July 31, 2003

THIS COLUMN ON OUTSOURCING IN THE I.T. INDUSTRY got quite a reaction, so some readers might be interested in this piece on the subject by Jeff Taylor, which takes a rather skeptical look at the supposed efficiencies involved.

I think there’s a counter-trend starting here. I have a friend who does software at a big corporation that has been doing a lot of outsourcing. They figured out that they were spending as much time and money fixing “low-cost” Indian coding as it would have cost them to do the work themselves using American programmers in-house, and are now bringing some of the work back.

No doubt over time a lot of work will move overseas, but a lot of times people underestimate the problems involved in spreading work over large groups of people who don’t talk to each other face-to-face. And too many companies focus on “savings” that are only on paper. I have a couple of friends who are aerospace engineers who say that their company’s supply chain is entirely controlled by one factor: purchase price. They’re getting Chinese made parts that are a hundred bucks cheaper than the American version — but they fail more often, and when they do a multimillion-dollar jet engine dies. This is generating a certain degree of customer dissatisfaction. . . .

UPDATE: Trent Telenko emails:

The last three major truck quality issues we had on the US Army’s FMTV truck program I work on have been traces to one each a Mainland Chinese, Taiwanese and Korean OEM through American distributors.

In each case the contractor has gone to either in-house fabrication or American OEMs to get reliable quality.

Yeah. It’s not like those folks aren’t capable of making good stuff, or that Americans aren’t capable of making crap. But when you let cost be the sole driver in procurement, well, you get what you pay for. At best.

ANOTHER UPDATE: Tim Belknap, who has a lot of experience with this sort of thing, has more on the subject.