Top 10 Reasons NOT to Outsource

Remi Vespa suggested an interesting topic in his 10 reasons NOT to outsource; while I agree with most of the points he made, my top 10 would be somewhat different:

1. No reasons to outsource. Let me clear a suspected circular reference here: take a look at my earlier posts Top reasons for outsourcing and My reasons to outsource; if your reasons for outsourcing are not listed there and more so after some reading and thinking appear to be superficial, they probably are.

2. Personal. If you do not believe in outsourcing, if it could present a clear and present danger to your career, or outsourcing is likely to affect your life in some tangible negative manner (take a look at Offshore Risks: Team and Personal Impacts for some hints) stay away from offshoring as far as you can.

3. No executive support / sponsorship, no organizational / team support. If you running and uphill battle in your organization – your execs do not believe outsourcing is beneficial for the organization, if getting appropriate funds is questionable, if your team doesn’t support you. Well, maybe you are agent of change, yet still, you need to pick your battles.

4. Low risk tolerance. Your organization / your boss / yourself do not tolerate risk well and have high penalties for mistakes. Trying offshoring in environment like that is a very risky proposition.

5. No appropriate opportunity. There is always a risk in applying such a powerful yet delicate weapon as outsourcing to tasks that are not made for it. And there is not much use of trying to fit square pegs in round holes.

6. No offshore-ready management resources. If you and your management team doesn’t have any experience with outsourcing you might be better off without it unless you are mentally and financially ready to sustain a lot of pain.

7. No processes. If your organization is process free or still straggling to achieve CMM1 inviting outsourcing is likely to cost you an arm and a leg, so stay away from offshore, unless of course you’ve got spares.

8. You need to cut costs, now. Properly handled and with a bit of luck offshoring is likely to show some cost savings, yet as they say it takes money to make money. Your need to invest before you realize the savings. So if your need to immediately make up for the luck of sales or some other reasons behind a deep dive in P&L you might look for some other cost saving techniques.

9. No sufficient runway for taking off. Getting offshore engagement off the ground and getting it to the point it starts delivering value is not a trivial exercise. Do not expect immediate gratifications nor even start on that route if you have not enough runway (funds, time and energy), there is no glory in crash-landing.

10. No runway to land. No matter how skillful you are, how well financed is the project, how perfectly it is executed there is still a chance that your offshoring engagement fails. If that failure is likely to cause substantial damage, if there is no way you can safely terminate the engagement think twice before starting it.

Of course many of these reasons and the items listed in Remi’s post can be dealt with, risks mitigated, and challenges addressed. Nevertheless you should not take any of them lightly and do not move forward with your outsourcing initiative till you take the last item off your Top Reasons NOT to Outsource list.

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One thought on “Top 10 Reasons NOT to Outsource

  1. I just read your latest blog and followed the link to reasons why you would offshore. I felt compelled to comment on those.

    * Diversity. Diversity in terms of bringing individual contributor with different background into the team often means a tremendous increase in productivity. A healthy portion of resources with different education, practical background, and way of operating could bring a fresh breath of air in stagnating organization. Also “diversifying” your portfolio of resources might help a great deal to deal with micro factors affecting employment / recruitment landscape of a specific geography.
    – You mean you can’t find a diversity here in the US? Have you looked out your office window lately? And you really think a bunch of developers in cubes thousands of miles away are somehow going to help out your stagnant organization?

    * Education. In countries such as India, Russia, China you find many people who value education to much higher degree than we do in the states. On one of my teams from St. Petersburg a majority of developers had at least MS and over 40% had Ph.D. That including QA engineers! Needless to say the brain power of the team was absolutely amazing.
    – There is no lack of brain power here in the US. Remember that the US leads the world in computer technology. The problem for you is, that people with brain power don’t want to work for you because there are better employment options here in the US. Why work for a guy who just views them as a “resource” instead of a knowledge worker.

    * Work Ethics. That doesn’t go across all geographies and companies, but fortunately you still can find outsourcing organizations with resources who’s work ethics are far superior to what you find for example in corporate America.
    – You probably have experienced a poor work ethic amongst your workers but this is just poor management. Your workers are probably bummed that you view them as an interchangeable cog that be easily replaced with another cog thousands of miles away. You simply need to update your skills on how to deal with a highly skilled workforce and the work ethic issue will disappear.

    * Talent Pool. Some outsourcing organizations instead of typical “selling mediocrity in bulk” build their team with top notch experts and people with exceptionally high IQ. Building such a team, no matter in which area of the world takes very long time.
    – Yea, hint, this is what your job should be, building your team with top notch experts. Not trooping all over the world trying to find the cheapest coder in some st peterberg backalley.

    * Processes. Getting process right is time consuming and costly. When ISO or CMM processes are a requirement it’s often much easier to build relationship with a subcontractor who already has those in place.
    – The process includes other parts of the business as well, particular the product development group. Are you going to offshore those people as well? If not, then you still need to build the processes between these groups.

    * Project Management. Project and program management is often something that a small software organization can not afford (or more often VPE can’t sell his execs / team on the need for it). Many, especially Indian vendors have that in perfect shape.
    – I’ve worked on a number of projects with no formal project management. It can be done with the right process. If you tighten the feedback loop between the various stakeholders, you’re need for project management is considerably reduced.

    * Cost. While I do not believe that offshore guarantees cost savings I do believe that there is a huge potential there especially with careful execution of multi-sourcing or/and micro-sourcing strategies.
    – Problem is, how do you know what offshoring ultimately costs your business? How do you estimate the long-term damage from not being able to respond quickly to changing market conditions, a demotivated workforce, etc.

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