Why Companies Have Stopped Outsourcing IT
blogs.wsj.com
blogs.wsj.com
While Walmart labor practices definitely get a bad rap (not necessarily undeserved), I found this story very encouraging. It's kind of ironic, but having developers work the cash registers actually suggests that these developers have a very high status in the business - they are not viewed as glorified typists, or even as technically talented but limited people where it comes to business. They are viewed as people who need to understand business processes deeply and who have the autonomy and authority to act on that understanding. And from what I understand, Walmart did rise to prominence at least in part on the effectiveness of its IT systems (which enabled more efficient supply chains, in particular).
This was a long time ago (and the WSJ article certainly acknowledges that some companies have been aware of this for a long time). Personally, it took me a long time to understand how software outsourcing could ever be anything other than a disaster, and I slowly came to realize that this is because I worked in the jobs that hadn't been outsourced, that required a lot of business context.
Even then, it's been pretty clear to me at times that decision makers higher up on the org chart really don't understand what I do. Or, more cynically, you could say they absolutely do understand it, but are aware that it would take a few years for the hidden costs of their decision to catch up with them, by which point they've made their numbers and can use it to move up another rung (ie., if a highly competent software developer who truly understands the business has built robust, well documented, well tested systems, that person could be replaced with someone more limited in ability and business understanding, and it could actually be a few years before critical systems no longer effectively support the business).
That's not really outsourcing. That's shifting from capital expenses to operating expenses which has tax and cash flow advantages.
The number of people that think somehow using AWS means you no longer need Ops staff is amazing. In a bad way. How often does "we can't afford our own Ops so we use AWS/Azure/etc" come up as a reason to accept the associated vendor lock in with a given provider?
Many would disagree with you, and run their business as if that is the case.
I'm not saying they are right, I'm saying thats the reality of how a number of decision makers act.
Also, a lot of companies opt to use Heroku first then migrate to basic ol' AWS once that gets far too expensive for them and may hire an operations engineer or two to replace the cost and to help them scale better with capital.
NoOps in a very literal sense being used to describe tech operations is something I never think I'll see anyone take seriously and that can scale.
It's the "replace an in-house team with a broadly equivalent external team" version of outsourcing of recent years that's the bastard.
The "capital (depreciation) vs operating" is only talking about hardware. Having in-house IT employees to install new servers, run new cabling, change tapes for backups, etc, is not a capital expense. Migrating to AWS can shift the FTEs from XYZ company's payroll to Amazon's payroll. Presumably, Amazon's engineers can do IT admin operations in a more cost-efficient manner. That's "outsourcing."
Yes, there would still be in-house employees as "AWS admins" but overall, there should be a net-reduction of FTEs doing commodity-IT grunt work.
http://www.nytimes.com/2015/06/04/us/last-task-after-layoff-...
http://www.computerworld.com/article/2879083/southern-califo...
http://www.breitbart.com/big-government/2015/09/07/exclusive...
This is a classic outsourcing strategy. Insourcing is the complete opposite, see https://en.wikipedia.org/wiki/Insourcing.
The way this should operate for software development is to have people at or near HQ that are the key roles - software architecture, project managers, requirements analysts and software development leads or managers. Then at your Asia branch (India most likely) you would staff up managers, software developers, etc. in a center where they can deliver things that are tightly aligned to your companies strategy instead of aligning to some legal contract.
In software terms: insourcing is a tightly coupled mutually beneficial interface, outsourcing is going through a facade owned by two legal teams.
And then they wonder, when they have to push out new releases/features, why no one got the capacity and why only half of the features work - half the time (returning maybe confidential customer data of others customers, ohh).
But then it's the "moral duty" (management words...) of the remaining "local" teams to work 20/24 7/7 for a month to try to salvage what can be salvaged.
I see no signs of it stopping. :\
Even in western countries like Finland, Denmark, and Austria, mid-level developers and other technically inclined can expect to make 1500-4000euros/month. Compare that to US developer salaries and you can see why.
The reframing of the discussion as about competitive advantage is a good one.
Even if you cannot put an accounting profit line with them, they facilitate the profit of the other departments.
where do you draw the line?
Better cleaning, not so much - it's just a cost/requirement of doing business .
Some companies don't consider their software or developers to be sources of competitive advantage, and you should try to avoid those if your goal is to work on cool stuff and have better chances of making more money. Some people do like the challenge of maximizing operational efficiency and might get a good job that way, but it's harder and fraught with politics.
I don't think this is news, but it seems to often be ignored.
Using term cost centre is so damaging for the culture that it can kill the company.
If you stop calling it "cost center" and decide to call it "pure awesomeness ninja center" won't make a difference, people will just attribute the same meaning to the new word.
On your point on competitiveness, I completely agree, just like HR having awesome hiring and retention policies can do miracles for a company, even if it's just a cost center.
Legal too, for any major corporation legal is just a cost center, but one that routinely saves the company from total obliteration.
Being a cost center or a revenue center has no relation to the relevance of the people involved.
http://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-pro...
Working for an insurance company on an internal system that helps agents sell and manage policies reduces costs by eliminating assistant and clerk positions and streamlining the process to save time. The development team working on such a project is working on reducing costs. This type of project is about lowering the floor (to increase profits, the more space between the floor and the ceiling the more profit).
A development team working on a software product that is sold is focused on adding as value to the product so that the company can charge more for the product, increasing sales and profits. This type of project is about raising the ceiling.
Ideally you want to be raising the ceiling, not lowering the floor. You can only lower the floor until you're on the ground (you can only reduce your costs/expenses to zero). If a company is focused on lowering the floor (reducing costs), they are interested and focused on removing YOU too (you're a cost). If a company is focused on raising the ceiling (increasing value and sales), they are more likely to see money spent on software development as an investment and are focused on making you more productive so you can add more value.
Work on a project that raises the ceiling not lowers the floor.
I could never image to work for a company that works for companies. Doing good work is rarely honoured or even noticed. And who cares. Good, that even non-tech people start to understand. How long did it take.
Then again, some of the contracting agencies are probably among the worst places, too, employing people with limited choices. Just need to identify the good ones.
Also, what about the practice of bringing in cheaper labour to undercut the local workforce. This seems to be growing everywhere?
That leaves me scratching my head a little bit. It sounds like he's saying that outsourcing is dead because everything has been outsourced already.
the technology landscape has changed since the outsourcing was initiated, some gains will be realized and bonuses will be distributed.
Like when taxi companies are outsourcing their iOS applications to agencies while Uber has in-house engineering(?)
One might ask, what are you when all of the proprietary parts of your companies process are 'owned' by outsiders?
Uber keeps trying to tell us that it's drivers aren't employees, so they're trying to outsource the drivers themselves.