Can someone explain to me how offshoring saves money again?

I swear I don't get it.

I just went through a week of meetings totalling about 30 hours to figure out how to manage offshore development resources yet again. This week is not unlike other weeks on a project that has been going on for months.

Average salary of everyone in the room is well over $120k a year.

All this money ticking off week after wee so we can figure out how to save $30/hour for 10 developers offshore.

I just don't get it.

sweatshops

Because it looks really good to bean counters who see it as:

1. In principle less expensive, especially since you don't have overhead which can easily be 75% of salary (thus a $100k engineer here costs $175k when you add benefits and a cube)
   
2. The work appears as a "contract" rather than "salary hours" which give some balance sheets woodies
   
3. The contract can be terminated at any time with no potential for wrongful discharge suits or severence, or the extremely tedious documentation and rehabilitation efforts to make "discharge for cause"
   
4. The outsourced workers don't get annoyed near you when you jerk them around or kill 9 months of their work because it "seemed like a good idea at the time"
   
5. The failure to count the coordination work that you mention as part of the project cost
   
6. The commoditization of humans as "labor hours" which ignores all kinds of extrinsic, immeasurable costs
   

This is said as a former engineer cum manager who was also overseeing outsourcing platform porting of a product that would have been too dull to attract local talent that would have done a competent job.

In my case, these projects were successful because of the dirt easy specification of "here it is working on X, make it do the same on Y, come back when you are done". I'd also had the pleasure of "outsourcing" novel development to internal corporate groups across the country or across the pond, where you get all the "joy" of oversight at a distance with none of the "benefits" enumerated above.

I'm sure there has been at least one article in Harvard Business Review titled something like "Is outsourcing really helping you?". But thankfully, I left that game, so I don't have to pay attention any more. In the end, my former firm found it far more efficient to recruit directly in Hyderbad, Bangalore, or Dublin, import the engineers and make them bona fide staff. Geographic locality matters, as can be measured by the travel budget of anyone trying to conduct remote development.

Finally American students are avoiding engineering in droves for reasons I don't fully understand while Indian and Irish (to cite two examples I know of, I'm sure there are more) are doing the exact opposite.

I hope that gives you some insight as to what the driving factors might be.

Oh man, I must really have been doing my "business trips" wrong, I got to see the magnificence of the world's conference rooms.

This offshoring thing has so many more tentacles than meet the eye. For instance, it is partly about establishing an in-roads for US businesses into the burgeoning Indian middle class demographic. My India colleague is here in the US, this week, and case in point: He tells me that Wal-Mart, BestBuy and other big box retailers are getting ready to pounce on Bangalore, Madras and Dehli (though they might experience some huge cultural backlashes).

Ultimately, US executives seem to want to offload the manufacturing and task-oriented functions, focusing instead on design, management and innovation functions and allowing cheaper foreign labor manage production and execution.

IMO, successful India offshoring usually involves highly repetitive and reproducible processes. More complex processes, like adjudicating medical claims, doesn't seem to work nearly as well.

Good luck. It's been over two years since the bulk of our IT dept. was outsourced to India, and we're just now starting to run on 7 of 8 cyliders.

PS: Although I'm not a huge fan of offshoring, I'd rather the work go to India than many other non-democratic countries with major human-rights issues.

PPS: Oh, and what Juro said.

I don't know about all the fuss mentioned above, but my organization and a few others in my industry, have outsourced and produced enormous financial savings in every way you want to measure it. My particular org refuses to call it outsourcing since we own the company in India, but it amounts to the same thing.

In my industry (and many others), the single biggest cost is Employee Expense. Any method that can reduce a function's Employee Expense by 75% will be implemented. We have very few issues with management concerns and travel expense is minimal comparatively. The workforce is amazingly bright, have no issues working on a US schedule and are pleasant to deal with.

As for the three-figure salaries in your situation, the reality is that those salaries are already paid for, piling on work for them is the norm, whatever firedrill is on the docket.

You may not want to believe this, but the "bean counters" are not stupid, do have empathy and are working for the good of the organization as a whole in the majority of cases. There are always whack jobs so please don't point out the cases where this is not true as evidence that the "bean counters", "management" and "Harvard theorists" just don't understand.

Yes and the leave the little missus at home to fend for himself. THIS IS WHY WE ARE SO OVER.
Although... it did give me time to get better aquainted with the pool boy Paolo.

Oh please.. you *know* why we are over - or should we ask the dog? Hmm???

I mean, I'm all for 'freaky' - but even I have my limits.

Given your forum title, Juro, I really don't wanna know where this is headed.

Out sourcing is one of the primary reasons that American students are avoiding engineering in the droves. My nephew was seriously considering what to major in, had all the math and science he needed and we convinced him to move into another area of science instead of engineering or computer science. The payoff for engineering is a thankless life of layoffs and you don't even get a gold watch anymore.

Most promising students have seen their parents get the pink slip already.

We re-directed him to medicine - more future and more options.

.

Ohhh... good point.

Erm... what I meant to say to Barnes is:

Baaaaah means No!

i was really tempted to point out the same thing but i always feel bad when my ex-lover quirrels sidetrack serious threads.

Lets just say I work for a company in the top 15 of the fortune 500.

We offshore a LOT of jobs.

The execs don't care about anything other than what looks like they're doing well and saving money. The technical details don't matter.

Turnover rate in India is high - we're talking about the avg person staying 4 weeks. They'll switch jobs over VERY minor changes in pay.

I don't think it's worth it, but then again, a lot of those who work for us in the united states were imported from overseas anyway. So offshoring the jobs doesn't ultimately cost american jobs.