Status Quo

By CIOinsight  |  Posted 06-22-2005

Offshore the Managers? Readers Speak

Resolved: That offshoring technology executive and/or development management will benefit project effectiveness and organizational competitiveness.

Two weeks back I described why I believe that if you accept the traditional business case arguments for offshoring development and developers, it makes more sense to offshore management and executives instead.

I invited readers to respond in 111 words or less with a "Pro" or "Con" statement to the resolution that leads off this article, and offered a small prize to the best argument on each side of the issue.

We got a lot of responses. They fell into five categories. There were general comments that did not try to argue for one side or another, pointing out additional aspects of the issue the writers believed important.

There were two piles o' writers who favored offshoring management: those who believed the people who do the line work should also be offshored (what we'll call Extraordinary Rendition), and those who took the line that workers should be hired in-house (we'll call this the Jeff Arrangement, because that's the one I suggested made most sense).

Among the "Con" respondents, there were those who believed line workers should be domiciled offshore or wherever the work could be done at the lowest out-of-pocket cost (we'll call this Status Quo), and there were writers who felt those in-house managers should be managing in-house developers (whom I call YIMBYs).

By the way: There were insightful responses that misunderstood the contention as well, conflating the term "offshoring" with "outsourcing," and making arguments in support or in opposition to outsourcing that was not offshore, something I didn't specifically address.

While organizations do some of their outsourcing offshore, most outsourcing is done domestically.

And while offshoring is almost always done to save on upfront labor costs, most outsourcing that isn't out of the region costs as much or more as leaving things inside the company.

For example, many organizations avoid putting consultants or other part-time experts on the books, even if they cost more as contractors, because our perverse tax structure usually punishes businesses for hiring local people and subsidizes layoffs or job exports.

Here, I'll present the Honorable Mentions, the most enlightening of the entries that didn't win. Some of these were of winning quality but didn't follow the instructions.

Extraordinary Rendition

The position is nothing new. This is already happening. This is next stage in outsourcing process. You have to bundle the application development as a process and offshore it.

So, for example, if the function of an IT-related department is to support the technology requirement of (say) Wealth Management Group. You can offshore this function entirely, which includes management and individual contributors.

The management of the offshore group will then deal with business managers onshore to support their requirements. — Sanjeev J. Nair, NetBenefit International

Mr. Nair makes a strong argument for offshoring both management and individual contributors. Note that later in his response, he also argued cogently for the Status Quo case, that is, keeping managers local while offshoring individual contributors.

Next Page: Status quo.

Status Quo

Status Quo

There were very few notes supporting in-house management but offshoring of line staff. Perhaps that's because it is the status quo and few feel energized to support that which "just is."

Or perhaps it's that, like cannibalism, the practitioners feel that it's a necessary evil if you're hungry enough (in this case, for a way to add some meat to the bottom line).

The best of the bunch is from the pseudonymous "King Hills." He argues that you need management to be local so it can provide leadership to the offshored staff:

The concept of offshoring becomes popular because of the pressure of "reducing cost." Who is under this pressure and who is making the decision to reduce the cost. The answer is .... "management."

Typical process to achieve this goal is starting from the bottom. Therefore, America corp. first move all bottom IT folks to India (many of them are just like tools in your toolbox; easily replaceable).

If this is not enough, they will cut the middle management and move the responsibility up in the chain (more painful to replace but doable). Eventually, they'll outsource the entire IT dept (perfect idea!).

Going in the other direction won't work because someone must still lead this group of highly paid IT folks.

Jeff Arrangement

It is about time that someone came up with this solution. I will give one example of how this is much better than what has been happening in the IT workforce.

For each $250,000 executive that you send overseas, you can keep or re-hire five good and experienced support people that are actually local and that you can understand when you need help to get back up and running. Better support means happier customers, and that equals money. — Aaron Fadeley, Reddy Electric.

Mr. Fadeley is examining both quantity and quality in the equation, and making it a zero-sum equation; if you offshore managers, you can save the big dollars, at least enough to employ staffers with proximity to where the work will be deployed, supporting the proximity and shared culture I have argued is also important.

YIMBY

I wish this was true, but people in upper management have bought the idea that development is a simple commodity and should be moved to wherever it is cheapest. The company I work for has created a new branch in India and has allocated that all development will be done there by the end of '06.

This is despite the fact that almost all offshoring attempts so far have failed. The perceived bargain of one-third the cost per developer is too tempting.

What is ironic is that the productivity will drop by more than the one-third of cost, so it will actually be more expensive. Thanks, Eric Brantingham

Mr. Brantingham makes the case for the Yes In My Back Yard approach, his contention being that if you factor in quality, life cycle cost is lower for local projects.

Sharp insights all, on all sides of the issue.

In the next column, I'll present the winners.

Jeff Angus is a management consultant and has been working with IT since 1974. He has held IT management positions in user interface design, marketing, operations and testing/analysis. Look for his book, "Management by Baseball: A Pocket Reader." Jeff's columns have appeared in The New York Times, The Washington Post, the St. Louis Post-Dispatch and the Baltimore Sun. He can be reached at jeff.angus@comcast.net.

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