offshoring

Offshore wind

It’s an off shore wind
pawing at my back
threading rain pellets
down the top
of my anorak
even the waves
are cowering low
wind sheer eddies
scurrying cross
salty flat
squally patterns
of rain shattering
off a sullen
sulky sea
sluggishly tiding in

A pause as if
an indrawing of breath
before the wind
blows back
fresh fistfuls
of rain
to hurl into the
sea slack
and in the one way
fight between
the surly smeary sea
and the billowing
bluster of the
impatient wind
the wind carries the day
but the sea will
still stay

Let’s not kid ourselves about just how cheap offshore labor really is. We not only pay substantially less per hour, we also avoid the costs we would incur if these workers immigrated here. We don’t pay for their medical expenses when they show up in the emergency room without insurance. We don’t pay for their pension costs if they don’t save for retirement. We don’t pay for their children’s public education. Nor do we pay for their out-of-wedlock children, their unemployment benefits and workers’ compensation, their slip and fall torts, their wear and tear on our public infrastructure, and the cost of their drunk driving, drug use and other crimes. We outsource pollution, its adverse effects on our health, and its clean-up costs. Neither the employees nor their employers are here to vote and seek political handouts.
—  Former Bain Capital partner and Mitt Romney supporter Edward Conard extols the virtues of “cheap offshore labor” in his book “Unintended Consequences.” Conard was for a long time the head of the manufacturing practice at Bain Capital. As we speak, Sensata Technologies, which is owned by Bain Capital, is preparing to offshore 170 jobs from a manufacturing plant in Freeport, Illinois to China.

Most people can at least identify the wealthiest neighborhoods in their town, but what about the richest person living in their state? You just might have to take a look at a new map made by the real estate trends blog Movoto to figure that out.

“So how did they get to where they are? Are they all self-made entrepreneurs, or were they just lucky? Do they hoard all that wealth, or do they give back?” Chris Kolmar, chief “armchair economist” for Movoto, asked.

The real estate blog found that these elite are a mix of entrepreneurs and those who inherited grand wealth.

“Of the wealthiest in each state, roughly half are founders of companies. Another major path to wealth is inheritance, with the Waltons being the most striking example,” Kolmar wrote, citing the founder of Walmart, Sam Walton, and how a few of his family members are the wealthiest people in their states, including Texas, Wyoming and Arkansas.

Taking it a step further, Movoto also found that higher education doesn’t necessarily equate to more wealth.

“From an undergraduate education to the coveted Ph.D., most members of the list have some sort of college degree. But years spent studying on campus isn’t necessarily a prerequisite to striking it rich. Bill Gates, a college dropout, is the wealthiest of them all,” Kolmar wrote.  ”On the other side of the academic spectrum, Delaware’s Robert Gore holds a Ph.D. but ranks second to last in terms of his net worth.”

Check out Movoto’s blog post to play around with an interactive version of the map and learn more about these well-off people.

flickr

(via female orcas offshore from brat chirpoev island in the kuril island chain 3 | Flickr - Photo Sharing!)

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We talk about offshore processing of asylum seekers a lot in Australia, but it’s important to understand its broader context.

Check out this animation which explains how the logic of “offshoring” underpins so much in our economy and politics. We do not just offshore refugees we do not want to house, but jobs we do not want to do, labor we do not want to pay for and protect fairly, income we do not want to pay taxes on, industries too dangerous/unwholesome and pollution and waste we do not want to suffer. What the First World “offshore” is basically its problems, so its economies look like successes while the Third World takes the brunt.

This short animation summarises John Urry’s new book, ‘Offshoring’.

CFOs feel it’s too risky while local authorities are warned to think twice before taking the plunge…

NEWS

Caution is the watchword for finance bosses and local government looking at outsourcing and offshoring ITPhoto: Shutterstock

Despite the growth of outsourcing, the associated risks are putting off many finance professionals and local government organisations.

CFOs see the offshoring of finance and accounting functions to low-cost locations as a riskier strategy than using cloud computing, according to research by analyst house Ovum.

Of the CFOs and senior financial executives quizzed by Ovum, 38.5 per cent said they view offshoring to India as unacceptable risk, while 44.2 per cent said the same about South and Central America. Just 29 per cent said the same about cloud computing.

Another major factor in businesses not wanting to pursue the “high-risk strategy” of offshoring is loyalty to staff, with 44 per cent saying this issue is holding them back.

Ovum lead analyst Peter Ryan said loyalty to staff is unlikely to be the only motivation because the desire to keep people with relevant skills will also be a factor.

Other major concerns about offshoring cited by the businesses surveyed are a loss of control over processes and the practice not delivering sufficient savings to be worthwhile. Many companies not already outsourcing said they wouldn’t be persuaded to do so even by cost reductions of up to 20 per cent.

Ovum’s Ryan said one of the major challenges for outsourcing companies is to show they “can deliver efficiencies beyond arbitrage through use of low-cost labour locations”.

Meanwhile, local government IT body Socitm has warned that outsourcing IT - especially a whole service - remains risky for local government organisations due to financial risks and a reduced ability to respond to change.

Discussing the pitfalls of outsourcing in more detail, Socitm’s research arm, Socitm Insight, said figures over the past decade suggest processes actually become more expensive if they are outsourced.

Socitm also warns against outsourcing information assets along with technology because this practice can make organisations less able to exploit data effectively to generate further efficiency savings.

In addition, if organisations outsource business IT because they are unable to manage it themselves, it suggests they’ll be equally unable to manage a contract. According to Socitm Insight, they may also be handing over economies of scale and savings that they ought to be able to make themselves.

Another area of risk is that local government organisations could lose valuable inhouse expertise by outsourcing processes, making them less able to challenge supplier recommendations.

In terms of ability to cope with change, outsourcing arrangements are often long-term and fail to address future requirements.

Author of the Socitm Insight report Martin Greenwood said outsourcing “should not be considered an inevitable response to austerity”.

He added that even smaller authorities - that could potentially benefit from outsourcing through economies of scale and extra capacity to react to rapid developments in IT - should first look at collaborating with other local authorities and services rather than automatically going down the outsourcing route.

A Change of Heart - Changing The Engine While The Car Is Running

“To do two things at once is to do neither” (Publilius Syrus)

A common dilemma facing businesses is ‘How can we develop the next big thing if we have to continue supporting our current offerings?’. After all it’s our current offerings and its customers that are paying the bills and we can’t ignore that can we?!?

Of course not, so let’s multitask. We’ll allocate 50% of each person’s time to doing new development and 50% to sustaining our current offering. It’s mathematically perfect and a great way to fully leverage each person’s expertise but hopelessly flawed in practice. The false economy of multitasking is well documented in both business and life. Not only is it flawed in organizational applications but its avoidance is at the very heart of software Service Oriented Architectures (SOA) with its emphasis on the single responsibility principle (SRP) and separation of concerns.

In our case, with the teams having completed basic Agile training, we were eager to move forward with our Agile transition. But knew we could not abandon sustaining business with our existing customers while we did it. Add to this the stigma associated with software maintenance and we had a hard choice to make.

  1. Continue having everyone do maintenance but set aside half their time to participate in the transition. Which we knew would translate to a very slow transition at best and no transition at worst.
  2. Leave a few of our key team members behind on maintenance while the rest moved forward with the transition. This would definitely keep the business happy but would do little for the morale and retention of the few left behind.
  3. Outsource the maintenance activities so that everyone could be part of the transition. This of course would require extra cost but bearing in mind the false economy of the first option and the potential for operational efficiencies - would it really in the long run?

We chose option 3 and went with a local outsourcer who had offshore operations based in India. The offshore workers were quick-to-learn, eager to please and unlike their North American counterparts had no issue working on software maintenance. Rather, they saw it as a great opportunity to gain North American experience and eventually a ticket to the riches of the West.

The thought of offshoring to India sent shudders through the organization. They had tried it once, failed miserably and were still paying off the technical debt incurred. The big difference this time though was scope of the work being offshored. We weren’t offshoring the future of our core competency but rather the maintenance of a shrinking legacy code base. We made sure any offshoring work candidates fulfilled the following criteria:

  1. Existing well-defined processes for workflow and governance.
  2. Work that requires low interaction with the business and customers.
  3. Work that can be performed during prime shift in offshore location.

Still it was not going to be easy. We were now planning to use an offshore transition to enable our Agile transition. A transition within a transition!

Under the guidance of a dedicated Release Manager with technical oversight and support from the development team, the offshore transition plan and operational models took shape. The development team spent countless hours bringing the offshore team up to speed going through the following phases:

  1. Knowledge Transfer
  2. Work Shadowing
  3. Guided Work
  4. Solo Work

It was tedious work for our development team members. They would often lament how much quicker they could do the work themselves rather than having to explain it to someone else to do. Their only solace was knowing that the faster the offshore team came up to speed, the faster they would be freed to participate in the Agile transition.

After 3 months, early results of the offshore transition were promising and dissipated any earlier objections to offshoring.

  1. We achieved a full crossover of ongoing maintenance responsibilities.

  2. We freed up all employees including those that were previously dedicated to legacy maintenance work to participate in the agile transition and new development work.

If you’re entering into an offshoring engagement solely to achieve cost savings, you will be sorely disappointed. Depending on the scope of work and operational model used, there may not be any cost savings. The real value for us behind offshoring was:

  1. The potential for quality improvements such as increased documentation and process enhancements to ease the transition.
  2. The opportunity to leverage the talents of your key employees towards improving core competencies and building new business value rather than maintaining legacy value.

We had our (Agile) cake and were able to begin eating it too!

Next post: Behind Every Great Transition…

This is a piece from 2010 I just ran across when recommending 99Designs, CrowdSpring and DesignCrowd to an entrepreneur trying to get his concept off the ground.

The title caught my attention, but it seems to be based on little more than grousing at the time by established, higher-priced design firms. I’m sure there also was, understandably, some fear of what this brave, new and increasingly connected world would bring. Five years later, though, crowdsourcing has only gained momentum, and its increased supply has reduced price.

Any time we start to condemn something as a “Walmart” of its particular industry, we should remind ourselves that Walmart has an extremely viable business model. Reduced costs–even and especially from offshoring (gulp!)–help everyone, including, yes, designers who can now crowdsource more services they need, such as funding, collaboration or market testing.

This is not to say that displacement isn’t a big deal or that we shouldn’t care about the people adversely affected. We need to do a better job of caring. But displacement from any source–technology, shifting demand or outsourcing–is simple a price of admission to the dynamic marketplace.

I was talking recently with John Geu who, one day in 2013, quit his day job to start Frost Bites Yogurt and Coffee and suddenly needed a great logo. He turned to 99Designs and a week later quickly got his choice pick from dozens of artists who entered designs out of a pool of over one million around the world. For only about $300, the friendly yeti he selected brought his marketing to life, even on t-shirts. Last year, when John added coffee to his menu, that same artist was immediately available again to augment the logo.

No one complained that this designer was never properly able to assess John’s needs or somehow skipped some crucial key step always taken by his more expensive competitors. Crowdsourcing just worked. It was easy, cheap and fast, allowing John to focus on his core skill set–providing really good yogurt and coffee.

Watch on benjamintomkins.tumblr.com

Innovation, Where Does It Come From?

WSJ confab of @mattwridley, @jonahlehrer, @stevenbjohnson, and @petersims considered the sources of innovation. Thumbs down on brainstorming, thumbs up on warm showers.

Another view comes from MIT President @SusanHockfield: keep manufacturing close, don’t send it offshore. Plus a call for Silicon Valley to actually build something.