Outsourcing and offshoring are popular practices in today’s global economy. In light of the recent events in Egypt though, you have to take a step back and wonder whether the economical advantages of such outsourcing are worth the risks. For example, I don’t see any riots or protests in the near future for places like Davenport, Iowa or West Point, Georgia. Egypt has the presence of such high profile companies as Microsoft, IBM, and Vodafone and, according to this article, their “impressive infrastructure, favorable business environment, and world-class multilingual workforce are among the many factors that attract companies to invest in Egypt.” Reading that article, it makes perfect sense why companies would outsource to Egypt. There are, however, risks involved, ones not associated with rural outsourcing in small town USA. To be fair, companies like the ones I just mentioned do plenty of due diligence when scouting offshore locations and they have contingency plans in place for matters such as this one. Hindsight is always 20/20 and nobody could have predicted the uprising in Egypt right now. There are risks that come with every choice and some have greater consequences than others. This is just one of the many reasons why risk management is so vital to an organization.
Archive for the ‘IT Outsourcing’ category
Egypt or Small Town USA?
February 1st, 2011IT Jobs: Made in China
December 9th, 2010While the job picture in the U.S. “seems” to be improving, the IT sector appears to be a mixed bag. The good news is that the number of IT jobs lost over the next few years will decrease. However, as far as job creation goes, the future looks bleak. This is all according to a study done by the Hackett Group. CIO.com spoke to a couple of Hackett’s lead researchers and you can read that interview right HERE. The following is a short snippet from the article:
“… CIO.com: You predict that IT job loss will level off at around 115,000 jobs a year, at least until 2014. What happens after that?
Michel Jannsen: In the corporate world, it’s going to be a grizzly picture here. [Net IT job loss] could continue until 10, 15 years from now.
Honorio Padron: Even longer. You know, the Chinese are now outsourcing to South Africa because it’s cheaper. [U.S. IT job loss] is going to go on for a long time. It could be 50 years.
Michel Jannsen: Companies have to understand the global marketplace. What we have is an asymmetrical talent war. In Asia or India the question is, ‘How do I hire 500 people?’ In the U.S. it will be, ‘How do I hire 5, 10, or 50?’ In the U.S., they will be hiring professionals with very specialized industry skills, the ability to manage in the global context, or experience in new technologies…”
Not exactly a ringing endorsement for IT employees, huh? Obviously this outsourcing and off-shoring isn’t a new development. It is also clear there are many benefits to doing business this way. Now I may be a bit naieve but I think this is a trend that needs to be reversed. It is bad enough now that everything you buy in the U.S. says “Made in China” but now that even applies to employees and workers. How is this country to get back on its feet if we keep shipping jobs overseas? I know the this argument has been made millions of times by millions of people but I encourage to read this whole interview and then think about all of the bright young minds out there who are enthralled with IT. What are they supposed to do? It would be an absolute shame to see that talent go to waste.
The Real Goal of Outsourcing
October 15th, 2010When asked why a company outsources their services, the most popular answer is cost. Simply put, it is cheaper. While that may be the case for a lot of companies that should not be your primary outsourcing focus. While cost is certainly a priority, your business should be looking for capability augmentation. You want a supplier who’s going to give you superior capabilities of a variable capacity. Sumeet Sanghani, Sr. Vice President of Outsourcing at SunTrust Bank gave a presentation about “Global Outsourcing” back in July at an IMF Forum. During that presentation, he gave several examples of capability augmentation at SunTrust. He spoke about the bank transitioning from FT based deals to outcome based deals and the outsourcing team’s creation of a knowledge services center of excellence. Mr. Sanghani sees these knowledge services centers as the future of outsourcing.
According to Sanghani though, there is an inherent bias against outsourcing, particularly given what is happening in the marketplace now and also the political sensitivity. Many companies prefer “easy” outsourcing. For example, “go get me the 40%, get it done in 6 months, and declare victory.” The perception here is that you do not want to overcomplicate governance because the company has enough things to do already.
If you would like to read the IMF report on Mr. Sanghani’s outsourcing presentation, entitled “Global Outsourcing at SunTrust,” please visit the Reports Section on the IMF website.
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