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Why I Hate the Term Outsourcing

Posted on Sunday, Jul 29th 2007

By Abhijit Nadgouda, Guest Author

What do you think of when you hear the word outsourcing? I think of something that it is not. Traditional outsourcing is defined as contracting with another company or person to do a particular function. Many of us do this for two primary reasons:

* We give it to the corresponding experts if we do not have the expertise with us.
* We have the expertise, but we do not have enough time to do the task.

This happens across industries and across departments. It helps you focus on your task, achieve the bigger vision better and build a relationship in the industry. It also helps you keep your entity lean and fit without the need to use ad-hoc expansion plans. Overall outsourcing has a value proposition which can help you build your business in an easier and better way. However, recently outsourcing has been flagging another aspect quite vigorously which has overshadowed all its benefits; and all credit to the software industry for this.

Today outsourcing is all about cheap labor and price negotiations. Not that the other aspects are not discussed, but this is the point on which contracts are hinged. Higher quality, compliance with standards and transparency are included as a formality, not as merit. And this is the reason, in spite of being in India, I have come to hate the term outsourcing. The moment I say I am based in India, they assume that my key ability is to hire hundreds of people and get work done for a very low price. All calls shouting for quality and best practices go unheard.

Another aspect of outsourcing is to treat the outsourced work as a blackbox. You do not worry about the details as long as the output is as you desire. This is supposed to help, but it has ended up hurting more. The biggest reason for this is that only the short-term goals and partial outputs get specified. And the blame is on either side. As a client you want to get involved as little as possible and do not go the full length in participation, and the I as developer make a lot of assumptions, especially because it fits with my model of low-price service.

This does not mean that a blackbox is not recommended, but you have to pay extra attention elsewhere in this case. Make sure that the output gets specified in all aspects – functionality, quality, flexibility and security, and that everyone knows what their responsibilities are. This applies not only to big tasks, but even to small ones like development of the simplest web site. The key thing to understand is that software development can never be temporary, it will always affect the future in one way or the other. Building temporary solutions allow both parties to easily disown their responsibilities. Unfortunately outsourcing, as we know it, does not acknowledge this.

Software cannot work well for the business unless the technical decisions are based on the business decisions. A disconnect between them means that the business will have to make that extra effort to gain benefit from it. For maximum ROI a collaborative approach is a must, and this cannot happen without trust and whole-hearted involvement of both the parties.

I am close to dropping the term outsourcing altogether, unless we start bringing it back to what it meant. Right balance of the three factors – fast, good and cheap is what outsourcing can do for you. It can provide a bottom-line justification for your business, but not necessarily through cheap labor. It can provide a higher value through talent, high quality or agility.

Of course this means that there is more work in finding the one who can do your task. However, it will pay back in benefits once you can build a good and responsible relationship instead of a one-night stand, which ends up being just another blaming game.

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[…] it. It implies opportunistic behavior, short term vision and disregard for merit. I have tried to outline my thoughts, and also tried to start a discussion on how we can use it for betterment of the business. This […]

On Outsourcing | iface thoughts Sunday, July 29, 2007 at 7:51 AM PT

I have written several articles about outsourcing. My view is from an IT executive tasked with making offshore development work in an environment that resists it.

Mike Kavis Sunday, July 29, 2007 at 12:01 PM PT

I am currently writing a guide about outsourcing for mid-market companies. We are an outsourcing provider specializing in accounting and we strongly believe that outsourcing works if it is well planned and implemented through close collaboration with the client organization. On a macro level, outsourcing benefits the global economy because the wealth is shared. When economies prosper and people have food and a better life, the result is less animosity between countries…leading to a more peaceful world.

Arlene Hauben Sunday, July 29, 2007 at 8:12 PM PT

Thanks for the your comments.

Ariene, it is a unique view that outsourcing helps the global economy because the wealth is shared. Well said.

Abhijit Nadgouda Sunday, July 29, 2007 at 9:30 PM PT

Arlene, I understand your point and I have nothing against outsourcing. But please, don’t be so candid. It doesn’t make a peacefull world, the 40 years old european father of 3 kids who is fired because someone in india will work 10 hours more per week for 50 % less has no reason to think outsourcing brings a better life and he won’t want peace and an open world.
When you are fired just because someone outthere will work for less than you, you can’t feel “better”. Peoples needs work to live and feel good and they want to be judged on their work, not on the fact that their salaries is too expensive. I live in Europe and i understand outsourcing but pls, don’t tell it makes the world better coz i know lots of peoples who have lost so much because of it.

Stéphane Traumat Monday, July 30, 2007 at 8:23 AM PT

I don’t read his post the same way you do, Stephane – I think he’s saying that there’s an appropriate use for outsourcing and that it’s been perverted into what you’re describing – cheap neo-slave labor to replace your expensive craftsmen.

He doesn’t see the impact on the original countries but describes their situation – they get dropped into stuff with no instructions, no relationships or proper process management. It’s just do it, and you’re cheaper so it’s better from someone else’s perspective.

Remember the cardinal rule of engineering:

     good, fast, cheap - pick two.
calenti Monday, July 30, 2007 at 12:21 PM PT

I was speaking of the comment of Arlene, nothing to say about the post 🙂

Stéphane Traumat Monday, July 30, 2007 at 2:05 PM PT

Hi Stéphane,

You should maybe have at the book “The World is flat” from Thomas L. Friedman (3 time Pulitzer price). The book has also been translated in French.

I’ve just finished reading the updated English edition and it changed the way I see the world today.

The author gave a conference at the MIT here (video):

Wikipedia page:


francois Monday, July 30, 2007 at 5:37 PM PT

Stephane, I don’t think the problem is the guy in India working 10 more hours and getting payed less than an european or us guy (because that is the market rate). The problem is “your” manager/boss that goes for this solution and the government not supporting the local market.



.w( the_mindstorm )p.

Alex Popescu Monday, July 30, 2007 at 5:44 PM PT

Alex, The guy in India is not the problem. For sure. The prb is the european guy who works hard and good but looses his job because someone does it the same way but less expensive. The prb is emotional, the competition is not fair so, as i said, don’t expect that this will make “peace on earth”.
Once again, i have nothing against outsourcing, it’s normal and natural but pls, don’t say that it will make peace on earth, no fairy tales pls.

Stéphane Traumat Tuesday, July 31, 2007 at 10:52 AM PT

Stephane, I am definitely not saying it will make peace on earth. Hopefully, it will level out the differences between people in this field, so that we will not have to worry about loosing the job due to cost reasons only.
And by the way: the problem is not the eu/us guy loosing his job… in fact he is the one having a problem. The problem comes from the huge difference between country economies (which have been encouraged long time by europeans 😉 ).



.w( the_mindstorm )p.

Alex Popescu Tuesday, July 31, 2007 at 8:05 PM PT

A good discussion is on here.

I think everyone agrees that outsourcing should not happen only on the basis of money. It hurts a lot when merit is rejected only because of that. It should be a case of relationships and of course value for money for the business. Unfortunately the value is overlooked currently, in most of the cases.

Thanks for the comments people.

Abhijit Nadgouda Tuesday, July 31, 2007 at 9:31 PM PT

It’s nothing more than companies trying to save a buck by moving tech support or other departments to third world nations. These nations rarely have the educational levels required to provide the service in the language required, as well as the people skills needed. Almost all agents you speak to can barely speak the english language (if that’s the language being serviced), have little to no education in the actual field they’re giving support in, and rarely have the patience to work with the customer. As a result, these third world nation employees wind up annoying customers to the point that they change services, or begin petitioning thier governments to ban outsourcing to overseas agencies.The agents have little to no customer service skills, will hang up on customers, transfer to incorrect departments intentionally to avoid the call, etc. The list can go on and on.
To be honest, placing these centers in the third world nations they’re in is a huge mistake. The centers should be closed and the services be returned to the country they’re being provided for.

Warlock Wednesday, December 19, 2007 at 2:06 PM PT

You are ridiculously off-base, I am afraid, Warlock. I think, the tech support people in India are extremely knowledgeable, speak good English, and by and large, have very good attitudes. Not all, but mostly they do.

Of course, from the viewpoint of those who have recently lost their jobs to off-shoring, the bitterness felt is understandable.

Sramana Mitra Wednesday, December 19, 2007 at 5:06 PM PT