Companies that go in with their eyes open and seek realistic gains with a sensible balancing of risk and reward with the outsourcer frequently see a sensible relationship build, and a lot of firms for whom IT isn't core have been effectively outsourcing for years without disaster striking or rivals overtaking them (the regulated utilities, large retailers etc.).

      If the bad or poorly incentivised executives who screw up their firms by outsourcing weren't able to do that, they'd be screwing up the firm by hiring and promoting the wrong employees and setting up the wrong processes internally, so outsourcing per se is neither a panacea to cut costs nor a monster that always screws up organisations.

    3. Tim Worstal

      Depends

      what you mean by outsourcing. Strictly speaking I'd define having an IT department as outsourcing: after all, the IT's no longer being done by the production staff, is it?

      And I'm pretty sure this cloud stuff is the outsourcing of running servers.

    4. Anonymous Coward
      Anonymous Coward

      A few

      The ones I've done have involved small businesses and small networks and the replacement of an in-house server with a managed solution. After the cost of all the hardware and software and licences etc etc, it was cheaper for the employees to get their managed email and data remotely (and backed up remotely and automatically) than to run it in-house.

      The upside was that it made it much easier for me to support since instead of having to remote in and fix the server every X hours, I simply told them to raise a support ticket once I'd established it wasn't an in-house problem. The downside of this was that I was actually de-skilling myself.

    5. Anonymous Coward
      Anonymous Coward

      I've seen it work well

      For IT support, I think having the customer facing call centers offshored doesn't matter at all so long as they speak good enough English without too thick of an accent (Central America seems to work better than India, in other words, for US support, and wages are similar between the two now anyway)

      For back end support, having the lower end support offshore in India isn't a big issue. A lot of that stuff is simple rote work that anyone can do, following a simple formula. When you get to higher levels of support for more complex problems where you might involve customers and/or vendors, it doesn't do well in India. Not that there aren't smart people there, but the really smart ones are in such demand they don't stick around very long and you end up with the ones who don't know enough to be able to move on to other jobs quite so easily. It is better having that last line of support local, especially if they're still located on site with the customer so they can develop relationships with them, etc.

      The problem is, as pointed out earlier, where do you get those high level guys in the US (or UK or other expensive countries) once all the low level jobs have moved on? The ladder by which new IT workers in the US learn on the job and become high skilled is being removed rung by rung, so fewer are able to climb it each year.

  7. thames

    Development is Uneven

    Outsourcing (or "trade" as it is known when the goods are tangible) depends on having some place to outsource to. Countries that are only flyspecks on a map will only have a very limited global effect. It takes large countries such as China, India, and Indonesia to really make a difference. Once you get beyond those ones though, the number of poor but "ready for growth" countries starts to look a bit scarce.

    Africa is expected to have a massive increase in population by that time, with Nigeria alone expected to grow to have a population similar to India or China. However, when you start looking at social and political factors, most of Africa (with a few exceptions) does not look anything like becoming the next China or India.

    Even in India, there is a huge social gulf between the educated elite who staff the outsourcing businesses and the rural peasantry. This means that the pool of usable labour is much smaller than simple population count would lead us to believe.

    I think what we are going to see is a group of mainly east Asian countries move from third to first world (or in India's case, different parts of the country straddle the boundary), leaving the rest of the third world to stagnate behind. This is much like how Europe moved far ahead of the rest of the world starting a couple of centuries ago.

    In other words, I don't think the whole third world will leap forward in one smooth motion. Rather, select bits of it will move to catch up and merge with the developed world, rather like Japan and South Korea have done. We will then have another period of stability until some other region moves ahead.

    We don't know what it is that enables a society to progress. It can't be just access to capital and education, since there are loads of countries which have both but can't make productive use of them. Whatever that something is though, some parts of the third world very obviously have it (e.g. China), while others don't (e.g. Congo), yet.

    1. Anonymous Coward
      Anonymous Coward

      Re: Development is Uneven

      'We don't know what it is that enables a society to progress. It can't be just access to capital and education, since there are loads of countries which have both but can't make productive use of them.'

      We don't know for sure, but we can make some well-informed observations.

      Countries for whom people are a competitive advantage need structures in place to maintain social order. However big a stick the government wields, carrots are also necessary and both China and India are people-centric economies that have progressed markedly in living standards since they liberalised in the 90s (though with the unsavoury sideline that the stick wielding elites have seen their wealth grow even faster).

      Countries for whom resources are a competitive advantage really have no economic need for people outside a few narrow industries and so are at high risk from divide and conquer politics, repressive dictatorships and civil war. Efforts by those countries to diversify into people-intensive industries often flounder because a successful people economy would require a loosening of the often repressive rules that keep the elite in power.

      In short, supply of capital and education are necessary but so is an economy which demands and rewards that education. Supply without demand creates anomalies like the many saudi men who study expensively and extensively abroad before going home to do nothing (or plot revolution).

      The narrower point, and a reason for concern among the working classes in the west, is that economic power is tied in the long term to political power. If globalisation and automation continue to marginalise people economically then their political power will disappear with it.

    2. I ain't Spartacus Gold badge

      Re: Development is Uneven

      thames,

      Africa is getting much richer already. For example quite a few countries haven't employed sufficient economists. So they've been guessing their GDP based on surveying a few big companies, and then guessing the rest. This was based on the idea of having this level of subsistence agriculture that only supported limited services, and basically hadn't changed much in years/decades/centuries. Several countries have now re-assessed this, Nigeria being one big example, and discovered that they now have a lot more trade going on than they thought.

      For example lots of goods (sometimes second hand from the West) like clothes and mobile phones now get right to even the remotest villages. This is why whenever you see documentaries that take cameras into the middle of rainforests, loads of people are wearing the same Chinese, Vietnamese and Banglasdeshi made tshirts as everyone else in the world.

      Globalisation is still going. Not that it won't be a bumpy ride. If the next door country suddenly becomes rich, and your repressive government is seen not to be letting you join the party, then revolution looks attractive. But revolution doesn't always lead to a better government. The French are on their 5th Republic, plus having had 3 Empires and an ancien regime - all since the 1780s. Just going from memory, they went through serveral revolutions and 15 different constitutions between 1789 and 1870.

      On the other hand, only a few countries have managed to jump into the "1st World" camp in the last 50 years. Not that anyone calls it that anymore. Lots have got into the middle-income group though. Which is a much nicer place to be than the other alternative. It'll be interesting to see if globalisation will improve things for them, or leave them where they are. Countries like Chile, Brazil, Argentina (who are the only one I can think of to drop out of the top group last century), Thailand etc.

    3. John Sanders
      Holmes

      Re: Development is Uneven

      """We don't know what it is that enables a society to progress."""

      Yes we do, it is a mix of individual freedom, including separation from state and church, and rule of law, including both the rights to private property, and some decent-quality democratic political system.

      The more a country conform to that the more prosperous they become, the farther from that, the less prosperous they become.

      1. Keven E.

        Societal progress by definition can't be uneven

        I question the suggestion that the progress of society has prosperity at its core. Plain and simple: "richness" is subjective. A decent-quality democratic political system is clearly not attainable when capitalism is a driving force. I don't see society-as-a-whole being supported when the polarization of politics (as I prefer to call it "classholism") is seeking to maintain the status quo of those divisions. This has clearly manifested in the aforementioned quick rise to the 10 to 50 times in global inequality as well as the inequalities that exist in the same (quite efficient) structures (eg. the mailroom and the penthouse). It doesn't seek to progress things from a social perspective. Individual freedoms and private property's are obviously not inherently society building. I'm not saying they couldn't be or never are.

  8. Gordon 10
    Thumb Up

    Splendid

    Nicely done Tim - thank you!

  9. Carbon life unit 5,232,556

    One day they'll be outsourcing to us.

    1. Bernard

      They already do and have for years. By far the biggest growth market for western luxury brands is Asia and while the stuff mostly gets made there too the 'expertise' and whatever else it is that makes a bag or pair of shoes worth £10,000 flows back to the west.

      Similarly architects, law firms and financial services outfits do tremendous business out there.

      And on a more basic level consumer brands like Coke and Unilever as well as western music and films have been there for years.

      Whether we'll ever get to Chinese NGOs fretting about the conditions in british sweatshops is another matter, but the times are certainly changing.

  10. Dominion

    At the big outsourcing companies the biggest problem is graduate recruitment. They bring in a load of grads to do tech jobs, and then promote them into non-tech roles - which was what the grads wanted to do in the first place. The training budget has then been blown on staff who stay don't use the skills after the first couple of years. If there's a skills shortage - do something about it rather bleating on about it and employing a load of spreadsheet zombies.

  11. matthewdjb
    FAIL

    Even with cheap labour, my experience is that the cheapest way to outsource is to pay the money to the service provider, but do all the actual work yourself.

  12. Anonymous Coward
    Anonymous Coward

    It will only stop for IT when....

    ...people realise that quality is a function of a team which takes pride and ownership in their work.

    If you keep sending the work offshore, it's a race to the bottom - lowest cost in an emerging economy, remote to the business, will always result in poor quality service and low productivity.

    Intellectual property and thinking cannot be delegated outside of your business - it has to be built up and retained internally to maintain capability.

    Off-shoring is certainly not cheaper in the long run when you look at the impact this has on your business. It may look good on the balance sheet for the first couple of years, and the Execs who implement this will be well rewarded for it. However - it will screw up your business beyond the short term, if what you outsource that which is core to it.

  13. kmac499

    Rarely outsourced depts

    In my limited experience if you want to avoid being outsourced, (or should that be undersourced). work in HR or Finance. For some unfathomable reason these 'skills' seem to be regarded as so sensitive they cannot be performed outside the sovereignity of a company.

    The poor IT bods that curate and protect the companies data to say nothing of turning the intellectual capital of a business into code can be sited anywhere??

  14. Anonymous Coward
    Anonymous Coward

    Banking debt and increasing cost of living; how does one deal with that as wages stagnate?

    As the global economy continues toward a convergence my salary has become stagnant, but as some of you will be aware, the cost of living keeps rising. At what point does one either let the bank come get those things we thought we'd be able pay for or does the governement step in?

    It appears at present that, the banks will be taking over a great deal of debt from a lot people, and the property that entails, 'cause here in NA the banks and any other sufficiently large corporations own the governments.

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