@ 48 - It looks like you are not able to stay competitive against Indians - We feel your pain but unfortunately it will just grow eventually.

@ 44 - Good for you and good for your clients. Last but not least, good for your husband that he got a wife like you…

@ 42 - Can you please publish a link to your identity? Thank you.

@48 try and google the CEO of Citigroup. You’ll be presently surprised

@45 .. its a very real danger. No first-hand experience but heard many strories during 2004-05 when it was white hot.

Gist of the argument is — Indian techies have a “service (pun) mindset” with little exposure to real product dev. (engineering). They’re still learning but you don’t want that at your expense.

Elance is 10 years old but largely a failed outfit. That model works for small one off stuff of low $$ value. not for mission-critical products.

Indians are lazy sneaky bastards.

I have been using outsourcing for startups since 2002 and it works. But you must have a local team - however minimal and small - and a project manager (local or remote). The issue really is communication.

@53

“Indian techies have a “service (pun) mindset” with little exposure to real product dev. (engineering). They’re still learning but you don’t want that at your expense.”

OK, then go pay 5x more for an american techie. it’s you choice.

@ 53 - I heard many stories also during 1990 to 2008 that clients were unable to pay bills and Indians still delivered products believing in Gandhian ideology

@ 54 - No wonder below message is written on your site.
“…We have closed our operations after 46 years..”

If you take a look at the data a bit deeper, you realize that these new characteristics just reflect the maturation of the outsourcing industry. Yes, outsourcing has grown up. Yes, more and more organizations are using it. Is anybody really surprised at this?

While comparative analyses, like this, help us understand complex movements, they often leave the reader, us, far short of anything actionable. The comparison of Outsourcing 1.0 to 2.0 is no exception.

When I read stuff like this I ask “so what?” That is, what should I do differently now that I know this information? For example, a better comparison would have been to show the differences between the “10 necessary characteristics for successful outsourcing.” At least with that I would know my chances of failure/success in this new world.

Jerry, thanks for the comment.

Overall, I agree - the difference between Outsourcing 1.0 and 2.0 echos the same process of maturation that can be found in several industries. The comparison between 1.0 and 2.0 is what it is: observational.

So, here are a couple of actionable pieces of advice:
http://www.monsoonco.com/blog/.....t-of-labor
http://www.monsoonco.com/blog/.....aks-screen
http://www.monsoonco.com/blog/look-for-no
http://www.monsoonco.com/blog/.....-messaging

That’s a great cartoon. I love all this globalization stuff, and how it’s possible to geo-arbitrage by being located in different parts of the world yet have clients elsewhere.

My situation:

* American white dude born in the US, but has an Indian first name (due to hippie parents)
* Started recently full-time offsite Webapp Dev freelancing so I can travel the world & develop code from anywhere
* Currently working with one Brit who lives in Japan
* Have other potential American clients, who happen to be living overseas right now in Bombay

* Next, I’m moving to a less expensive part of Europe to cut my cost of living by about 40% (not to mention, the awesomeness of getting to live in Europe for a while to see that part of the world)

* Net result: get paid 2x as much (hourly), the first 80k of my income earned abroad is tax free, living expenses are 40% less, getting to travel to exotic lands, not answer to a PHB and generally have a ton more freedom!

Globalization 3.0, baby!

ps. mod +1 for “The 4-Hour Work Week” by Tim Ferris, who talks a lot about this kind of stuff.

Sad. This is about as funny as BC. You all need to get a life

Dear King, just to clear up things, we did not outsource Us->Romania->India (that would be funny indeed).
What i meant is that we had customers that stoped working with indian companies, and we had to pick up where they left off.

In reference to indian companies beeing multi-billion , the truth is there are only a hand full of these outsourcing giants and several tens of thousands of either indian companies doing outsourcing on a 12-50 man team who just individuals.

These smaller players operate from freelancing sites and these are what most people have experience with in terms of being defrauded. Some of these indian firms thus small paint a picture they are bigger than they really are. We the webmasters only have the feedback from freelancing sites and the companies website to go by. Its not like we can just get on a plane for indian as most of the time its money issues that made us use freelancers in the first place.

the big companies like tata and infosys etc have offices in the us which makes them honest. the smaller outfits do not have offices in US or major european countried which means bringing them to court is a long drawn process in indian courts.

I work for a major telecommunications company. And by major, I don’t just mean you’ve heard of us; I mean you use one or more of our services, daily. We outsource quite a bit and we have for a long time. In the beginning, it was a good way to have some tedious coding done by the time you got up the next morning. However, with the increase in outsourcing came a commensurate increase in specious CS degrees granted in India. It became the easy route to a quick American Dollar.

And so, recently, work we’ve farmed out to reputable, well-referenced, firms comes back shoddily done: some simple javascript backend code came back bug-ridden, sans comments, and inconsistently formatted. We spent more hours fixing their poor craftsmanship than implementing and streamlining our interface. And this is honestly the norm for the companies we’ve worked with (our options of limited given the scale and nature of our operations).

So say what you will, King, but every wave has a crest and a trough. The glut of horrible graduates will see to it that the trough of outsourcing is deep indeed.

In 2007, more than $40m worth of projects were completed succesfully by Elance service providers in the US, India, Europe, Russia and other parts of the world. Data and sample sizes large enough to be statistically relevant to this discussion do not support the assertion that service providers in one country are more or less reliable than service providers in another country.

A more appropriate generalization supported by our data, is that buyers who consistently hire the lowest bidders for a particular class of jobs tend to have lower success rates.

Outsourcing, just like hiring and managing people, requires some effort and is not for everyone.

While I can see the near impossibility of paying contract staff in the West the wages they require to continue their lavish lifestyle, I do sometimes wonder when the people who are working in these developing economies will dispense with their Western bosses and start doing all the R and D themselves…

From a biased (obviously) animator in SF

Nice work Sandeep and Aron…

I’ve heard recently about the rising cost of outsourcing…so much so in fact that Indian companies like elance have re-outsouced back to the states. Is anyone familiar with this process???

http://actionstalk.com

@ 62 - You can find as many cases as you want the other way also : Companies stopped working with Romanians and went to Indian for help. Just because handful cases are there, you can’t generalize terms. When 10 citizens in a country with 1M population have flu, you can’t say that whole country is affected with flu. Just like that, look at India’s overall market cap in outsourcing and then you are welcomed to publish numbers.

@ 64 - Bad devs are in every country. Just ask any good dev you know….

@ 66 - The thirst for knowledge depends on the individual and not per country

@12, @13, @24, @48, @54

For all of those who’ve labeled an entire race as “liars”, “fakes”, “flukes”, “lazy sneaky bastards”, “dishonest” people who are “unreliable” and will “screw you up”, this is what I have to say:

GROW UP!!

You’re reading the top tech blog in 2008, and yet you’ve somehow managed to inundate these comments with needless racist divisiveness and a truly impressive ignorance of the underlying issue.

Enlighten your mind with factual data; read about how these “flukes” and “lazy bastards” have made a difference in Technology and the World: http://en.wikipedia.org/wiki/L....._Americans

Here’s just a few from the list:

Sabeer Bhatia, founder of Hotmail (do I hear free email for civilians?)
Amar Bose, physicist and founder of Bose Corporation (anyone say iPod Dock)
Vivek Ranadive, CEO and founder of Tibco Software
Vinod Khosla, founder, Sun Microsystems (Too bad, this fake created thousands of jobs)
N.R. Narayana Murthy, founder of Infosys Technologies
Om Malik, technology journalist and blogger (GigaOM)
Vinod Gupta, CEO and founder of InfoUSA

A few bad experiences on freelance websites don’t justify the cretinous rubbish being posted! So cut out the shallow, facile and ignorant stereotyping and focus on the few selective posts that shine light on the right strategic approach to Outsourcing.

With an open mind and the right technical/management skills, you are poised for success, whether you build your company in the Bay Area or India!

San Francisco or Mumbai, chances are you’ll run into a few (or a lot) of us brown people in your office

- A proud Indian American (writing with an open mind)

@53

There are 15,000+ IT companies in India. Some profess to ‘do it all’. Many specialize. Not fair to paint all with same brush.

There are some teams that do only SEO work, some that do only High end CAD-CAM engineering, many that do ecommerce sites by the dozen daily..

If you want experience and expertise in product development then you need make an effort to find a team that specializes in that area. You may start with a small part of our development and expand the relationship.

Duncan,

I want to point out that SlideShare is not outsourcing. Our team is partly based in New Delhi (the rest in Mountain View). But every person who works on SlideShare is part of the SlideShare team with stock options and all.

rashmi

The second picture is very close to what’s happening now, just don’t agree with some points

“I have a cousin who does that” is not a normal practice if it’s about a contract for $250mln. Instead I would write “hire more in Bangalore”
eLance is not the only site as shown here. Perhaps one of the oldest, but not the oldest. GetAFreelancer.com has lots of good programmers and designers and there are more similar sites.

India is looking a lot better, today. Thousands of developers in India creating value for Western companies. We must understand what India is doing today towards institutionalizing innovation. We do expect to see next Salesforce.com or YouTube from India, in the future.

The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of labor, capital, technology and resources.

With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian outsourcing companies in the US and UK.

The negotiations take the original RFP, the supplier proposals, BAFO submissions and convert these into the contractual agreement between the client and the supplier. This stage finalizes the documentation and the final pricing structure.

At the heart of every outsourcing deal is a contractual agreement that defines how the client and the supplier will work together.
Outsourcing is the need of an hour it helps reducing cost for small budget to big scale companies. There is no point loosing money and not outsource for cheap and talented work force.

There are several reasons to outsource i am listing few of them
* Cost savings
* Cost restructuring
* Improve quality
* Operational expertise
* Staffing issues
* Catalyst for change (The outsourcer becomes a Change agent in the process) most important as far as deals are concerned.
* Reduce time to market
* Time zone (A sequential task can be done during normal day shift in different time zones - to make it seamlessly available 24×7) Important factor for deadlines
* Customer Pressure

“There is strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market” - anyone can easily understand the plights of US labor market but sometimes it’s necessary for a business to take certain steps in order to survive and take care of the share market too.

My point here is if we think about a company and its perspective we should be able to understand that the main goal of any company is the profit making and Outsourcing is giving them an option to make sure they are getting most of it.

As far as India is concerned when it comes to OutSourcing check out the figures below
“For the FY06 financial year the projections is of US$7.2 billion worth of services provided by this industry. The base in terms of headcount being roughly 400,000 people directly employed in this Industry. The global BPO Industry is estimated to be worth 120-150 billion dollars, of this the offshore BPO is estimated to be some US$11.4 billion. India thus has some 5-6% share of the total Industry, but a commanding 63% share of the offshore component. The U.S $7.2 billion also represents some 20% of the IT and BPO Industry which is in total expected to have revenues worth US$36 billion for 2006. The headcount at 400,000 is some 40% of the approximate one million workers estimated to be directly employes in the IT and BPO Sector.”

“Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. 72% of European multinational companies have outsourced financial functions over the past two years.

Additionally, 71% of European companies and 78% US companies plan to use these services in the next 12-24 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels.”

What i would like to see in the coming future if India can come up with an idea where they can target the medical patients to come and get the treatment here. This will be a huge sector as medical services in India are much much cheaper than US, UK or Australia.

No wonder India is at the center of a brewing storm in America, where politicians are starting to view offshore outsourcing as the root of the jobless recovery in tech and services. But, if we are talking about Jobless people i would like to know how talented they are? I have never seen any such talented person not getting a good offer.

Still, this deep source of low-cost, high-IQ, English-speaking brainpower may soon have a more far-reaching impact on the U.S. than China. Manufacturing — China’s strength — accounts for just 14% of U.S. output and 11% of jobs. India’s forte is services — which make up 60% of the U.S. economy and employ two-thirds of its workers. And Indian knowledge workers are making their way up the New Economy food chain, mastering tasks requiring analysis, marketing acumen, and creativity. This means India is penetrating America’s economic core

Great cartoon .. and healthy debate with some not needed comments… About oursourcing I think many people or companies try to outsource with just one point in their mind and that is PRICE.. they don’t check out other things (like who are the peoples going to work on it, their expertise, etc ) and when it fails you start to blame the whole outsourcing model.

You just need to know your team, know what you are building and project management skills…

I think comment was needed for the cartoon, which indeed is very humorous but we all have started discussing about pros and cons of outsourcing…

Good Stuff
I think..
Keep going what we have and improve it at certain level, so it
give GOOD result at the end of the day. OUTSOURCING really gives lot of things to india…
BUT…
Needs more and more…
Keep going and doing…
Cartoon shows the scenario. People are commenting about Indian IT market.
NEED to SERIOUS on this. we have to manage INDIAN IT MARKET…

What I laugh at is how dependence is formed by outsourcing, it gets to the point where people are so used to just paying to get something done that they completely lose track of how they’re spending money on some of the simplest things. On elance and similar sites there are people who have to keep putting up projects just to make a few changes because they have no clue what’s going on with their code or how to make a simple adjustment.

The real thing is that Indian IT field is booming, and while they’re doing the programming work - it’s hilarious that US upstarts are so dependent thinking they’re getting the better end of the deal, when in reality the work could have been done cheaper if they did it locally (since upgrades and subsequent changes wouldn’t need to be outsourced in future). India will shoot itself by not using its skill to advance firms and startups within the country.

While the US will shoot itself by bleeding money on things that aren’t wholly necessary - and by too heavily exporting work that could just as easily have been done locally at lesser cost later on (but initially higher cost to train/educate). Poor planning, and greed is basically what it is.

Wow, very Good!!!

Did anyone have the experiences with chinese outsourcing firms? How about them?

bad idea to outsource core product development. Some services are o.k to save some $. India is the worst place to do it. Way over-hyped based on English and cheap labor.

@Ape,

not everybody has a PhD in Computer Sciences. We have a lot of clients for whom it is easier to pick up the phone and ask us to alter couple of words on the web site instead of doing it all by themselves. People needs are different.

If anybody has had a bad experience with outsourcing offshore, it should be expected — nothing is perfect. I am sure people have had a bad experience at their corner dry cleaners. But if anybody thinks that you can send some requirements and some money to India and you are going to get a product back that is perfect and exceeds expectations, then you should go back to school and take a class called Life 101. With off-shoring or any type of contract work in general, you have to — MANAGE. You have to manage your suppliers, manage the requirements, manage the expectations, manage the budget, and manage the delivery. It is generally the same process as if you are doing it in-house, except you probably won’t know the people who are doing your work. Oh yeah, I shouldn’t have to say this because it is elementary, but get a referral, use somebody that a friend or a client has used so you don’t go into a contract blind. If your business model can accept it, there are so many benefits to having outsourced operations, it should seriously be considered if you are trying to make a buck.

My experience with Indian outsourcers was that they tried to extort us 1 year into the project. They said: we’re not going ahead with this project unless you send us more money - and we’re keeping the code until you do. We got out of that relationship, but it cost us a lot of time!! NEVER WORK WITH OUTSOURCERS IN INDIA.

@ 83 - I feel sorry for you…ALWAYS WORK WITH INDIAN COMPANIES. THEY ARE THE BEST.

Indian outsourcers like to smoke the exotic hashish - that is why their code is so sloppy. Silly Indian outsourcers - just say NO!

@ 85 - Get a life..

At my design firm we have had so many nightmares using Indian outsourcing. We tried China as well, even worse. The cultural gap was just too much. We had to learn the hard way. Too much money and time was lost, I think it’s better to stick with people that you can meet face to face, plus, have a phone conversation that doesn’t take three times longer than it needs. Also, the time difference was a pain when it came down to deadlines. I think that it’s just a bad business trend. You can’t innovate without the right communication.

I think a lot of what’s happening (and making India look bad) is quality control problems. I think it would be a great idea for the Indian government to make some kind of business performance registry like they have in the US.

In the US, you can make complaints to the BBB, and they are recorded on the company’s permanent record. Fraudulent companies die out very quickly.

If India continues operating without some sort of official Blacklist of Shame for much longer, I think they might start seeing less business.

suck my dick bitch

Outsourcing rocks for average work. Why pay so much to ppl here when same things can be done for cheaper. Every industry moves towards cost effectiveness and quality for average things. Its like japanese cars… way better than american cars, cheaper but there ends the story.. nowhere in the league of european cars.. pay for the work you want.. want a know of the shelf solution.. outsource…
the following indian companies have some value add.. but their developers in india suck big time:
Tata Consultancy service - say tata to your dreams
Wipro - Wipe my assro
Cognizant - oh they speak the best “hinglish” from far south
Infosys - probably the better of the above… but still just like jap car manufacturer

India is best in Outsourcing Business

Cricket Humor - visit http://jokecricket.blogspot.com/

Yes indeed sometimes such scenarios are very true because of cultural differences. We at Zigron Inc have made sure that we fulfill this gap but introducing Silicon Valley style development and approach in our offshore offices. Due to this reason we have successfully worked with few starts in past and also working on few of our own properties like Ourlikes.com.

But its truly funny to see this and realize that this does happen

Haris (www.zigron.com)

Tu meke!

Interesting points being shared here—given me plenty to consider for sure. For those here who have experienced success outsourcing , I would be very grateful if you would provide a listing of some dependable companies as well as any sample sites these companies have developed.

I have to admit that I’m currently “on the fence” with regards to outsourcing an upcoming project. Although I am fully capable of developing all aspects of the project myself, I would certainly welcome any outside assistance to shrink the development window.

Interesting discussions (at least from most posters)

A short story of my company’s experiences in this area. Management decided to embrace the idea of sending many of the operational jobs to India in order to save money. So they actually created a new company in India to facilitate this and moved many of the clerical jobs to India with great success. The work is getting done and they are saving money. So, it stands to reason that they should start forcing IT to do the same thing. After all, if data entry is able to make it work, it should also work for IT application development.

I was then told to hire app dev resources in our India office. It quickly became apparent to me that India was going to take alot more care and feeding than my US folks. You must fully document everything you need them to get done in painstaking detail. Sometimes almost to the point of actually coding it yourself. They would often have to rework it 2-3 times after code reviews were done.

I didn’t experience much in the way of creativity or innovation from my team in India. They wanted to be told exactly what needed to be done in detail and did not feel comfortable adding new ideas. (In hindsight, this may have been partly my fault. But I did my best to encourage it). It was at this point that I realized that all my US development resources were spending all their time documenting what needed to be done and passing it off to India. Their productivity (and morale) began to decline. Of course, management was all over me because it was not showing the huge savings and productivity they were getting in data entry. Totally unrealistic expectations.

I began working with other offshore solutions elsewhere. Particularly in Mexico and Romania. Mexico is nice because of the timezone and cheap travel. Mexico seems to have a good pool of developers but Romania seems to have a bit more technical experience. Prices are in line with India. I literally spend half of the time documenting and explaining what needs to be done vs India. Code quality is magnitudes better. They also seem to be alot more aggressive and creative than India.

With the results we achieved in Mexico and Romania, I was able to convince mgt to stop using India.

It can be done effectively if you find the right situation for your company and the way you work. It wasn’t easy for me or my team.

Good luck.

@95

Thanks for sharing your experience. You make a valid point about the need for greater documentation with an Indian development team:

“You must fully document everything you need them to get done in painstaking detail. Sometimes almost to the point of actually coding it yourself. They would often have to rework it 2-3 times after code reviews were done.”

However, I think your bad experience reflects the quality of the specific team you recruited. As I’ve said in previous comments, India is a big country, with tens of millions joining the IT workforce annually. The size of the labor pool (and more importantly, the demand for it) has lead to challenges with education, training, and overall quality.

But, it’s all about learning how to do it right. There are recruiting, training, and peer mentorship strategies that can instill a creative, self-motivated mindset in your team.

“I didn’t experience much in the way of creativity or innovation from my team in India. They wanted to be told exactly what needed to be done in detail and did not feel comfortable adding new ideas.”

I appreciate you pointing out that this was partly your responsibility. But, more than that, offshore work is an emerging management skill - a new job description, complete with its own cultural nuances and challenges based on distance.

And, thankfully, pockets of people are learning to do it right. Once a critical mass of people get it, India will be well on its way.

Manju,

Outsourcing doesnt mean YOU doesnt need to know anything and everything will be done sucessfully by the company you outsourced too. By your judgement it seems you are either lazy to learn how to work with a company offshore or just plain dumb. I outsource my work to south-east asian countries and give them a detailed requirement specs doc and 99% of the time they deliver the exact thing and always meet the deadline.

Since I have been in this outsourcing business for almost 8 years, I truly believe that outsourcing is great and makes great sense. It can work if you change your way to think and manage. Here is how.

1. Constant Communication. This is the most important factor to make outsourcing work. Because of culture, time and distance difference, you have to learn how to communicate with your outsourcing partners and how to train them to understand your messages. Does it really add any cost? At the beginning, yes. But after a while, when everyone is on the same page, the communication goes smoothly and you will feel benefit gained. Some of you felt pain instead of benefit because they met some liars or whatever you called. I don’t think it is fair to blame the entire industry. Is it true that liars are everywhere if you don’t know how to choose your partners?

2. Prompt status checking. You have to follow the development cycle. There is no way out no matter that you do locally, hire a near shore development team or use offshore teams on the other side of the globe. People think “ok, I pay you to do the work. I just need to sit in my resort cabinet and wait for the perfect results at the end.” No. Outsourcing leverages your cost by using cheaper labour elsewhere. It doesn’t get rid of the cost to manage them. My advice is to treat the outsourcing partnership as an extension of your current team and manage them as you do normally. If you want to outsource entire solution, you have to pay higher price in searching for a company with good reputation and paying them more to do the work. There is no such a thing that you don’t spend money or time to pre-screen the partnerships nor to manage the relationship afterwards. The project dooms to be failed if you are cheap yourself. No short-cut: everything has price.

3. Western-trained Management team on side. Trust is the key for outsourcing to succeed. You need to have faith on the management team of the outsourcing projects. If the owner of the company you outsource to is not who you know or doesn’t have a proven track record, you should hire a person who has western development experience on side. It is not difficult to find one if you are willing to pay a better price than the average developer price. This person can help you to train the team and bring the development process in line with yours. It is also your great asset to make communication (#1 issue above) succeeds.

4. Pyramid team structure. You have to ask the outsourcing team to create a structure with a few team leads and many solders under them. Team leads play crucial role in communication, status report and points of contact. They are the driving force to get your requirements or assigned tasks understood, planned, tracked and completed. On the other hand, you have to have similar structure in your local team who can constantly communicate their counterparties in the team lead level. You should absolutely avoid direct communication or giving direct commands to team member (solders). It will cause chaos.

If you do the above right, you will benefit:

a. Time difference becomes your advantage. For example, your local team finishes up development work at the west at 6PM but the eastern team starts working and continued your work if you gave some instructions. Or the QA team at east can test your work and give you quality report when you wake up next day.

b. The developers in developing countries usually feel time pressure to deliver project on time within budget. The motivation is simple: impress you and wish projects keep coming. If you have local western-trained manager on side, their 8-hour work day can be fully utilized without any break if you want. You have probably never seen such productivity. I have. (Well, there is a trade-off: quality is an issue if you do things fast. Anything else new? We have seen poor quality products all the time in US. So it is not an outsourcing issue but rather a project management issue. Agree?)

c. Money saving is questionable in this forum. In my opinion, if you can minimize communication cost, what else cost is business as usual. If you don’t know how to manage it locally, you will not know how to manage it in outsourcing. People talk about meeting and travelling costs. Do you really need travel while internet has provided cheaper and effective face-to-face meetings? If you like to travel, you would have spent the money anyway without outsourcing. The bottom line is how you can create effective communication among partners and minimize the cost to communicate.

Cheers!

Outsourcing is tricky, but it’s like anything else in life. It takes practice to get it right. Outsourcing is about high-value, not low cost. If you pay someone ten bucks an hour and expect great code, you’re kidding yourself.

Sending work offshore can not be transactional. Granted, there are a bunch of mis-managed ’software sweatshops’ offshore, but some companies get burned because they don’t actually nurture a relationship with an offshore team. It’s really hard to send work abroad and expect it to come back how you see it in your minds eye. You need to develop a relationship with the offshore team so they understand what you want.

Raza Imam
http://BoycottSoftwareSweatshops.com

Welcome to the global economy.

I love outsourcing. Never before were you able to tap-that resource 4000 miles away. Love it!