If we look at the number of organisations outsourcing their software development, IT service desk or WAN support to India and other cheap-labour countries, offshoring nowadays seems not only convenient and straight-forward, but as easy as abc. But what the media doesn't seem to cover is an issue that is not at all uncommon: it hit Barclays, Quark, Dell and a large number of other companies - what happens if all is not well and you have to take the offshored back in-house?
The phenomenon has already been dubbed ‘backshoring' in the US, where 30 per cent of Fortune 500 companies have experienced it, according to Oxford Analytica. As for the UK, a survey conducted by the National Computing Centre found that 14 per cnet of the respondents who have used offshored facilities for their IT have switched work back to the UK, and another 24 per cent are considering the move. This means that nearly 40 cent of organisations haven't found offshoring satisfying.
However, the problem is that once you decide to reverse the decision, the process is not trouble-free. Of those who have taken services back in-house, 30 per cent say they have found it ‘difficult' and nearly half, 49 per cent, ‘moderately difficult'. When we talk about IT, in fact, we are dealing with the pulsating heart and veins of a modern business, where everything seems to rely on technology. So the costs of reversing an offshore operation do not only cover the facilities and assets - it extends to data security, staff skills, system disruptions and inefficiencies, low user or client satisfaction, client loss, and maybe much more. What happens to the CIO who proposed or supported the offshore move?
Let's look at some examples. Barclays had a recent ‘divorce' from Accenture which appears to be peaceful and grievance-free, just the best answer to their present needs. When the application development and management of their banking systems were assigned to Accenture in 2004, around 900 employees were transferred to the provider. But only 230 are expected to be taken back. What happens to the various development, support and maintenance staff and their skills every time they are shifted to the other side? Some are taken on by the new employer under TUPE arrangements - the Transfer of Undertakings (Protection of Employment) Regulations that preserve employees' terms and conditions with the previous company - although the majority will be lost, either voluntarily or forcefully made redundant. Unfortunately, when you lose people you lose their acquired skills as well, and to that there is no remedy.
An organisation which decided to openly talk about their failure is Everdream, which provides customers with remote desktop management services, and that in 2003 decided to outsource their Californian help desk to Costa Rica to aid scalability as their business was growing. Fifteen people were sent to the provider to train the call centre employees ‘the Everdream way'. It turned out to be an ever-nightmare when trainers found themselves dealing with a completely different business culture where the idea of customer service was "move ‘em through", clashing with the hands-on approach of the firm. The strong foreign accent also failed to impress the customers, who started to complain almost immediately. The ‘shallow talent pool' in Costa Rica led Everdream to pull out, as happened to Dell the previous year: customers unhappy with their Indian technical support launched in 2002 made the company decide to re-route calls back to the U.S. In Everdream's case, the pull-out was spread across six months, making the transition softer and minimising the damage, and many employees had their jobs back. However, it did take some extra financial effort to take the work back in-house and the long-term damage, the relationship with customers, is difficult to measure.
Bad customer service and poor product quality is what brought many Quark clients to switch from their software to Adobe's InDesign during the Indian experience, never to return - 60 per cent of their customer base, it is claimed. When work was brought back home, the C-executive who decided and led the offshore move was fired without hesitation.
Finally, a mixture of reasons have brought many offshored Oracle projects to fail for a number of US companies, it was reported a few years ago. Communication problems, poorly skilled and trained developers and enormous cost over-runs were topped with the previously unconsidered difference in the Indian law system. Oracle jobs were returned to the US, but the unrecoverable financial loss left many organisations strained.