Was Offshoring Such A Good Idea ?

[Paddles]

If anyone here who thinks offshoring is an inherently bad idea could they find me anyone willing to work hard for 5K a year?

In addition they need to be able to program computers to some extent.

Failures in offshoring are due to bad management and short-termism. Most of the comments on here are plain ignorant of the realities.

Welcome to my world. There are bad offshoring suppliers out there but they are more than outnumbered by bad clients who think that their inability to manage a UK workforce will be masked by shipping the work to Bangalore and not explaining what it is they want in a coherent mannner.

Edited November 14, 2008 by Paddles

[Peter Hun]

I did a contract where a US Manager and his Indian born second were insistent on out-sourcing work from the US to India. I believe they had a vested interest in doing so though - big contracts, big profits if you owned a company providing outsourced services.

AIG outsourced their IT to an Indian company - part owned by AIG's founder.

Nasty company.

[wickywackywoo]

One has to ask the question why people thought offshoring was such a good idea.

The Uk is now losing thousands of jobs each day, the banks that are now effectively nationalised and therefore funded by the taxpayer who is not only hard pushed both in work and out of it, is in fact now funding the payroll of many hundreds of thousands of offshore workers, whilst nearly two million workers in the UK are dropped on the scrapheap.

I could never understand the short termism of offshoring, the process whereby you transfer skills offshore and operate your business at least cost, whilst relying on Uk consumers to keep your business going. For me, and I admit not being an economist, its seems rather odd to put your consumers on the dole, and then expect them to have money to buy your products indefinately.

I am reading a lot about the US now reeling over the fact many jobs were sent offshore, with full approval of the Government on the day, and the protectionists are now getting a lot of press, Obama is rumoured to be anti offshoring, and I am guessing that he will close the floodgates to prevent further job losses.

I think it is now fairly apparant to the average Joe in the street, that having a Labour Government that has been hell bent of Globalisation, Global Equality, and having taken their eye off of the real issues of the day, has not only cost them the next election, but it has cost many millions of British workers their jobs in the process.

The last Labour Government bankrupt the country, it comes as no suprise to me that this one should be any different.

To be frank, owning a house is the least of our worries today, the real issue in most people minds is how long can this government keep paying out benefits for the many millions that will be knocking on their door shortly, and will we see people starving in the streets early next year ?

They were forced to offshore. I am reliably informed by many people on these forums that all Brits (excluding themselves) are fat, lazy, no good chavs and all foreigners are wonderful, hardworking honest people who would never dream of committing a crime

[RufflesTheGuineaPig]

The problem for an indivual company with offshoring is it makes the books look good, but ultimately destroys the value of the company.

Basically it's only usefull if you plan to sell the company.

[wickywackywoo]

The originator of this thread like so many others in the country worked as an enabler for business when it comes to offshoring. All the rhetoric we have been fed over the years about British workers being lazy, useless, and generally unworthy was orchestrated for the purpose of allowing business to justify offshoring not on the basis of cost (as everyone it is about) but instead on the basis that they just can't find good enough people in the UK.

Spot on! Amazing how may people genuinely seem to believe this nonsense about all Brits crap, all foreigners great. You even see many, many people on these forums that strongly believe this. My guess is that they are largely the younger/more impressionable generation, although you do get some surprisingly stupid older people.

[Paddles]

I love these threads whenever they pop up on here. I work in this industry, I'm the b*stard who brokers these deals and runs the programme that gets these jobs offshore.

If you don't want me to offshore your job, make sure you are as close to the business function as possible and that your (i.e. personal and departmental) track record is one of innovation and continuous improvement.

On the other hand, if you are in some back office function that is easily-documented and repeatable and you "do it that way because we've always done it that way" without ever questioning if it's best for the business...... well, sorry but I'm your nemesis.

Alternatively, you could always Google "Beckman ruling" and try to engineer yourself into fitting the criteria.

[1929crash]

One has to ask the question why people thought offshoring was such a good idea.

The Uk is now losing thousands of jobs each day, the banks that are now effectively nationalised and therefore funded by the taxpayer who is not only hard pushed both in work and out of it, is in fact now funding the payroll of many hundreds of thousands of offshore workers, whilst nearly two million workers in the UK are dropped on the scrapheap.

I could never understand the short termism of offshoring, the process whereby you transfer skills offshore and operate your business at least cost, whilst relying on Uk consumers to keep your business going. For me, and I admit not being an economist, its seems rather odd to put your consumers on the dole, and then expect them to have money to buy your products indefinately.

I am reading a lot about the US now reeling over the fact many jobs were sent offshore, with full approval of the Government on the day, and the protectionists are now getting a lot of press, Obama is rumoured to be anti offshoring, and I am guessing that he will close the floodgates to prevent further job losses.

I think it is now fairly apparant to the average Joe in the street, that having a Labour Government that has been hell bent of Globalisation, Global Equality, and having taken their eye off of the real issues of the day, has not only cost them the next election, but it has cost many millions of British workers their jobs in the process.

The last Labour Government bankrupt the country, it comes as no suprise to me that this one should be any different.

To be frank, owning a house is the least of our worries today, the real issue in most people minds is how long can this government keep paying out benefits for the many millions that will be knocking on their door shortly, and will we see people starving in the streets early next year ?

You are correct.

[Paddles]

Counter position: would also help if the boards weren't so finance-orientated and placed more emphasis on long-term strategy/value.

Let's not go there...... I reckon there's a real gap in the market for offshoring senior management jobs. Far too many real lifePeter Principle examples.

[time 2 raise interest rates]

It's not such a good idea now the £ has tanked they must be costing a fortune.

[Mikhail Liebenstein]

Actually offshoring can be a disaster for a firm, especially now most of the offshoring benefits have gone.

My firm has just been hit by 30% cost increases on a variety of computing and electrical kit - a combination of wage increases and currency changes.

Over the course Sterling and the Dollar are going to weaken and this will make China too expensive to do business in and will actually make your business uncompetitive.

The next Country everyone jumps to will be Vietnam, but after that they run out of places to go.

Any CEO that looks at offshoring now is coming to the offshoring party far too late and probably should be removed from post by shareholders as it now longers saves companies money and actually is not much better than gambling on long term exchange rates.

Edited November 14, 2008 by mikelivingstone

[wonderpup]

I love these threads whenever they pop up on here. I work in this industry, I'm the b*stard who brokers these deals and runs the programme that gets these jobs offshore.

What about the OPs concerns- do you see a problem with the fact that one mans redundant employee is another mans best customer? The question is, once we have exported all the work, who is going to buy all the products?

[SMAC67]

I've seen the same mistakes happen, with exactly the same frustrations.

If you understand what you're dealing with though, you can make great savings in your business by using offshoring to offshore what you can. The trick is understanding what you can't, and understanding what other costs you incur (not material costs, as you suggest).

I've seen Indian developers who - though inferior - produce more or the same than comparable graduates for a small fraction of the same pay. If you can't make use of that then you shouldn't be in business.

My point is that rubbishing offshoring completely is as idiotic as offshoring for the sake of it.

I feel sorry for offshored workers, they get completely screwed as when the axe comes no-one thinks twice about them.

Unfortunately you are the idiot who believes that one person having all the resources in the world means that the world is both profitable and efficient. You don't even understand your own shell game and that ultimately it is suicide. All life and all busines is a loss leader over time, although it may show a profit at any point in time. Ultimately it is all a waste.

If you want to know why the global economy is going down the pan, just look at off-shoring as one of the reasons. It all comes down to entropy. John Maynard Keynes was a wise man, unfortunately most people neither read nor understand his theories.

Modern economic theory and Milton Friedman is about as valid as the bible, both are based on make believe.

[wonderpup]

I think this is the point - despite lots of rumblings, over the last ten years offshoring didn't lead to an increase in unemployment (long-term).

It depends how you define unemployment- replacing a well paid job with a poorly paid one has the same effect, the individual has less spending power. And the threat of offshoring has been used to keep wages depressed- so the overall effect is that Uk companies are exporting wealth to other countries at the expense of UK workers- the ultimate end game being that there is no one left in the UK to buy the products that the outsourcing companies make.

The sawing off the branch you are sitting on analogy works perfectly for this.

[Paddles]

What about the OPs concerns- do you see a problem with the fact that one mans redundant employee is another mans best customer? The question is, once we have exported all the work, who is going to buy all the products?

You're getting into real "whither Great Britain?" territory here.

What jobs are we offshoring? In the main, back office functions, service functions, nothing that particularly drives "value".

What do we want the backbone of our economy to be based on? We used to make stuff, then we tried to take the Olympic Gold for "industrial action" from the French and then we rebuilt our economy from doing up our houses and selling them on for massive profit.

We're not Singapore and on the other hand we're not a manufacturing country that can compete with China either. So what are we?

[the_duke_of_hazzard]

Unfortunately you are the idiot who believes that one person having all the resources in the world means that the world is both profitable and efficient. You don't even understand your own shell game and that ultimately it is suicide. All life and all busines is a loss leader over time, although it may show a profit at any point in time. Ultimately it is all a waste.

If you want to know why the global economy is going down the pan, just look at off-shoring as one of the reasons. It all comes down to entropy. John Maynard Keynes was a wise man, unfortunately most people neither read nor understand his theories.

Modern economic theory and Milton Friedman is about as valid as the bible, both are based on make believe.

You're the idiot - you've swallowed a few books and have generated a philosophy worthy of a GCSE Media Studies Student. Have a gold star.

[ken_ichikawa]

You're getting into real "whither Great Britain?" territory here.

What jobs are we offshoring? In the main, back office functions, service functions, nothing that particularly drives "value".

What do we want the backbone of our economy to be based on? We used to make stuff, then we tried to take the Olympic Gold for "industrial action" from the French and then we rebuilt our economy from doing up our houses and selling them on for massive profit.

We're not Singapore and on the other hand we're not a manufacturing country that can compete with China either. So what are we?

My text book says you should NEVER outsource the main value adding activities of your company.....

Strange that my accountancy practice I work at (for how much longer I don't know) outsources many of its accounts jobs off to Pakistan, which is our main value adding activity....

What are we? , loan sharks , the city being loan shark and gamblers , now all we have is loansharking to Africa which is being dominated by China these days.... so what are we? , dunno...

[the_duke_of_hazzard]

Working hard and working well are not the same thing. That "to some extent" is the mistake most managers seemed to have made.

By all means outsource unskilled work to whoever bids competitively for it, and then invest the money you save in training skilled local labour to perform your skilled work.

Why would I bother if I can get cheaper labour that's better for my business elsewhere? In any case we're still hiring in the UK for the very reasons others have pointed out. My only point is that the cheapness of labour can't be simply ignored because it doesn't fit in with your nationalistic ideals.

[the_duke_of_hazzard]

I'm watching the phenomena of gloabal wage abitration whereby the rise in living standards in the developing countries of the East crosses over with the falling living standards of the West.

At that point, jobs may begin to flow back West again.

I'm almost seeing it already - the Indian nationals I work with on-shore here are on a UK wage of about 16k. That is not much less than the starting salary of a UK graduate developer.... and the quality of their work is usually on par

One uninteneded fallout from the comming recession will be to accelerate the fall in UK wages via a combination of weak Stirling and actual pay cuts (I have seen my own day rate tank 20% in the last year).

Before long, the offshore model will either be abandoned - or jobs move to countries with lower living standards. trouble is, I don't see too many university graduates coming out of Cambodia etc at the present...

This cycle's been happening at least since the early 80s, probably before as well for all I know.

[the_duke_of_hazzard]

I have seen this attitude ruin companies and innovative software products countless times. To you, it may look comparable but underneath the covers, my experience is that it is usually a mess. Yes, they produce something that looks ok and will work short term but the long term prospects for the software/company are compromised because of poor workmanship and poorly thought out solutions. I work in the software industry and have experience of at least a dozen offshore projects. None of them have been very successful but that hasn't stopped execs from touting them as such.

I'm a software developer. I know the difference between good and bad, that's why I'm paid well. And that's why we are still hiring in the UK as well as using offshore labour.

[the_duke_of_hazzard]

If you can't afford to employ local workers at the prevailing rate, you don't have a UK business surely? Wouldn't it make more business sense to move your whole operation to India?

Did you not read my sig?

[SNACR]

IMHO, I can't see manufacturing returning to the UK even with the sterling devaluation. If you want a product made why are you going to bother with the exorbitant property costs, the hassle of endless regulations and a bolshy workforce?

If the alternative is just emailing a product specification to an english speaking manufacturer's agent in Hong Kong. It's a no brainer, unless we indulge in protectionist import tariffs and what happens then "anyone, anyone?" -In case it sounds patronising this is a popular culture reference.

[the_duke_of_hazzard]

IMHO, I can't see manufacturing returning to the UK even with the sterling devaluation. If you want a product made why are you going to bother with the exorbitant property costs, the hassle of endless regulations and a bolshy workforce?

If the alternative is just emailing a product specification to an english speaking manufacturer's agent in Hong Kong. It's a no brainer, unless we indulge in protectionist import tariffs and what happens then "anyone, anyone?" -In case it sounds patronising this is a popular culture reference.

Property costs will fall, as will the costs of labour here. Regulations - well, if the situation gets really bad no-one will follow them.

Also, the price of oil is up over the longer term, so you might be able to make it cheaper, but transporting it is another matter.

[ken_ichikawa]

Property costs will fall, as will the costs of labour here. Regulations - well, if the situation gets really bad no-one will follow them.

Also, the price of oil is up over the longer term, so you might be able to make it cheaper, but transporting it is another matter.

The problem is though one of risk , in that sure you can call a bloke in Hong Kong to have something made in China ...(hmm they are actually the same place )...

And making things at home might well be cheaper per unit...

but it has a lot more risk in that China has the infrastructure massive massive factory complexes in China, ready to take your orders with a yes sir! attitude...

You put your money in you shortly get it back out in product...it comes on a shipping container a few weeks later...

While here you need business property to put your manufacturing in , buy/lease machines , hire staff tool up the production line buy materials and then start making your product...

A similar thing happens with mechanics , in that do you take it to a mechanic or do it yourself....

A mechanic has all the tools , skills and parts and oils/fluids/gaskets you need, a decent one does anyway..

While if you want to do it yourself you need to buy your own set of tools , and get the parts yourself, in the longer term you get your money back , but in the short term no......

My oldest tools about 7 years have paid themselves back a few years ago saving on labour and cost adjusted overhead on labour...I winced at the initial outlay of them , but they always pay for themselves I have to overhaul my brakes every 6 months take it to a mechanic 2.5 hour job £45 an hour labour (overhead adjusted), my piston puller was £93 , and my TORX set was £25 , it paid for itself in a year.

My newest tools cost me £90 the other day and will take a year or so to pay me back, for many people it is a no brainer they take it to the mechanics viewing the short term only.

Edited November 14, 2008 by kennichi

[Paddles]

My text book says you should NEVER outsource the main value adding activities of your company.....

Strange that my accountancy practice I work at (for how much longer I don't know) outsources many of its accounts jobs off to Pakistan, which is our main value adding activity....

What are we? , loan sharks , the city being loan shark and gamblers , now all we have is loansharking to Africa which is being dominated by China these days.... so what are we? , dunno...

I canned my accountants for exactly that reason; they offshored the back office function and let the offshore company communicate directly with me, the client. Idiots. Crap service and when I checked, not competitive pricing. Someone really didn't think about that hard enough, did they?

[ken_ichikawa]

I canned my accountants for exactly that reason; they offshored the back office function and let the offshore company communicate directly with me, the client. Idiots. Crap service and when I checked, not competitive pricing. Someone really didn't think about that hard enough, did they?

Its actually quite funny at my firm the partners laud the outsourcing of accounts jobs highly and think it is marvellous since the blokes in Pakistan will do it for £4-5 an hour, the problem is they do not account for the fact I have to spent hours and hours and hours correcting their mistakes.

Some are forgivable ie British Gas supplying electricity.

Some are definately not, like where £117.50 of stuff goes through the accounts, to me that instantly looks wrong in that its £100 goes through the accounts £17.5 goes to the VAT liability account....

Its getting kind of ridiculous sometimes I spent 2 days correcting a job that would have taken me in total 3 days to do , add in the outsource function and it took 4 days...