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Elbonian Rhapsody

Back in the early 1990s, I was working for a medium-sized software firm who had decided to try transferring its development to India.

At the time, the "world-wide web" was just getting started, and one of the first cartoons available online was Dilbert. As webmaster, I contrived a small script which would make today's Dilbert available from our website, with a click through to the main site.

Just as the Indian transfer was warming up, Adams was doing his "Elbonian" series of cartoons, where Dilbert's company is transferring its software development to a mythical apparently-Eastern-European country, Elbonia, which has no technological infrastructure.

Upper management was not amused at the correlation.

I have no issues with outsourcing per se. Economically, I'm convinced it when it's chosen correctly, it ultimately works out for the best for all involved -- except perhaps the poor schmo who must be retrained in something less outsourceable, and even that, only in the short run. Including if that's me, which it appeared to be.

But what I saw in the Indian outsourcing effort was mind-bogglingly stupid. No serious attention was paid to infrastructure costs, connectivity fees, actual labor costs, nor quality. It was as if the thinking was simply: "Wow, I'm screwing someone here in the US, therefore I must be making a bigger profit!" It was sort of an inverse parody of certain extreme leftist dogmas, where the belief that if someone is making a profit, someone else must be hurt.

Of course, they weren't increasing profits, and there was no reason to think they would be from the outset.

The VPs I'd discuss it with would say, glowingly: "There are more Ph.D.s per capita in Bangalore (or some other city) than anywhere in the world!" I tried to gently point out that sounded a little too good be true, and suggest perhaps some of those degrees came in cereal boxes -- that we were looking at the Lake Woebegon syndrome writ large. (No insult to India, but no country has that high a percentage of it's population as PhD-type material, as we'd think of it here in the US -- much less with decades of software development experience.)

At the outset, the Indian consulting company (Tata) promised us 3 qualified, degreed programmers for the equivalent of one US programmer -- by the end, the ratio was something pathetic like 4 to 3. And let's not get into hardware, facility, and networking costs. I could see this was probably costing more than it was saving long before we got into it, but upper management would not be dissuaded.

So we moved a software product to India, and discovered, after many months, what most companies discovered: (1) While there are indeed some excellent Indian programmers, our management was just too stupid to make sure our project was staffed with them. (2) Indians tend to be agreeable, and tell you things are just fine, even things aren't going well. (3) Costs were higher than American development. (4) US employees got sick of staying up till two in the morning in order to have conference calls. (5) When we were done, we'd paid millions for a snarl of code which didn't actually do anything.

So, since then, I've made much of my income from failed Indian outsourcing software projects, bringing them back to the US. Often companies just seem to assume that overseas software will be a lot more robust than turns out to be (A friend suggests they absorb that thinking from the trade mags.) In the worst cases, they lose millions (and more importantly, years) and get very little back in return.

Comments

Very reassuring.

I worked for 9 months for a 24 hour call center in the Philippines (American owned). They'd brought in some American management and personelle to put a good face on the IPO, and then planned to get rid of them afterwards. Not that I'm complaining, I just wanted to see the country and they let me know in advance that it would be temporary. Though they seemed to have kept one of the better American managers, to their credit. I don't really think that the company deserves either universal praise or condemnation.

The pros and cons;

Pro: They seemed to pretty easily handle 24 hour support. The company was busiest during their night (American day) but still had a good number of people on the floor during the Philippine day.
Staffing 24 hour phone support seemed pretty doable.

Filipinos are culturally more similar to Americans than, say, Asian Indians. So the company could compete well for customer support work vs. Indian call centers.

There's less technological expertise in the Philippines, supposedly, so the work is more work along the lines of customer service than tech support. But there were still some very smart trainers there.

The biggest cons include that the Philippines is just about tapped out in terms of quality English speakers. So in the short term, call center growth depends on expensive in-house English training, influencing the gov't to teach English like they did two generations ago (the gov't in the Philippines is so corrupt that it can barely support a public school system. Two years of college education was requested to work at McDonalds, IIRC), lowering standards, or poaching off of the other call centers. Identity theft (CC#s) was also a big problem. I don't know if it was worse than in the states, but crime outside the call center seemed to be much worse than in the states for certain, and one of the trainers had his cell phone stolen when he set it down on the floor. Black markets there are far more organized, though at least one of the people who got caught at the company was doing stupid things like using a cc# to buy roses for his girlfriend rather than anything that seemed related to organized crime. I wouldn't be surprised if organized crime will begin to increasingly focus on these call centers eventually. Also, while the company touted lower turnover to their investors, the turnover rate seemed to actually be fairly high. Though I have no actual numbers to compare. And purchasing technology in the Philippines cost ~60% or more compared to the states, because it wasn't produced locally, and a lot of money there was made off of import fees. Thank God I had my laptop and didn't have to use one of their computers that worked at a snail's pace.

The company could compete with American call centers fairly well, but the outsourcing wasn't nearly as cost effective as would be initially assumed. Our company, from what I was told, tended to be on the higher end of things quality-wise. I'm not sure how the cheap and dirty places were run.

Posted by: Ryan on February 8, 2007 11:03 AM

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