Submitted by Khalid on Sun, 2004/05/02 - 17:45  Outsourcing software development to India has become more and more popular over the last few years, and picked up even more momentum lately. Corporations in the USA has followed this path because a technology worker costs some five times less in India than in the USA.  Motivation for Outsourcing  Corporate executives started seeing software development and support, and the whole of Information Technology as a cost, and not as a strength, nor a differentiator. So they started thinking of it as something they can subcontract, just like security guards, janitorial, landscaping and snow removal.  Objections to Outsourcing 

However, this is not always the case, and there are hidden costs, and some pitfalls, such as difference in work culture, communication styles, and time zones, not to mention the long term safety and security concerns of giving everything to a foreign country, and a foreign jurisdicition. The analogy of janitorial and landscaping is not an accurate one though. The reason being these services, although they are outside the company, they are still within the city or the country. This gives some soft of control, being under the same jurisdiction, and there is no danger of political tensions, wars, or the international scene affecting the service. Moreover, janotorial is a low skill, low risk, and not core to the business. Software and Information Systems in general contain many functions that are vital to the company doing business, and in many cases it is part of the “Intellectual Capital” of the company. 

Moreover, it seems that there is little evidence for the huge cost savings that are the main motivat ion for outsourcing. For example, a Deloitte & Touche study says that 70% of companies had negative experience with outsourcing. Moreover, 44% of companies got no cost savings from doing it. This may be caused by the fact that growth of outsourcing in India is slowing down, mainly due to labor shortage and wage inflation as a research report by Gartner puts it. 

Security and Privacy Issues An example of security and privacy issues in outsourcing, is that your data is not under your control. Here is an example where data was leaked on the web, from a US outsourcer by an American. While in America local law enforcement can handle such cases fairly quickly, what happens if this is overseas under a foreign jurisdiction? Or if political issues come between USA and India?  

A recent case was when a British tabloid newspaper was able to buy customer data from an Indian IT worker, as reported in the BBC. While there are criminals in every country, the difference is that if a crime occurs in the USA, law enforcement can and will act because it is within the jurisdiction. If a crime involving a country’s citizens is committed abroad, they can only file a complain and wait! This was discussed on Slashdot too. Here are some more cases where there was black mail, and the company preferred to pay the programmer, because the PR cost will be less! 

Historical Analogies and Differences Many see an analogy between manufacturing jobs going offshore over the last few decades, where lots of blue collar jobs were lost to Mexico and South East Asia, and see the software offshoring trend as the pendulum now hitting the white collar sector. 

There are some differences though. In the case of Mexico for example, Maquilladoras in the border twin cities were set up to take advantage of the cheap labor. With NAFTA, there is free movement of goods and people across the border in both directions. So an American who is willing to relocate for a job, can do so if they like. However, in the India case, an American cannot go to India, since in one direction, it is free trade, and in the other there is protectionism, where Indian government rules prevent such job seekers from applying (unless their skill is needed). Canada as an Outsourcing Destination 

Surprisingly, Canada is a near shore outsourcing country for the USA. While it cannot compete with cost and salaries of India, it has several advantages, including proximity, closeness in culture and language, stability, quality, and skills.  A PriceWaterhouseCoopers report titled A Fine Balance: The Impact of Offshore IT Services on Canada’s IT Landscape details why Canada is a better alternative. Some companies realize this advantage and refuse to do offshore outsourcing to India, as discussed in the IT Manager’s Journal article Is Canada the solution for offshore outsourcing-wary U.S. companies?. You can read a discussion on Slashdot of this article, titled: “Why Offshore when Canada is next door?”  Also, here is an article titled Canada as back-door to U.S. software industry and the obligatory Slashdot discussion of it. 

for  for more info please visit our site: http://www.semaphore-software.com/offshore-outsourcing/offshore_outsourcing_services.htm 

Source: http://baheyeldin.com/software/articles-on-outsourcing-and-offshoring.html