Offshore paradox

Offshore paradox

Paul perez, london 01/08/06 paul.perez@pymma.com

An increasing number of European enterprises use some offshore societies for their computer developments. This approach is justified financially by the low cost of the non European manpower. However in the exacerbated competition that our firms undergo, this decision seems paradoxical . Below, I am going to try to explain why!

Desires of the Business

The cause of numerous perturbations, globalization had the effect of accelerating the movement of ideas and therefore, to create a new competition on a world scale. If an excellent marketing idea is applied in England or in Korea, to be in the running with this new competition, it is necessary to adapt one's marketing and work processes quickly in order to not lose a valuable share of the market.

Conscious of this evolution, management of these enterprises demand that their computer systems follow the same rhythm. The business wants the information system to "stick to the maximum" and as quickly as possible to its needs. Therefore the life cycle of the computer applications becomes shorter and shorter and everything that can be made to reduce the delay between the clarification of a marketing idea and its "computer" realization is considered beneficial for the enterprise

Loss of competitiveness in Businesses

As I mentioned in the introduction, offshore expertises are used more and more. It is an inexpensive, abundant, competent manpower, in fact very competent. Companies such as TCS (www.tcs.com) or NIIT (www.niittechnologies.co.uk) often have rigorous organizations more effective than that of European service companies. Taking advantage of this godsend, the business "degreases" its computer services while comparing the "European" costs to the cost of the offshore.

This approach is financially justifiable when the constraints of time are low (production services, maintenance, development of software packages). Numerous local teams (production, maintenance) have been replaced by offshore teams advantageously .

Indeed, when offshore teams are used, we noted among our customers that the necessary time for the realization of the IT projects is multiplied on average by 3 or 4. In certain "pathological" cases the average time of realization has been multiplied by 6.

Therefore, when we apply this approach of relocation to the conception and development of critical applications submitted by pressure from the competition (Web site, commercial applications, operation marketing...), the immediate consequence is that the time of adaptation to market for an enterprise is 3 to 4 times longer. (I don't speak here of the loss made to know how, nor of the flight of expertise)

The Paradox

To pay some developers an hourly rate three times less for work that takes three times longer, the economy can only be justified in some cases when one limits their horizon to the application developments. Where I have difficulty in understanding, and I raise a paradox, is that with the use of offshore services, competitiveness and the reactivity of the enterprise reduces, the business that wants their computer services to be more and more short in reaction time, often seem to do everything possible to lengthen this delay while using these offshore services .

Why extend the delays of realization for savings that are difficult to justify? Such politics systematically generate losses of reactivity at the business and marketing levels (which are intolerable in international competition).

The use of offshore for critical applications does not reduce the time of adaptation of the information system to the constraints of the business, on the contrary, it increases it! The paradox here is crying out in numerous international companies and the people responsible for IT (DIS, CEO) play the quiet ostrich role whilst underlining this paradox. Let us hope that the person responsible for the business will become aware of this dangerous problem quickly, if only for competitiveness and the know how of their company.