The Hidden Cost of Outsourcing 275
Alien54 writes to tell us CNNMoney is reporting that outsourcing may not be as big of a bargain as some might think. From the article: "With consumers enjoying more choice than ever before, evidence is growing that great service is essential for long-term customer retention. To cite just one example, a recent survey of pension policyholders in the United Kingdom found that 75 percent would leave their current provider if they experienced bad customer service."
More than that.... (Score:2, Interesting)
Additionally, getting a "script monkey" on the support-line does an unbelievable amount of damage to customer confidence in the company in question. Knowing that you will have to endure the reading of a fixed script that, at it's conclusion, will not be relevant to the problem at hand anyway does not underscore confidence. Colloquial understanding and language nuances go completely over their heads.
Cheaper is not always better.....
Re:The author is thirty years behind... (Score:3, Interesting)
And to be frank, in most areas I'm quite willing to forgoe service for price. Even the best service policies are generally too restrictive and inconvenient to be worth it. If it's cheap enough I can have a third party repair it (or have a backup plan if it's a service-only thing), or just replace as needed and it will still end up being cheaper and less inconvenient. Oh yeah, bring me that cheap Chinese sugary goodness, baby!
Capative Audience... (Score:3, Interesting)
I keep thinking about that whenever one of my witty, insightful and intelligent comment is modded down by some idiot moderator on Slashdot. Why do I keep coming back to same abuse day in and day out? I really need to go somewhere else.
The new trend... homesourcing! (Score:4, Interesting)
Not that there's anything wrong with Indian call centers but half the time I can't get past the Indian accent to understand what the hell is being said. There is a limited amount of things they can do as well and to say that Indian call centers provide "customer service" would be an overstatement.
When you call a company for customer service you should be able to get someone able to bend the rules if circumstances warrant. The "paid parrots" of Indian call centers can't do that.
Price isn't always important... (Score:5, Interesting)
Often this is not the case. As a part-time marketeer, I can tell you that often what I do to lure customers away from my competition is:
1) "educate" my target segment to expect a higher level of service (change their expectations)
2) tell my competitor's customers that my competitor does not offer that higher level of service (given the new expectations, make them feel unhappy with their current provider)
3) make damn sure my own company offers the higher level of service when my competitor's now-unhappy customers go looking
4) don't compete on price; higher service can demand equal or higher price
5) repeat as necessary
Believe me - I'm not the only out there doing this either.
Re:Broken Connection (Score:2, Interesting)
Yes, and just because the work has been moved to India does not mean the work is done poorly. The major disadvantage to outsourcing to a foreign country comes from language/accent/communication issues. I have definitely had times where I had trouble communicating with a person in customer service because of that. However, if that hurdle can be overcome through education or through selectively hiring foreigners who have made an effort to learn English and learn it well, outsourcing can be a boost to customer service even from the consumer point of view. Support lines can be open 24/7 rather than the standard 9am-5pm Mon-Fri. More customer service personnel can be hired for the same cost, meaning shorter waits to speak to a live person. So if done right, outsourcing can save the company money and boost people's sense of customer service.
Just a thought (Score:4, Interesting)
I'm currently working as a Customer Support in a local company in Malaysia where we help our client's client (mostly from the US and UK) troubleshooting their generic computing problems over the telephone.
Anyway, I've been working for a almost a year now and from what I've seen, the company I worked for has been recruting really skillful/talented people (most of them have CS degrees from Australia) to do the support.
However as you may know, most of these people speaks really poor, non-standard English. To make the matter worse, most of them (including me) have problems with our clients' American/English accent. Personally I'm sad that I've had clients that hanged up on me because they couldn't understand me in some occasions.
Okay so now, I would like some opinions from my fellow
Outsourcing at a random DG of the E.U. (Score:3, Interesting)
Well, here's a true story. A DG (I will not mention which DG) of the European Union has outsourced it's software system that is responsible for the registration and follow-up of requests that basically seek funding of the EU government. That same project is running on it's last legs. The reason is quite simple.
After version 4 and 5, which worked but were not 'modern' enough (not using EJB's in a J2EE server) version 6 was outsourced, and contractor architects designed a J2EE application that should bring the next installment of the software which was untill then running just fine. The rules were a little more complex than before, and some political choices undoubtedly had their effect on the overall design of the system, but so far so good. Of course, the EU is a 'fair' institution, meaning that everybody should be allowed to bid on a contract that allowed the contractor firm to (and here it went terribly wrong) design and implement of a subsection of tha entire application. Ok, ok, not the best solution in the world, and you know, maybe this would have worked if the staff (of which most of them serve lifteme sentences):
- had at least been knowledgeable of J2EE
- had reduced the complexity induced by splitting the application
- if the number of contractors involved in the project would be limited.
- if each project would have had a propper code-review follow-up and an architecture steering group that had an overarching view on the system
- if testing frameworks had been used to test the software
- if project leads would not have been pushed around like toypuppets, from 'dev' to 'organisation', from 'infrastructure' to 'dev'
- if projects themselves would not have been pushed around. Basically they were extremely good in killing all forms of know-how about their own system. Hand-overs were cabinets full of stacks of paper that nobody reads or cares about.
None of these things were there. Can you imagine the mess they are in? I guess you need a little help, let me refresh what can go wrong: XML stored in relational databases, CMP and XA transaction management all over the place, code that is oblivious to memory and performance consumption, timeout periods that allow sessions to continue to run 3000 seconds, and worst of all, session security is only invoked 'once every n times', and n varies per subsection between 5 and 500. (luckily the application runs within a secured domain, but still.) Some modules implemented their own database operations when the responsibility for the tables they access belongs to other modules. Security is implemented in 3 different ways, and doesn't even have roles and users, like every other security has. Code-reviews are dangerous for your health. Tables are being updated by hand, XML's are being edited by the helpdesk by hand, and 'development' people are filling in forms because the users are unable to, while at the same time they are debugging the database because parts of it have been corrupted.. The whole server system has to be restarted each morning, and around noon at exactly 12.19, 'something' brings the servers to the point where none of the applications respond in a timely fashion. I spell it like d.i.s.a.s.t.e.r.
But there's another surprise.. the new next version 7 is due by the end of the year. And that has been decided politcally. I don't think I have ever seen a bigger mess than this one.
I worked there briefly as a contractual agent trying to clean up parts of the mess and bring rather basic things like source-control under their attention. All events, persons and organisations in this text are pure fictional and do not adhere to reality. They really don't!
Re:Capative Audience... (Score:2, Interesting)
I looked at your past comments. I don't think those words mean what you think they mean.
Somebody at these firms failed micro... (Score:3, Interesting)
To Dell, satisfying a customer can be meassured in terms of future revenue, while a contractor is going to view each call as a cost to be paid out of their contracted fee. Changing the incentive structure would change the results drastically.
Imagine: You get paid some amount of money per week to deal with customers, out of this you must pay for staff and equipment. More time spent on customers means more staff must be hired. What would be the profit maximizing solution? Spend as little time on customers as you can while maintaining sufficient quality that you contract doesn't get canceled. You know there are no substitues for your services, customers MUST come to you unless they wish to incur the cost of a new computer. If you breed an atmosphere where your workers try to minimize the duration of calls, your quality will degrade and people will not purchase that brand in the future.
Now imagine a setup where you get some smaller amount of money, almost enough to keep your doors open, and your customers rate your performance as "poor", "okay", or "good", and you get paid a small bonus for being "okay", and a larger bonus for being "good". Being "poor" most of the time means you go out of business (hopefully for the customers' sake you lose your contract first...) Pass on part of the quality bonus to your employees and they will spend more time, making sure that they get their extra money by being helpful. In order to realize the largest return possible you will invest part of your profits in training and more staff (for a decreased wait-time).
The contracting firm of course needs to ask if they can do it for less money, but cheaper labor means a smaller fixed cost, so it would likely end-up outsourcing to another firm somewhere were wages are lower, say in rural Kentucky or purhaps off-shoring it to somewhere in the British Commonwealth. Basic microeconomic lessons: if your product runs the same software as your competitors, then your cost/quality combination must be more attractive if you wish to capture or retain that marginal customer; time spent on the phone listening to recorded messages tell you how much your business is valued is considered a cost by consumers; and incentives matter.
When it's "good enough" the execs don't care. (Score:4, Interesting)
Also, those complaining about outsourcing are probably wasting their breath. The next round of outsourcing is going to be targeting all the "innovation" jobs in IT like systems architecture and design that we thought were safe. I'm planning to stay in for the long haul and hope that some of this comes back around. However, we need to adjust our expectations to the new reality. If it's cheaper, it will be done. Unless consumer prices and our rampant spending are adjusted, we have no way to compete with people who will do good enough work for 10% of the price.
The real hidden cost of outsourcing is the loss of a talent pool. If and when I have a kid, I'll encourage it to be smart and study, but I think I'll encourage it to be a lawyer or an MBA. They're not replaceable, and the professions (medical, law, etc.) have a very strong organization that keeps the barrier to entry and salaries high. A good example is pharmacy. Pharmacists don't make their own compounds anymore; they pour tablets from the big bottle to little ones, and get paid very high salaries to do it. All they have to be is careful.
Re:Dollar is king (Score:4, Interesting)
Yeah, right.
I have gone through this process only to have an agent hang up one me, leaving me to start over.
One time the agent was downright rude a number of times, finally putting me on hold for 20 minutes and then disconnecting. The total call time just with that agent was about 2 hours.
I have gone through tiers of agents only to be told I would have to pay a bunch of bucks (I was trying to get new copies of the original re-install disks). I tried again, went through more hours and tiers of agents, and got the disks free.
I called to extend my warranty. After a long time, I was told that I couldn't. I tried again, different agent, and was able to extend it.
In fairness, though, the people who finally solved my problems were usually in outsource centers in India or the Phillipines.
Dell's problem goes way beyond outsourcing. They have too many tiers of agents, in too many different groups, with too many who can do nothing but follow scripts. They are, in other words, simply clueless about how to do customer service.
Of course, if the Dell products I have had were more reliable, the issue of their customer service would be moot.
I have been a Dell customer for a long time (almost a decade). Only recently have they provided such horrible customer service.
Next time I need a laptop, I'm going to try to find someone who is clueful about after-sales service.
I certainly hope that somebody with some power at Dell stumbles across this threat. And cares!
Re:12 of the many problems with outsourcing to Ind (Score:4, Interesting)
1) After you teach the Indian company how to write good software for your industry, a relative of the owner of the Indian company will go into business in competition with you.
This is true in pretty much any business relationship. Whomever you teach how to do a thing for your profit will try to figure out ways of doing that same thing for their profit.
3) All products require innovation. Indian programmers are not usually innovative; it's not a quality of the Hindu culture.
This is one of those bigotry motivated points.
I know enough Indian people to say this is false. You don't have to believe me though- take a look at the list of Nobel laureates. Just wanted to refute one in case anybody was wondering.
4) No matter what the project plans say, programming requires decision-making that affects the long term health of your product and your company. How often does programming require far-reaching decision-making? Possibly as often as once per hour.
The general point here is completely valid, and people will have to learn how to evaluate companies for their work performance. Switching industries- who would you rather hire to do special effects for your eature film: Zenera (my company) or Industrial Light and Magic ?
Well, ILM has earned their reputation through lots of successful high profile projects. You can look at a ton of their work. You'd be smart to go with ILM unless your project is small and you can afford a risk, then you can risk a small unknown studio like Zenera.
My pricing reflects that- I am much cheaper per man hour than ILM. That's my company giving prospective customers a valid business reason to choose us. It decreases risks in case of failure and costs in case of success.
The same is true in any sort of outsourcing- I talked about reputation, but a management team must examine who they are outsourcing to, and their prior work product, in order for the move to be effective.
5) People in India are amazingly poor for a reason. That reason may (will) affect the work they do for you.
If the parent means to refer to the lack of materialistic motive in their culture, I fail to see the validity of the point.
In general, Indian culture values education. That is valuable- especially in a knowledge industry like programming.
Mostly however I think this "point" is, again, motivated by bigotry.
6) There's a big overhead in crossing cultural boundaries. On the other hand, programmers in the U.S. may spend a lot of time playing video games rather than learning social skills; there is a big barrier between someone with low social skills and the normal world, also.
This sounds like a point, but ends up being a non-issue. Indians, or any other foreign contractors will have to expend their own internal efforts on these issues. Native contractors are likely to use that as leisure time. Both are "wastes" from a productivity standpoint.
(I know there is a point here about leisure time being restorative and allowing people to work more effectively when they are on task- but there are some studies that indicate that what is really needed is time away from the "primary" task, a secondary task is often just as effective as a pure leisure time. Let the shrinks sort it out.)
7) You may not notice the low quality of your product until it is too late. That's why you outsourced, isn't it?: You wanted to avoid giving attention to a critical area.
Anyone who outsources their critical business processes is a fool.
There are valid reasons for outsourcing, most of which boil down to focusing on where your expertise is, and letting other experts do what they are good at for you.
Using Apple as an example, they outsource almost all of their manufacturing and assembly. They focus on design and engineering. (Software and hardware)
Re:Ideas are free and universally available (Score:4, Interesting)
Mmm... no. Sorry.
There are a lot of bright people in China, but there are also a lot of companies out to swipe IP from other countries. The most recent example I've read about is a whole segment of the auto industry over there devoted to copying the designs of companies like Honda and Mercedes.
One of them even stole their *symbol* from Audi, which they slapped on a copy of another manufacturer's car. I thought that one was particularly funny - it reminded me of the bootleg Versace/Universal Studios "dual logo" t-shirts in Kamikaze Girls.
Re:When it's "good enough" the execs don't care. (Score:4, Interesting)
My daughter (currently in High School) was interested in studying Comp Sci in college (like her mom and dad). We talked her out of it. She's also had people (usually current or ex-software developers) come into her school for 'career' days and tell her class that there's no future in IT, it's all going overseas. Interest in IT as a career among her peers is fairly minimal.
Generation Y is not stupid. They see what's happening to their parents and friends of their parents. And they're adjusting accordingly.
Re:I call BS (Score:1, Interesting)
I've learned that "success" for off-shored projects means that something was delivered. That something is usually either incomplete, designed wrong, or just plain broken. And the killer is that the code is so badly done that it is either difficult to impossible to maintain. Usually you have to redo it from scratch.
As far as your claim that in 5-to-10 years they'll be good architects; sorry, I disagree there as well. There will be architects, no question. And they'll be billing themselves as "good", like they are now. But I know these kinds of "architects", and they just don't have the solid engineering fundamentals to be any good. They have the buzzwords, but don't understand the basics (though they think they do).
These kinds of "architects" end up costing even more time and money.
But the proof is in the pudding. I compete with these guys all the time, and my rates have done nothing except gone up. I'll be raising them again this year as well. When I actually see some competition out of India, I'll be the first to change my mind. But all I've seen is clueless crap that has cost more than it was worth.
I'd love to see them go to $40 per hour. At that rate, they are no longer competitve over there, as they lose the on-site local advantage.
Sorry, I think you're just spouting delusional BS. When I start to see something different first hand, as I said, I'll be the first to admit that there's something good over there.
Re:Dollar is king (Score:3, Interesting)
Re:Dollar is king (Score:3, Interesting)
My intent is not to bash Indians or offshore workers. Prior to us pursuing offshoring, easily half of the people placed as full time hires were Indian anyway, and their status varied from native US citizens, naturalized US citizens, green card holders, and H1B visa holders. With my last team, I was the only white guy in otherwise all Indian team. We used to joke and say I was the affirmative action guy.
That being said, with the offshore guys, I've seen a dropoff in quality with respect to English skills compared to the onshore guys. The onshore guys (and girls), for the most part, have decent English skills (there are exceptions, of course). From a technical skill perspective, the onshore guys are equivilent to the distribution we get if we were placing the candidates ourselves. Some are good, most are in the middle, and some are bad. The Wipro guys do have the advantage of having a large knowledge network they can call up for solutions to things they can't figure out themselves.
The big problem with outsourcing is, at least in my company, it's being presented as a silver bullet to cure all of the IT cost problems. It isn't. It's costing us more, especially when you factor in time to market impacts to NPV. This isn't the fault of the outsource providers (for the most part, Unisucks is a different story), but the fault of our business customers who aren't really a good fit for an outsourcing model, and unless they change the way they deliver requirements, never will be.