Question Re: Offshoring - has its time been and gone in Questions about SAP Websites

Offshoring - has its time been and gone

Former Member — Thu, 28 Feb 2008 13:12:34 GMT

Hi guys -- this is the Coffee corner so please read this thread in the spirit in which it was originally intended.

The two areas where I've had to deal with "Off shored" facilites are in ABAP development and in Telephone Call centres.

My experience with BOTH has usually been at best a totally frustrating exercise, or at worst nothing less than an unmitigated disaster.

Customer experience in the UK at least with Off shored Telephone Call centres have been such a disaster that some Banks are now actually making TV commercials saying "UK Call centres Only".

Since a lot of Indians speak excellent English (often better than Native speakers) this can only be a resounding vote of NO to this type of actiivity.I

I found that one answer to avoid the hassle with these call centres was to call the DUTCH help number - most of these guys don't speak Dutch so the help desks are still actually located in Holland (or for any other language than English you could possibly use the same "bypass" to get a local help desk).

Looking at the typical queries raised on the various ABAP Forums as well - where people from this part of the world are posting the most elementary questions (or often worse - asking for complete solutions before they even realize that computer keyboards do actually have an F1 or HELP key on them) only confirms my view that this was a short term expedient for USA corporation chiefs to make their balance sheets look good in the very short term, inflate the share price hugely and move on pocketing HUGE bonuses on the way while leaving other people to pick up the pieces.

Where it DOES work is in such things as providing cheaper hardware infrastructure such as Networking or components -- but there is no way you can run business processes sensibly without functional consultants ON SITE especially now with B2B, C2B, B2C and all sorts of 24 hour online processes -- you can't wait 3 days while you explain the process to someone on the other side of the world whats happening, find a fix, write a Spec, wait for them to go through their change management procedures, test it and then find the progammer has either not understood the problem or there is a defect in the solution etc etc.

Maybe running Batch relatively constant stuff like payroll or some FI applications might work but in the scenario I've described above you will find that your customer has gone elsewhere.

Offshoring CAN work if the correct things are offshored but the mass wholesale offshoring nearly everything has as a lot of people predicted only ended in tears both to the source country who liost the jobs in the first place and the newer country where once these jobs have gone will never return owing to the complete customer dissatisfaction with the whole process.

I'm not talking sour grapes here -- I've been in SAP more years thabn I care to remember as a freelancer and now more than ever the phone is still ringing off the hook.

Cheers

Jimbo

Re: Offshoring - has its time been and gone

ChrisSolomon — Thu, 28 Feb 2008 13:32:57 GMT

I have read a LOT of interesting articles in CIO magazine about this over the last 2 years or so. Most articles seem to point out that when using off-shoring with truly external organizations, any cost savings is diminshed (or in some cases, comes at a greater expense!) after about 5 years due to various reasons. In the last 6 months to a year, there seems to be a shift happening where off-shoreing companies are now being expected to provide greater services and value (ie. more-bang-for-less-buck) as well as the fact that many previously strong areas of offshoring are now having to compete with other emerging, cheaper areas (much like the India versus China competition that appears to be wavering but on the brink...many more cultural, language and political barriers to work out with China, but once that happens, I think it will be like removing a dam). It's almost as if these companies are now expected to become akin to consulting firms in some ways. And now, you throw into this mix the national/politcal issues (like you mentioned in the UK and what is happening here in the US with a lot of talk of bringing jobs back to the US via "punishing" companies that send work overseas, not to mention our economic problems at the moment and an election year to boot!). Very interesting times.

Re: Offshoring - has its time been and gone

Former Member — Thu, 28 Feb 2008 13:47:54 GMT

Hi there

Politics could also be another factor but I think in the scenarios I described above it was actually Market Forces driving this type of stuff back home.

Politics is a totally different issue however which I don't want to get too much into.

Incidentally talking of politics with the Green and Environmental issues taking more and more prominence it could well be an added "reverse twist" to the whole offshoring sorry saga.

China itself is no problem -- apart from anything else they have a HUGE HUGE internal market themselves to satisfy and unlike India are also creating the manufacturing infrastructure such as roads, ports, railways etc etc to service this and they will need MASSIVE MASSIVE expertise from the West for years and years to come.

India is in not nearly such an enviable position. - Apart from a few centres of "Ëxcellence" such as a relatively cocooned I.T sector in Bangalore, New Delhi etc the whole infrastructure is in total disarray and they could be in serious trouble if the I.T sector folds - jobs can be moved these days easily at the stroke of a pen.

China won't be interested in "call Centres" etc -- due to all sorts of cultural and other factors.

On the Infrastructure front just go into ANY decent hotel in Beijing / Shanghai that caters to westerners. Everything works first time, is spotlessly clean and service is exemplary.

In New Delhi sometimes it's hard most days even to get a working Internet connection in the hotel room -- the manager while polite will always have the same excuse -- it's just being looked at --I'll call my uncle / other relative etc who knows someone in telco who'll get it fixed --meanwhile 2 days later it's STILL not working.

Cheers

jimbo

Re: Offshoring - has its time been and gone

Former Member — Thu, 28 Feb 2008 14:47:52 GMT

Are you sure it is not a sour grape issue?

You rebuke someone heavily for asking a stupid question(I agree its stupid) [here|https://www.sdn.sap.com/irj/sdn/profile?userid=3584538]

Then you answer a question from non asian background with not so stupid but similar request promising to reward points [here|https://www.sdn.sap.com/irj/sdn/profile?userid=3584538].

Further you post questions with huge pre conditions to be able to answer [here|https://www.sdn.sap.com/irj/sdn/profile?userid=3584538]

Anyway comming back to the point, the offshoring activity is more economic than a short term profit churning initiative.

There a few disasters, but the list of success stories is long too. And it didnot start now but from the mainframes time. Over years consultants from countries where internet service does not work in hotels have provided consistent support to their clients. The brand building activity had started then and not when ERP 2.0 was launched. You do not hand over control your critical systems to anyone just because it is cheaper, it would be the dumbest business decisions by any standards.

Irrespective of the public outcry or politice. I think the Offshore Onsite model is here to stay.

Regards

Santanu

Re: Offshoring - has its time been and gone

Former Member — Thu, 28 Feb 2008 16:01:21 GMT

your links are funny. you managed to make me click and see the (false) target 3 times in a row.

Congrats on that )

Re: Offshoring - has its time been and gone

Former Member — Thu, 28 Feb 2008 16:21:45 GMT

Sorry for the goofup:

[here|/message/4948003#4948003 [original link is broken]]

[here|].

[here|]

And James its just a discussion..nothing personal

Regards

Santanu

Edited by: Santanu Dawn on Feb 28, 2008 5:21 PM

Re: Offshoring - has its time been and gone

Former Member — Thu, 28 Feb 2008 16:23:48 GMT

Hello,

>I think the Offshore Onsite model is here to stay.

So you mean that countries like India will never develop to the point where they will get a big and mature enough internal IT market to give real work (projects) to indian IT workers ?

I hope for India and all developping countries that you are wrong. I think that outsourcing will only happen during a transition time.

When a software engineer from India will get the same wages as a US engineer, why would a US company outsource to India ?

Regards,

Olivier

Re: Offshoring - has its time been and gone

Former Member — Thu, 28 Feb 2008 21:43:07 GMT

Actually you can already see the beginning of the end of the "classical offshore model"

I've been recently in a small European country where one of its largest employers is ACTUALLY FLYING IN loads of Indian I.T contractors to work in Europe for a short while and then fly them back home again.

Now IMO this spells the beginning of the end since

a) It emphasizes the the point that for certain critical operations you actually DO NEED CONSULTANTS ON SITE as I pointed out earlier in this thread - 24 hour B2B/B2C/C2B etc type of operations often need immediate attention which is usually poorly served by remote off shored facilities

and

b) once these indian contractors realize the wage differential between what they earn and the other guys then "all hell will break loose". When they also go back home this will have severe implications as well as they will realize the true value of the services they are offering.

If the Indian I.T market is as smart as it is supposed to be then they will develop their own PROPER consultancies and consultants and the market place will be the real test of how this works.

As I said before --for all sorts of reasons the Offshoring model was viable for a while and still is in specialized niche areas such as Basis, Backup, Network Infrastructure etc. but the "Off shore everything" model has shown to be what many people always suspected it was -- a short term idea to temporaily maximize the company's bottom line so managers could look good without any thought given to the long term implications.

And Santanu -- I am not taking offence -- remember I STARTED this whole thread.

Of course there are many many competant I.T workers, Engineers, Doctors etc etc who come from India -- that's not the point at issue - especially since most of these guys can get well paying jobs in almost any country on the planet anyway.

Entrepreneurs like TATA etc which can compete globally with anybody exist as well so no one is saying all Indian workers are a load of Tosh --far from it --my point was with a) the whole idea of "Off shored" working, and b) the quality of the people usually employed in these activities.

Whether it's India, Antarctica , the USA, UK or even Planet Mars if you pay people low wages don't expect stellar results even if you can get away with it for a short time.

Cheers

jimbo

Re: Offshoring - has its time been and gone

Former Member — Fri, 29 Feb 2008 08:43:06 GMT

India's economy is growing at 9% p.a., and even at that rate it will take a long time to catch up to the West. By the 22nd century, most of the worlds population will be in Asia, and living standards in Asia will be similar to the West.

Indian companies are already moving up the value chain, and doing innovative and creative work. For knowledge workers the salary is about 20% of US salaries, but the salaries are growing at over 10% p.a.

I think that in the 21st century the world is a better place because of globalization. With international trade, economies have become interlinked. Countries that depend on each other for products and services are less likely to go to war with each other.

Al Lal

www.olap.wetpaint.com

Re: Offshoring - has its time been and gone

Former Member — Fri, 29 Feb 2008 09:39:40 GMT

Outsourcing (in IT) is just one step in business evolution (if I may term it so). It happened with forces of globalization and will continue to evolve in some form or other.

It can be objectively argued in which cases it is effective and in which ones it is not. However, one would dismiss it summarily at one's own peril.

Globalization has brought many disruptive forces in its wake, and all countries/societies face it in some or other form. Thinking outsourcing as the only 'big' issue, and one that can be addressed by just rolling it back, and/or demagoging it is futile, and may have unwanted consequences.

If we believe in market forces determining what is a sound business practice, let it play itself out - outsourcing may not survive if it is not beneficial to the business.

If we are complaining of the adverse effects on individuals (eg job losses etc) - and take that as an absolute violation not to be tolerated one bit, we need to look in the mirror (and history books) and stop playing victim.

It is funny to see people looking at newbie posts on SDN and extrapolating it to a mandate on outsourcing. Really?

Much as one would like to vent with personal anecdotes of non-working infrastructure in a hotel in India (or other such places), it begs explanation how that is relevant to a discussion on outsourcing.

Bad as rampant newbie posts are, it is equally grating to see posts venting personal frustrations in the garb of a rational discussion on a business practice.

Re: Offshoring - has its time been and gone

Former Member — Fri, 29 Feb 2008 09:58:11 GMT

Hi,

> For knowledge workers the salary is about 20% of US salaries, but the salaries are growing >at over 10% p.a.

With a 10% increase each year and if wages stay the same in US, it will take 17 years for India knowledge workers to be as paid as in US.

>Countries that depend on each other for products and services are less likely to go to war >with each other.

I completely agree on this. This was completely the reason of the European community (and later Union).

After 3 wars, it is now completely unconcevable to imagine a new war between Germany and France (at least for the next century !).

Regards,

Olivier

Re: Offshoring - has its time been and gone

ThomasZloch — Fri, 29 Feb 2008 12:37:04 GMT

> After 3 wars, it is now completely unconcevable to imagine a new war between Germany and France (at least for the next century

For competition I recommend football (but not rugby).

Re: Offshoring - has its time been and gone

Former Member — Fri, 29 Feb 2008 13:18:08 GMT

I think some people here have misunderstood the main question here.

Let's get some mis-conceptions out of the way.

1) The Sour Grapes Issue ==>I'm still getting more phone calls than I can handle and have been a free lancer in SAP for many many years at rates that newer people in the industry probably couldn't even DREAM about . Currently there's no lack of demand for SAP consultants ANYWHERE as far as I know (possibly the US might be an exception - I haven't been there for a while so I can't say).

Here in Europe the market is booming again.

2) Globalisation / World Trade. This on the whole with some minor caveats is HUGELY BENEFICIAL even if adjustments have to be made in working practices.

3) Some type of Offshoring is fine -- companies that can provide a stable server type infrastructure and keep it working 24 hours a day 7 days a week at an economic price is an example.

Stable applications like say Payroll, most financial stuff and some type of HR processes can be run anywhere on the planet (or even Off planet if we could establish a data ceentre on Mars etc.)

4) Some types of applications are NOT suited to a "classical offshore "process -- these are as I've described a lot of the newer 24 hour e-commerce stuff, CRM. B2B,C2C.B2C, and C2B type stuff. These applications require ON SITE functional consultants who understand the business processes properly and programmers who can hit the ground running having to fix problems often by word ofr mouth and certainly without having to rely on any technical or functional specifications.

The classic Functional Spec, Technical spec, code review, develop, test, test result review, transport request, move to PROD type of approach won't work.

Some large corporations even have scenarious where stuff is only transported to a PROD system ONCE A WEEK.

By the time this happens you've probably lost another 1000 customers because the e-commerce facility isn't working properly.

5) The initial consultants employed in the OFFSHORED facilities have largely moved on to better and more lucrative positions, meanwhile the whole of the SAP scenarios have become infinitely more complex. The newer intake of people not only need to actually have a much higher skill level than the previous people employed in this business, they also have to do more work in less time.

As I've posted previously I am 100% convinced that the "Classical 100% Off shore everything " model has run its course.

Some services will always be managed in cheaper locations - but I'm really certain that the major I.T companies in India (or the off shoots of US / European companies based there) will be looking at other forms of enterprises in order to "grow their business"from now on.

(Finally just as an addendum -- Non working Communication Infrastructure in a place that prides itself on being 100% ready to handle business from anywhere iin the world is not actually a good indicator of how the other necessary parts of the equation might fit together. Of course any type of equipment can break down -- have you ever tried using the London Underground -- Now that's a job I'd outsource at an instant if anybody was made enough to accept the commission) but it does seem to be a fairly frequent occurrence - at least on the trips I've made - compared to that other Asian giant china.

Cheers

jimbo

Re: Offshoring - has its time been and gone

Former Member — Fri, 29 Feb 2008 14:53:46 GMT

 With a 10% increase each year and if wages stay the same in US, it will take 17 years for India knowledge workers to be as paid as in US.

IMhO, the salary should be propotional to the expenditure and some savings (so that we can die an a warm place). So, instead of comparing the salaries of US and salaries in India, one should think of what i'll spend if i'm in US and what i'll spend if i'm in India. The reason why people want to work for a few years onsite (client place) is because of the exchange rate disparity.

Also, i do agree that is a good market within India. But then if i as an MNC, do an implementation for an Indian Customer, i can't do it for cut throat price because i get my revenue in INR and my operation costs are also in INR. So, not as much ROI as i see for customers in US/Europe.

There might be major hit on the offshoring only if the currency exchange rates become equal. Then it will not become profitable to outsource (if cost savings is the objective). But then if specialized knowledge is required, offshore will still happen despite higher costs (because of Visa issues).

Regards,

Ak.

Re: Offshoring - has its time been and gone

Former Member — Fri, 29 Feb 2008 17:14:24 GMT

Hi James,

>>Some types of applications are NOT suited to a "classical offshore "process -- these are as I've described a lot of the newer 24 hour e-commerce stuff, CRM. B2B,C2C.B2C, and C2B type stuff. These applications require ON SITE functional consultants who understand the business processes properly and programmers who can hit the ground running having to fix problems often by word ofr mouth and certainly without having to rely on any technical or functional specifications.

I dint want to comment about others. I am working for around 2 years in an Offshored Project. We were part of implementing SRM and related applications for the client. The implementation was a succes and the customers were happy. Now we are providing Production support for all the applications (Read including B2B). Through onsite-offshore model, we give them a 24*7 support. Incase of issues, we work even on weekends. Overall the customer is happy and I see many such cases here at offshored locations(read India).

Finally, if your opinion is projects are offshored only coz they get services at cheaper rate. I disagree with your opinion.

Regards,

Jaishankar

Re: Offshoring - has its time been and gone

Former Member — Mon, 03 Mar 2008 00:11:51 GMT


> By the 22nd century, most of the worlds population will be in Asia,  
> Al Lal

Errrr...doesn't Asia already have "most of the worlds population"?

Re: Offshoring - has its time been and gone

Former Member — Mon, 03 Mar 2008 00:13:09 GMT

After reading this, I feel we should have a "Ranting corner"....

Re: Offshoring - has its time been and gone

Former Member — Mon, 03 Mar 2008 00:53:03 GMT


> Finally, if your opinion is projects are offshored only coz they get services at cheaper rate. I disagree with your opinion.

What was the initial motivation for Western companies to go down this route, if not the cost benefits?

Re: Offshoring - has its time been and gone

Former Member — Mon, 03 Mar 2008 13:28:44 GMT

Actually it's not RANT. The fact that some of these companies are actually flying consultants back to the "original business areas" such as Europe etc only emphasizes the point that the offshoring idea was done for ONE REASON AND ONE REASON ONLY ONLY -- SHORT TERM BOTTOM LINE.

Anybody who thinks this was done for "altruistic purposes" such as improving the lot of people in some of these countries was 100% totally living in cloud cuckoo land.

Now if consultants are actually being flown from India in large numbers (never mind about the "Carbon / Green issues here of making un-necessary plane journeys etc) it proves above all else

1) You do actually need ON SITE expertise (wherever the consultants come from)

and 2) These people wouldn't be sent half way round the planet if there weren't significant (but these days de-creasing) cost benefits in doing this.

I'm not saying that India etc has poor consultants --far from it -- but I think most people will realize that the days are long since gone where you could outsource your whole operation somewhere else and expect to make a huge profit on it.

Most guys I know in India are smart --why should they work for 90 EUR a day when thet can get anything up to 1000 EUR a day in Europe -- of course they'll come here for a few years, go home and live like royalty --wouldn't you if you were in the same situation.

The "cheap wages" idea won't wash in the long term as it's impossible these days to prevent wages from risng to the "norm" even if you can get away with it for a short time.

For a while Polish Plumbers and builders were hugely in evidence in Western Europe -- as their standards (and wages) have risen a lot have gone back home ( and started their own businesses) whilst their places have been taken by Albanians and Bulgarians.

Outsourcing IS viable in the short term for selected areas but it is not a long term solution - even in a global market place. If you don't develop your own markets then you are lost.

Cheers

jimbo

Re: Offshoring - has its time been and gone

Former Member — Mon, 03 Mar 2008 17:13:41 GMT

>>What was the initial motivation for Western companies to go down this route, if not the cost benefits?

Again I dont want to generalize things.

If I own a business in Western side at initial stage/time I would not have outsourced my business operation to a different part of the world to gain some dollars at the expense of quality of my product/service. This is just my view and you can have a view that is completely opposite to mine.

Regards,

Jaishankar