In chapter 4 of the Reynolds text we read about business processes and IT outsourcing. Outsourcing is an arrangement between two organizations to provide services that could have been provided by the company's employees. In addition we learned about offshore outsourcing which is the relocation of the individuals doing work to another country. Most individuals view outsourcing as the way to do business in today's economy mainly because of the cost benefits relationship and the increase in work force. I am skeptical however. I have always been one to question whether or not outsourcing a number of operations, specifically in relation to management, was the best decisions for an organization. Going further, I had initially considered the outsourcing of IT activities to be worthy yet after reading the attached article I have come to find that if offshore and international operations are not properly developed, the result can end in a world of problems, most of which could have been avoided.
The first horror story I read was about Fran Schmidt who worked in the medical industry and was asked to create a team and outsource the existing internal development and quality assurance IT departments at her company. Fran was not bogged down by the usual issues such as language barriers or accents that are hard to translate. Rather Fran's team in India was facing a 13 hour delay in information communication. If the U.S office were to submit something to the IT department now located in India, those in India would not receive the data until the next working day. Outsourcing in this respect, result in a constant game of "catch-up" because their existing Microsoft Visual SourceSafe could not collaborate with the country 8,000 miles away. In the end, Fran spent large sums of company resources to transition to a new software known as AccuRev which reduced the time difference from 13 hours to 1.5 hours. Clearly, it is important for a company to "test their infrastructure before going live offshore." Not only did the company waste money when they thought they were saving, but they lost knowledge because individuals in India, with less experience, were replacing those who were proficient in America.
The painful lessons of James Hills, president of a marketing firm known as Marketing Help Net is another example of outsourcing gone wrong. Hills' new company had gotten into an argument with his offshore website developers in the Philippines. Hills came into the office the next day to find that the developers turned off his clients website. Working offshore appears to be a good solution for the new client because resulted in large reduction in costs, yet major problems became noticeable. The providers were constantly missing deadlines, the designs were not what he expected, and the functionality was lacking. In the end, Hills stop making payments and the offshore company shut down the website. Hills recognizes that his major flaw was not performing probably background check and asking for references prior to beginning the relationship. This project was poorly planned and had no risk management involved. All said and done, Hills has vowed that he will not outsource any longer, and that if he were to test it again he would only go offshore with U.S based companies rather than contract workers.
In my opinion, we as students can learn more from the errors of small time businesses than major corporations because we will see more small time issues in our future careers. I recommend my peers read the rest of this article in order to hear the other horror stories mentioned and take with them the knowledge that a lack of project management and underdeveloped outsources endeavors will result in more hurt than good. Sometimes the decreases in cost are not worth the loss of knowledge or the loss of a client.
Horrors Offshore
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