Does Outsourcing Programming Really Save Money? 653
itwbennett writes "In a blog post titled 'Why I Will Never Feel Threatened by Cheap Overseas Programming', John Larson tells the story of a startup that shipped its initial programming to India, paying $14 per hour, with predictably disastrous results. Larson concludes: 'I have yet to see a project done overseas at that sort of hourly rate that has actually gone well.' But in this not-uncommon tale of outsourcing woe, is the problem really with the programming or with unrealistic expectations?" The comments on Larson's blog post (originally titled "Why I Will Never Feel Threatened by Programmers in India") seem to me more valuable than the post itself.
Faulty Reasoning (Score:5, Insightful)
Just because the overseas programmers suck (debatable, but let's assume) doesn't mean management isn't going to go for the $14/hr carrot.
Re:Faulty Reasoning (Score:5, Insightful)
Re:Faulty Reasoning (Score:5, Insightful)
You get what you pay for (Score:2, Insightful)
Then for an equivalent skill level in India, they will have to pay approx USD(x/10)/hour
if they decide to pay x/20 , then obviously they will get lower quality
They need to go for cheap, not the absolute cheapest
Re:Faulty Reasoning (Score:5, Insightful)
> It might take a few years...
Yup, I've been hearing that since 2000. How much longer do you think? 20 more years? 50? A century? I don't think so. Show the PHB two salary numbers, he's going to pick the lower one, never mind any other factors (e.g. overall cost).
Fungibility (Score:4, Insightful)
Modern management philosophy depersonalizes employees into interchangeable resources. There is Management, Knowledge Experts and "Cogs".
They don't even care that it's more expensive using cheap programmers to get a job done - it's worth it to them to not have to depend on any individual contributor.
Example: those rentacoder websites (Score:2, Insightful)
I had a project that I was outsourcing a bid for. It was probably 6 - 10 hours maximum and I put a bid out for $150 figuring $15/hour or more for this simple task. All the overseas programmers started putting in bids of $250 - $500 and the ONLY bid I saw that was $150 or less was an AMERICAN PROGRAMMER!
If anyone NEEDS to know what the bid was, it was integrating a payment API into a web application. I've had people in the past do it in less than 2 hours for the $150 price I was offering.
Re:Faulty Reasoning (Score:4, Insightful)
Problem is software is an expense that adds little value to bottom line unless your a software company. Therefore go cheap and invest in more sales and accounting gurus who can better raise the stock price and bring better value to the shareholders. That is what is taught in business school and makes sense. You dont save anything as it never generates revenue.
Re:Faulty Reasoning (Score:5, Insightful)
Exactly. You should feel threatened, because quality frequently doesn't win out.
There are a lot more McDonalds than five star restaurants.
Re:Faulty Reasoning (Score:5, Insightful)
Outsourcing... (Score:5, Insightful)
If you pay someone by the hour, they will work as slowly as they can...
If you pay someone by project, they will cut corners to finish quicker.
If you pay someone by lines of code they will write bloated code.
All of this is even worse when the developers are halfway round the world and you can't keep track of them so easily, and when you don't have sufficiently clued up people on hand to inspect the code they have written.
Re:You get what you pay for (Score:2, Insightful)
Nah, they need to just not outsource. Never works, and with laws like HIPA /Sarbanes Oxley - the legal games that have to be played to ensure compliance aren't worth the cost or effort. How many Marines had their personal / medical data exposed because our laws don't apply to their people?
Not to mention that *all* foreign companies (foreign to India) have to let the government sniff / watch all traffic on the VPN connections between contractors and the parent company. Not many contracts (native to the company's country) allow for this sniffing.
Outsourcing sucks (Score:5, Insightful)
I am really amazed at how much our clients undermine their own goals. I understand that cost is what drives programming jobs to my country - but I still have to see a really successful product come out of this. It would be difficult to find a single cause for this, but all of the following are at least partially responsible:
1 - Low wages.
2 - Lack of good programmers getting involved: some of the programmers you can get for the lower wages are great, some suck. I've seen companies taking just anyone interested to fill programmer positions for such jobs (you can train them, right?). Getting involved in the selection process may help prevent this.
3 - Lack of trust in the the outsourced team: you can't think of the outsourced team as a bunch of mindless morons and expect them to care about your product. In those cases in which the outsourced team was a very good team, it didn't make the slightest difference because people was told what to do, and not to think - which makes hiring inexperienced people a pretty attractive alternative.
4 - Giving more importance to cost & time, than to quality: what would anyone expect to get, when quality is secondary to time & cost? This is a huge way to undermine your projects.
5 - Communication: communication is harder when people is spread all over the world. IMHO you need to compensate this difficulty by having some tool to help you keep in touch. In my current company, we use skype, and we keep in touch at all times with the client, which really helped solve this particular problem.
6 - Planning: planning is much more difficult when delivering work to someone who is not right at your side.
5 - Etc, etc.
There's a "right" way and LOTS of wrong ones. (Score:4, Insightful)
I know of a couple of software projects that are outsourced and getting good results.
This one basically the formula for one of the best of them:
Each team is overseen by a local (stateside/canadian) lead programmer who can actually review the code properly.
There are guidelines in place for documenting and commenting the code. Don't follow the guidelines, don't get paid.
And they pay close to what US programmers for a similar project would demand.
As such, they never run out of a supply of candidates. They can afford to be VERY choosy about their hires. And they get damn good value for their money.
Yes, they went through a few scammers during their early spin-up. But they had that sort of thing built into their expectations. They eventually wound up with a crack cadre of programmers and software products that are some of the best-documented I've ever seen anywhere. You could literally spend a couple hours reading the documentation and start working on the software.
Then you get the guys who think they're going to set up a programmer sweatshop someplace and pay sub-subsistence wages to hordes of thousands and magically fall on the fair side of the "infinite monkeys" principle.
I have zero pity for these fools and the crap they wind up with (if anything is ever actually delivered).
Re:Faulty Reasoning (Score:5, Insightful)
Re:Faulty Reasoning (Score:5, Insightful)
The main problem I've had with Indian programmers is that a lot of them don't really understand english (even though it is the official language of India) - which makes explaining requirements more difficult, but at least they can do math properly.
Not all overseas developers suck, and not all US developers are awesome. I can see why management would be willing to take the lower cost option, when they aren't guaranteed (or qualified) to identify and hire good talent locally.
College Hires the real problem (Score:5, Insightful)
I think you hit on something, even if you haven't realized it. Companies don't hire first year students. The numbers have been dropping for almost a decade now. Companies get it into their head "why deal with college hires when we can use experienced off-shore". Well you can't keep a pipeline of experienced programmers in the US unless you make the investments in the next generation of programmers.
Re:Faulty Reasoning (Score:5, Insightful)
Don't be the ugly American (Score:5, Insightful)
The main problem I've had with Indian programmers is that a lot of them don't really understand english (even though it is the official language of India)
English is an official language of India, and not the primary one. The primary official language is Hindi - you know, their native language.
I realize it's vastly preferable that they speak English if they work for you, but you're implying there's actually something wrong with Indians who don't speak English, and that's absurd. There's nothing any more backward or stupid about an Indian who doesn't speak English than there is with a Canadian who doesn't speak French or a Belgian who doesn't speak German.
Don't practice the cultural ignorance and arrogance that befalls other Americans. I think you're smarter than that.
Don't blame programmers for poor management (Score:4, Insightful)
If you can't get the guy down the hall to do it right, don't expect it come back right from India correctly either. Most software fails are due to poor planning, misunderstood or absent requirements, poor design with no input from customers, and so on. Yes, most of us who've worked with or managed foreign teams know that the coding from India (or Iowa, for that matter) may not always be top notch, but coding is the easiest part. Planning, useful documentation and management of a well conceived project is the difficult part.
Re:Faulty Reasoning (Score:5, Insightful)
This is because they dont give a rats ass how much it costs in 5 years.
They care about the balance sheet for the next 90 days.
This will not change until they fix the problems with corporations.
Re:Faulty Reasoning (Score:5, Insightful)
"That is what is taught in business school and makes sense. "
Yet the company I am at that has a non business school owner who goes against ALL the crap they teach at business schools is still here after 40 years and 3 recessions.
All of out competition is now gone. The last one filed for chapter 11, 1 month ago. WE are the ONLY company now left on this side of the state while all the Business school morons cant keep their business running.
I don't care if you have 20 phd's in business. you suck compared to a man that pours his heart and soul into a business and does the right thing before maximizing profits.
Honestly, business school grads are some of the stupidest people I have met. They can't comprehend concepts like customer satisfaction, customer retention, talent retention, and paying people what they are worth, not what they will begrudgingly accept.
Re:Faulty Reasoning (Score:5, Insightful)
The way thing work now, that's never going to really happen. It's the MBA effect. The goal of an MBA is increasing ROA, there are two ways to do that, either increase revenues or decreases assets. One is hard to do, the other is pure profit for the current quarter. That's why many projects (and factories for that matter) get outsourced. Reduce the assets and the magic number goes up. Brag about it to your peers and get promoted to some other job, the sucker who comes after you gets to clean up the mess.
The "it will cost more later" argument won't do anything as long we allow disposable idiots to run businesses. That why it's so remarkable when someone who doesn't consider it their one and only goal to increase a magic number comes along and leads a company to (temporary) greatness. There's a convincing argument that Google, Apple, even Microsoft (among others), became huge because their CEOs looked beyond the numbers games and actually cared about the companies they were working on. Dell's the current example for the idiot CEOs who only care about numbers that don't actually mean anything, Dell gradually sold off it's assets to a Chinese company, now that very same company is in the process of cutting Dell out of all the businesses it used to own. Why? Because Dell doesn't own anything but a brand name and a web site, now.
Re:Faulty Reasoning (Score:5, Insightful)
Re:Faulty Reasoning (Score:5, Insightful)
Only if the managers who made the decisions stick around. If they take their bonuses and leave, then it may be the guy who ends up cleaning up the mess who also gets the blame. After all there wasn't a problem until he pointed out that the work wasn't going to get done on time, and now he's spending so much money to fix a problem that was only supposed to be a small fraction of that to start with...
Office politics can be as stupid and unrealistic as the real stuff. Also once the decision has been made, some people can become completely unable to accept that it was a mistake or that it should have been done differently. They'll blame someone else for hiring the wrong outsourced IT company or not tracking the project closely enough.
Re:Outsourcing sucks (Score:1, Insightful)
5 - Communication: communication is harder when people is spread all over the world. IMHO you need to compensate this difficulty by having some tool to help you keep in touch. In my current company, we use skype, and we keep in touch at all times with the client, which really helped solve this particular problem.
6 - Planning: planning is much more difficult when delivering work to someone who is not right at your side.
5 - Etc, etc.
And with quality like this, is it any wonder out-sourcing doesn't work? ;)
Re:Faulty Reasoning (Score:4, Insightful)
A company can only get burned like this so many times before cooler heads prevail.
That has not been my experience. I have seen businesses make the same mistakes over and over again, and cooler heads just never prevail. Aside from my personal experience, we see it all the time that some CEO gets hired to a company, they totally screw things up and leave in some level of disgrace, and then they're hired by another company to be the CEO and repeat the whole thing over again. We've seen "geniuses" at Wall Street almost destroy the world's economic system, get away with it and stay in their positions of power, and then they turn around and engage in the same behavior.
People often aren't rational, and people often don't learn from their mistakes.
Re:Faulty Reasoning (Score:3, Insightful)
I'll probably get modded down for saying this - but over the years, I've worked as a developer/tech arch in Palo Alto, Mountain View, Milwaukee and Portsmouth, and my experience is that the vast majority of US programmers also suck.
I've been on Slashdot for ten thousand years, and have never registered. Pity I've no mod points to give you, but you're already at +5, Insightful, so meh.
Absolutely. Absofrigginlutely.
I'm not a programmer; I'm a sysadmin. I've dealt with enough code to know when shit sucks, though - and oh my god, the shit that comes out of a great many US programmers. It isn't just programmers, though. Nine out of ten jobs I walk into; the systems have been set up by retarded monkey children, pounding on keyboards.
There's no difference between shitty Indians and shitty Americans. Or shitty Russians. Or shitty Chileans. Or shitty anyone. Shitty workers are everywhere; and if you're a manager who insists on hiring idiots, you might as well hire the cheap ones and save some money.
Re:Faulty Reasoning (Score:5, Insightful)
Wish I could mod your post up higher (but hey, it's +5 Insightful as I speak, so what can a guy do, right?).
I, too, work for a small manufacturing business where the owners are not from "business school backgrounds". They simply understand our industry and have hands-on experience with it, and do their best to run a successful company.
I've seen plenty of other places run by the folks with "professional degrees" too, and typically, they get way too fixated on spreadsheets and reports, vs. having a firm grip on the realities unfolding right in front of them every day.
You *do* want a few basic, easy to interpret and use reports being generated, so you can nip problems in the bud. (Say you've got guys out in the shop who start slacking off, pretending they're really busy when they're not? They might be pretty effective at making the people observing them believe they really are working as hard as they can. It's not that hard to pace yourself so you take 15 seconds to put a box on a belt, or make sure you cut a piece with the saw *slowly* to waste a little time without anyone noticing. But a good daily or weekly report on man-hours spent and output completed would "red flag" this behavior pretty quickly.)
But keeping one's head buried in the numerical data seems to be the downfall of many an MBA out there. You simply can't base all your decisions on what produces the best numbers for you in certain columns.... You've got to actually care about what your business does (yes, even if in the short-term, that occasionally means taking a loss to please somebody).
Take our business, for example. In the recession, we really took a beating and we had to do 2 rounds of painful layoffs. Still, we did what was needed to trim things back to an effective skeleton crew of employees who could keep the place functional ... and we held our prices as low as possible, and provided the same level of customer service we always did (even when we had to pay to correct problems for customers that weren't really our fault, sometimes). We outlasted one of our biggest competitors, who has been a thorn in our side for decades. (He responded to the downturn by running a barrage of expensive advertising and giving away special promotions and perks.) Now, we suddenly have almost all of his business, which is giving us a big boost moving forward.
Actually overseas programmers don't suck.... (Score:3, Insightful)
Management that is supposed to oversee the project sucks.
Outsourcing properly is hard work, and how many managers do you know that actually work hard? Remember, these are the same people who couldn't figure out how to build and market a widget, now have decided that a boost in profits is only possible by outsourcing.
You must create comprehensive requirements. That takes a team. Reading large boring documents and sweating the details. How many of these lazy managers do you think would actually read anything over 10 pages long?
Next, you must set design reviews. Again, what is the attention span of these managers? Again, the lazy ones who decided to outsource in the first place?
Next, you must review the progress at multiple stages - and have enough flexibility in the contract that if you have to burn it and start over, you can afford that. Typically you don't have to burn everything, but you need to fix the other steps in the process that you obviously messed up on.
If you want a Ferrari and not a Tata, you had better be able to express the difference in a requirements document. "A car with 4 wheels" isn't going to cut it.
Best practice is to have a requirement that is based on a previous product. "We wants something just like this except......"
Oh, and don't forget to tell the Chinese that all materials must be food safe as specified in California or EU.
Re:Faulty Reasoning (Score:5, Insightful)
Employees of some outsourcing outfit do not work for you.
They work for their own company.
That contractual wall that separates them from you ensures that they will never care about your company nor go out of their way to
Re:Faulty Reasoning (Score:5, Insightful)
Same tactic politicians use.
Sell off the capital buildings, then rent them from the new owners. Claim profits during your term, and put it into the programs of your supporters. Let the next guy figure out how to pay the rent.
Re:Faulty Reasoning (Score:4, Insightful)
usually you only get to pick one
Pay less for the same suckage (Score:4, Insightful)
Perhaps from business's perspective it works like this: Since we don't know how to leverage, motivate, and manage talent, we might as well pay less for the same suckage.
Re:Faulty Reasoning (Score:3, Insightful)
Yes, because everyone knows that as soon as you put on a suit, you instantly become smarter, more aware, more effective, more efficient, more professional at your actual job (your programming skills), and you are worth more money. What are suits and slacks made out of that enables that transformation to happen?
Re:Don't be the ugly American (Score:5, Insightful)
Re:Faulty Reasoning (Score:4, Insightful)
This will not change until they fix the problems with corporations.
Then you have a long wait becuase corporations have worked the way you object to for as long as there have been corporations (and if think corps are a recent phenomena you don't know very much about them.) Corporations answer to one entity, their investors. Who are the investors? If you have a 401K- YOU. Retirees, pension funds, individual investors, hedge funds made up of other investment entities, if you save money in any way YOU are the person who causes these "problems" you're referrring to. Your only fix really is to remove any profit motive from yourself, so, fix away.
Re:Faulty Reasoning (Score:5, Insightful)
Seems to me that some number of years/decades back, most of Corporate America lost its sense of direction/balance/mission. Today it's "all about the money," and personally I believe that's wrong. If you're a car company, and you're "all about the money" instead of "all about cars" you may not have failed yet, but you're clearly on the road there.
Obviously you can't ignore the money. By the same token it's probably handy to have some MBAs around. But you need to keep track of who's in charge and what's the mission, and that shouldn't be the MBAs - it should be somebody experienced in the company's products.
To switch from the car company analogy to the software company analogy, would you rather buy your software from a company that's "all about software" while managing to make a profit, or from a company that's "all about profit" while managing to make software? Which company do you think will produce better software? (or better cars, to switch the analogy back.)
Re:Faulty Reasoning (Score:4, Insightful)
Re:Faulty Reasoning (Score:4, Insightful)
Re:Faulty Reasoning (Score:5, Insightful)
Corporations answer to their investors, that's a laugh. The modern corporation is an illusion run by psychopaths to confuse and decieve their investors. The number one goal of corporations today, is to guide as much of the company income towards company executive pockets and to maintain this for as long as possible until the company explodes under the weight of impossible debt.
The reality is failed offshoring is driven by nothing but pure greed. Some executive will claim the project costs 'x' based up a salary of 'y' but by offshoring for a salary of 1/5'y' they will save money and the executive deserves 10% of that saving as a bonus, of course when it fails the executive has already received their bonus and has launched a bunch of other half-arsed schemes since then.
As for the off-shorers they are coding for a price and they will contently code what ever crap they have been told to code no matter how piss-poor the results.
Re:Don't be the ugly American (Score:4, Insightful)
English is an official language of India, and not the primary one. The primary official language is Hindi - you know, a native language.
FTFY
There is no single native language for all of India. There isn't even a single native language for a majority of India. Hindi is is the most popular first language in India but native Hindi speakers are largely confined to handful of states of the North/Central area. India's high tech centers, where most of the outsourcing/offshoring takes place, are mostly in the South.
Re:Faulty Reasoning (Score:4, Insightful)
Re:Outsourced Programming Flaws (Score:5, Insightful)
Why didn't college teach me Lying 101 and 102?
Those are MBA levels courses
Re:Don't be the ugly American (Score:4, Insightful)
you're implying there's actually something wrong with Indians who don't speak English
Nobody is implying that a particular Indian is defective if he does not speak English. On the other hand, if the Indian that you're specifying your requirements to, in English, does not speak English very well, then the end result is going to be defective.
Re:Faulty Reasoning (Score:2, Insightful)
I have been to a professional conference where all the attendees---except one---are wearing slacks, collared shirts or business uniforms. The one sore thumb was in a t-shirt, jeans and sneakers. Everyone wondered what kind of company he works for that would allow their representative to come to a conference dressed like that.
And if you think the guy is smart, forget about it. He is not. During the discussion no one would take his ideas seriously because obviously if he cannot even be bother to dress appropriately for a professional conference one has to doubt whether he can even be bothered to think deeply about what he is about to say.
14/hr in india provides better living conditions (Score:3, Insightful)
the question is, why everything is so expensive in america - why they became so expensive, and why they are STILL staying so expensive, despite all the cost reductions due to outsourcing of manufacturing et al. cost of manufacturing shoes have gone to almost dime-level, but they are still being sold arond at least a few dozen bucks level. exorbitant profits.
this kills american competitiveness. corporations make exorbitant monies over americans, but they dont pay a reasonable percentage of what they make as salaries to americans. then americans make much less, and have to still live in an expensive world. all for shareholder betterment.
that being said, its possible for an american to compete easily at the 30/hr level. such a level, actually exists. indian programmers do not stay at $3, 5, 10/hr levels either - they jump ship going to higher hourlies. as far as what i can tell, a good one wont stay at 15/hr level either. so, everything normalizes at 30/hr level - those who are working at those hourly wages stay working with whomever they are working for a long time without jumping ships. this 'ship jumping under 30/hr level' also seems to contribute to the shitty work that is delivered under 15/hr. (you can still have good work done around 15/hr though).
Re:Faulty Reasoning (Score:2, Insightful)
The manager at my fund absolutely answers to me and the other people I work with.
Dude, you are delusional. I dare you to go to your fund manager and tell him to vote a particular way at a shareholder meeting. Then, after he gets done laughing at you, I double dare you to threaten to take your money out of the fund. Let us know how that goes!
Re:Faulty Reasoning (Score:4, Insightful)
And there is a substantial business risk in transferring the corporate processes to a new, different process. Case in point - a company I used to work for bought SAP, and budgeted 1 year and $300 million for the cost of the software, changing their systems and training for the US half of the company. Three years and almost $1 billion later, they finally were mostly done. The company cancelled the rollout to the overseas half of the company, and SAP stock dropped 20% the next day.
That old computer system is ingrown into every aspect of a company, down to the color and layout of the receipts handed out for petty cash. Replacing it is very much like replacing the nerves in a body without putting the patient to sleep during the operation. And when, as is common, the big company is the result of a dozen or two dozen mergers of many smaller companies (themselves also mergers), it is likely that each of those smaller divisions is still running on their old systems for the same reason, and it's just too expensive AND dangerous to change.
Citibank reportedly spent $500 million just fixing Y2K bugs in their existing system - and saved their company, according to the reports. Imagine changing operations to fit to a new system written from scratch.
Probably 1/2 of the problems that will crop up will have to do with business processes that nobody realized even existed.
Re:Faulty Reasoning (Score:5, Insightful)
If you're not aware, a bunch of "hippies in jeans and t-shirts" have done quite well here in Silicon Valley. While obviously there are many other factors at play, one reason for the success of the valley is that, by and large, nobody cares what you look like so long as you're intelligent and get your work done. Keep your suits, we'll keep our t-shirts, and call me when your fashionocracy catches up to our meritocracy.
Re:Faulty Reasoning (Score:5, Insightful)
No, it's not the MBA effect. *sigh* I have an MBA. I rant about the exact same things you do. They don't teach managing to the quarter or tweaking some stupid number to get a bonus. Quite the contrary, they teach building incentive systems that DON'T reward doing stupid or harmful things to your business. The "it will cost more later" argument is perfectly well respected by any competent MBA, though of course how much more and how much later matters. The damn sad thing is that if I come in and engage in a course of action that drives a company's revenue through the roof this year, but puts it out of business in 5, the market will put the share price through the roof and give me a ton of money. The market is not composed of MBAs. It's composed of fools. The only solution I can think of is simply not to take a company public, because when you do, you have to pander to fools rather than build REAL value.
Re:Faulty Reasoning (Score:4, Insightful)
And yeah, not all investments are divorced from their investors. Just usually mutual funds, like GP was talking about. You know, the sort that "regular people" invest into. The fact that you have had actual communication with your fund manager sets you apart from the masses.
As for "going elsewhere", my company's 401k plan has a list of places I can put my money. They're all treated the same. And I'm going good when it comes to wealth, I HAVE a 401k option.
Re:Faulty Reasoning (Score:5, Insightful)
Ha, it's similar in US too. The web turned everyone into a "dev" even if they only know HTML and some high level scripting language. So now there's a glut of programmers that just aren't very good.
As "Joel on Software" puts it, even if you're using Ruby on Rails and just push a couple buttons to create a web page, you still need to understand the fundamentals like pointers and recursion. If you can't understand those then you will have difficulty with abstraction elsewhere.