Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

One in three offshore projects fail
silicon.com ^ | October 18 2004 | Andy McCue

Posted on 10/19/2004 9:29:27 AM PDT by Willie Green

For education and discussion only. Not for commercial use.

Some IT bosses wrongly 'forced' into it by the board, claims report...

One in five IT execs claims to have been "forced" into offshore outsourcing due to pressure from the board and shareholders and over a third say their offshore projects failed, according to new report.

Out of the sample of 5,231 IT users across the US, UK, Canada and Europe, quizzed by research firm Ventoro, 19 per cent said they have an offshore strategy. Out of these 45 per cent said it was a success and 36 per cent claimed it had failed.

One in three also admitted to moving work from the offshore team back to the onshore team because of "performance problems".

Cost remains the main driver for offshoring, although a fifth cited pressure from the board and shareholders. Security, intellectual property issues and quality of service were the main reasons given for not moving services overseas.

Interestingly, however, while one in 10 firms admit to suffering IP theft on an offshore project, in two out of three cases the source of the problem was a member of the onshore team.

The main cause of offshoring failures is a lack of preparation and poor execution by the user organisation, although Ventoro admits that some offshore vendors can try to "steamroller the initial engagement process" in a rush to get the contract signed.

The Offshore 2005 research also warns against unrealistic cost saving expectations. When the successful and failed offshore projects were taken into account the average saving was found to be less than 10 per cent, although when the just the successful projects are taken into account the average saving is around 19 per cent.

"If you are anticipating offshoring savings of 50 per cent or more, you are not being realistic," the report said.

The potential for a customer backlash must also be taken into account by firms looking at offshoring and the research suggests firms ask customers if they are willing to pay a premium to have the service done locally. "If the answer is yes, reconsider moving offshore," said the report.

But it also claims the backlash has yet to materialise. "While customers are passionate about the offshore debate, their purchasing patterns do not indicate they are serious about the issue."


TOPICS: Business/Economy; Culture/Society; Foreign Affairs
KEYWORDS: globalism; outsourcing; quality; thebusheconomy; trade

1 posted on 10/19/2004 9:29:28 AM PDT by Willie Green
[ Post Reply | Private Reply | View Replies]

To: Willie Green

Interestingly, however, while one in 10 firms admit to suffering IP theft on an offshore project, in two out of three cases the source of the problem was a member of the onshore team.

...

The Offshore 2005 research also warns against unrealistic cost saving expectations. When the successful and failed offshore projects were taken into account the average saving was found to be less than 10 per cent, although when the just the successful projects are taken into account the average saving is around 19 per cent.

Assuming the credibility of the source, I wonder what the savings would be if both the failures and the thefts were taken into account. Less than 10% is already a thin pie to slice; accounting for the loss of intellectual property might well bring "savings" to 0 or less...

2 posted on 10/19/2004 9:38:32 AM PDT by snowsislander
[ Post Reply | Private Reply | To 1 | View Replies]

To: Willie Green

And they wonder why this happens, when in every single one of these posts the word "quality" never appears by those advocating outsourcing.


3 posted on 10/19/2004 9:39:29 AM PDT by KC_Conspirator (I am poster #48)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Willie Green

My theory on IT outsourcing has always been that it will decline as soon as the crappy results come in. If we just let the free market process take its course, all will be worked out. As it should be.


4 posted on 10/19/2004 9:40:29 AM PDT by cspackler (There are 10 kinds of people in this world, those who understand binary and those who don't.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Willie Green
Good post.  This topic is usually such a hot button so it's refreshing when we can get more light than heat.  

The study polled companies in "US, UK, Canada and Europe" about offshoring.  I'd be interested in knowing whether European projects offshored to the US were more or less successful than vise versa.

5 posted on 10/19/2004 9:48:02 AM PDT by expat_panama
[ Post Reply | Private Reply | To 1 | View Replies]

To: cspackler

That, and the fact that there's a whole bunch of lawyers who are going to get rich in the emerging litigation market overseas. While there may be a flood of outsourcing now, you just wait until the lawyers and insurance companies sink their teeth into them overseas countries where labor is so cheap. Just as we export technology and jobs to cheap labor markets, we'll export our labor laws , unions, insurance regulations and health care programs. That'll prove to be the great equalizer.


6 posted on 10/19/2004 9:51:09 AM PDT by raygun
[ Post Reply | Private Reply | To 4 | View Replies]

To: raygun
we'll export our labor laws , unions, insurance regulations and health care programs.

It's an on going process.  I had a lawyer friend that flew to Bhopal (way back when) so he could sign up clients to sue Union Carbide. 

You can run to India but you can't hide.

7 posted on 10/19/2004 9:56:36 AM PDT by expat_panama
[ Post Reply | Private Reply | To 6 | View Replies]

To: Willie Green
"If you are anticipating offshoring savings of 50 per cent or more, you are not being realistic," the report said.

If you are having specific things done by the right people the comparative cost for some coding, web services for example, can be as low as 6% of domestic costs.

8 posted on 10/19/2004 10:22:49 AM PDT by isthisnickcool (Only dummies play poker with George W. Bush.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Willie Green

Software projects have high failure rates. Even the ones that aren't offshored.


9 posted on 10/19/2004 10:42:21 AM PDT by Moonman62 (Federal Creed: If it moves tax it. If it keeps moving regulate it. If it stops moving subsidize it.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Moonman62
So is it 'offshore' or 'in house' projects that do better?  The article says that by offshoring "the average saving was found to be less than 10 per cent".  Does that mean that we need a price difference greater than 10 percent before we switch?
10 posted on 10/19/2004 11:06:26 AM PDT by expat_panama
[ Post Reply | Private Reply | To 9 | View Replies]

To: expat_panama

Good question. I think all important software projects should be done inhouse or with a trusted vendor. Failure for software projects is a subjective term. I think something like 90% slip dates. Some projects are doomed from the start. An executive wants it done, or some company is willing to pay a vendor, the reason being internal political reasons even though they know it's not going to work.. I imagine many of these are offshored. If a project is going to fail you want it done at the cheapest price, right?


11 posted on 10/19/2004 11:37:01 AM PDT by Moonman62 (Federal Creed: If it moves tax it. If it keeps moving regulate it. If it stops moving subsidize it.)
[ Post Reply | Private Reply | To 10 | View Replies]

To: Willie Green

the executives read this as - "2 of 3 succeed", so they just keeping sending it all over.


12 posted on 10/19/2004 11:38:35 AM PDT by oceanview
[ Post Reply | Private Reply | To 1 | View Replies]

To: Moonman62

Offshoring just means you can fail cheaper than fail onshore.


13 posted on 10/19/2004 11:39:06 AM PDT by dfwgator (It's sad that the news media treats Michael Jackson better than our military.)
[ Post Reply | Private Reply | To 9 | View Replies]

To: HAL9000; Bush2000; Lazamataz; Nick Danger

14 posted on 10/19/2004 11:39:37 AM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Moonman62
The only thing I'm sure of is that I worked for a few years writing code and and years later in my old age I don't even want to think if it.
15 posted on 10/19/2004 11:43:07 AM PDT by expat_panama
[ Post Reply | Private Reply | To 11 | View Replies]

To: Willie Green

Most projects fail due to poor management, not the quality of work being done by line-level developers and testers.


16 posted on 10/19/2004 4:02:17 PM PDT by Bush2000
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson