Beware of the abundant arrogance of ignorance when it comes to offshoring. The booming thunder of drums of doom has been echoing even louder, originating from the inner sanctum of CNN's Lou Dobbs show. The chill of IT layoffs from outsourcing to offshore operations challenges the wisdom of corporate and political leadership. Some might even convince you that control lies in the hands of the CIO, the corporation or even the government, and that they could turn back the tide. This, sadly, could not be more distant from the truth.
In reality, CIOs have no control - in fact, if they don't take aggressive action, they risk peril to themselves. Enterprise leadership and government have demonstrated no concerns. Management consultants and lobbyists have no better recommendation. From their macroeconomic perspective, offshoring promises and delivers economic and competitive benefit, period. If one turns a blind eye to the hardships of outsourcing, as the government seems to have done, financial benefits to the top brass and corporations are substantial.
This column is about confronting the fact that offshoring is real. Forrester Research estimates that 3.4 million white-collar service jobs will be outsourced to low-pay countries by 2015. IT jobs constitute the largest share.
Proponents of offshoring have established that proof of benefits cannot be denied. After the initial short-term trauma of displaced employees, the corporation does emerge stronger and healthier.
Cost, schedule and quality goals in the first outsourcing project are typically met 47 percent of the time. Beginning with the second project, savings can be more than 35 percent, quality of service is improved in approximately 70 percent of the projects and delivery is faster in 50 percent of the projects. When outsourced to offshore vendors, communications and cultural factors can be significant challenges; however, the promise of cost savings is still far too attractive.
When your competitors are weighing cost savings with enhanced service options and deploying strategic migration paths, don't the procrastinators stand to lose? For an enterprise deferring IT investments, outsourcing is hardly a discretionary path. On the contrary, for some functions it might be the only choice. For many, there is no other alternative. The economics are compelling. The sands have already shifted. Neither enterprise leaders nor government is either willing or able to turn back this tide.
The famed Lou Dobbs list of U.S. companies utilizing offshore services lists virtually all household names of the Fortune 500 companies. Benefits of offshoring are pervasive across business functions: IT, HR, call center, facilities management, finance and accounting, logistics and other industry-specific business processes.
To meet the demands of these stakeholders at lower costs and higher service levels, top IT companies have spawned armies of engineers and professionals abroad. Chieftains of U.S.-based IT companies - Sam Palmisano of IBM, Steve Balmer of Microsoft, Carly Fiorina of HP and Larry Ellison of Oracle - have all invested heavily in benefits of operations abroad. If it were not for anchored R&D investment in the labs and expertise here, would R&D be susceptible to moving offshore as well? In fact, that boundary is in the process of collapse as we speak.
What were originally testing and quality assurance outposts of U.S. development efforts have morphed into strategic design centers for core products architecture.
Indeed, the IT vendors accrue benefits. They can service customers at lower costs and often provide value-added services increasing the total revenue per customer. Margins are better and shareholders are better rewarded. Smaller dollar investments in training eager foreign labor produce lofty returns on skills development. Indeed, there are tax benefits in deferring income from foreign operations. So the companies have an incentive to continue foreign growth. U.S.-based IT vendors have strong financial incentives to grow offshoring capabilities.
This column is a sad commentary from the perspective of massive migration of IT opportunities, which has left considerable hardship in our communities and U.S. operations. Yet, if a management knee-jerk reaction engages an offshoring initiative, lack of preparation can leave IT staff and professionals even more vulnerable - hierarchy of service levels, retraining for staff, adequate controls.
Change, like time, is continuous and uninterruptible. Leading, reshaping, embracing and adapting are the only wise choices to maintain control of your future. As an IT leader, ignoring, avoiding, resisting or rejecting the offshore option could be an error of catastrophic proportions for your enterprise and career. If the new CEO or CFO who saved 47 percent by offshoring at a previous assignment asks you for data on cost savings potential by offshoring, what will be your response?
- What do you do? Execute your mission. Lead! Deliver competitive advantage to the enterprise.
- Where do you start? At the top. Secure executive sponsorship.
- When do you start? Right away! Why have you waited so long?
- How? Implement your quality process and use project management controls.
- What is your goal? Evaluate cost-effective efficiency-enhancement options to align IT with enterprise strategic vision.
Charge like there is no tomorrow! Be the evangelist to deliver best IT value and competitive advantage to the enterprise. Hoist the flag of leadership and carry the banner to explore all options. Create loyalty and enthusiasm on your team by revitalizing career-path and growth plans. Make visible the accomplishments of your team, boost morale and be the leader you need to be. Otherwise, someone else will be pitching to save costs and deliver more value!
Please share your views, success stories, and validation of content or seek counsel at RR@biresults.com.
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