The Coming Pause in Outsourcing


    Well, you are hearing it here, first! Outsourcing and Offshoring are poised for much needed
    adjustments and reorganization. I will try to guess here in this column, the most likely outcomes
    and activities related to these in the coming months and year!

    The last two to three years has seen a lot of "irrational exuberance" when it comes to Software
    Development and Business Process Outsourcing and Offshoring. Anything in sight has been outsourced
    or offshored with much promised cost savings.

    Now that companies have had two or three years to digest what happened with their outsourcing
    efforts, they have a rich set of lessons learned and experiences. Many large software development
    projects seem to be running into problems. Business Processes, especially voice-based customer support
    ones have either been scaled back or brought back or moved from third-party vendors to their
    own captive units (Like Dell).

    The most valuable lessons I am guessing that organizations learned when it comes to Software Development Outsourcing is that throwing more people at the problem is not going to improve the situation you are in.

    And that Communication is the bottleneck, not people or technologies! And that Cost Savings projected
    usually does not include other hidden costs when things are not going as planned before.

    Whether it is Software Development or Business Process Outsourcing, the importance of ongoing
    close governance would have been realized!

    And what is likely happen during this pause?

    Organizations may bring many business processes back having realized that they were not suitable for
    outsourcing in the first place.

    Totally outsourced software development efforts may move back to an On-site + Offshore or Onsite + Outsourced models, since they may address the communication problem much more effectively. Partially onsite models may have to be reverted to salvage projects that are not going well, earlier in the process. This may not provide the same cost savings that purely offshore models may provide, but organizations may not have a choice.

    This is also likely to ratchet up the demand for H1B visas.

    How can Lean Six Sigma and Agile Methodologies help in this coming pause?

    I have read articles about projects and companies offshore that have already switched to more
    agile methods like Scrum or Rapid Prototyping.

    In Business Process Outsourcing, vendors may need to demonstrate a committment to longer term
    process improvement, not just executing a business process.

    Pause awhile,
    And let my counsel sway you in this case.
    – William Shakespeare, Much Ado About Nothing.




    Please enter your comment!
    Please enter your name here