There was an interesting post on Information Week’s “CIOs Uncensored” blog.  John Soat had received an email from a PR agency trying to get coverage for some consulting firm.  Part of their pitch was the following:

The end of offshoring: As costs rise in offshore locations and firms are seeing projects fail, much of the gusto for offshore is fading.

* New thing is rightsourcing, using high-quality onsite resources where possible.

Mr. Soat observed that this seemed a bit extreme, then he shared the following:

However, the results of the most recent survey by the Society for Information Management of 130 CIOs and top IT execs would seem to contradict the thesis that offshore outsourcing is on the rise, and suggest that maybe “The end of offshore outsourcing” is a hot topic after all.  Almost 60% of the SIM survey respondents said that less than 10% of their 2007 IT budgets had been allocated for outsourcing of any kind, and 73% said that no amount of their 2007 budgets — 0% — had been allocated for offshore outsourcing.

Mr. Soat goes on to ponder whether offshore outsourcing has run it’s course, or whether it’s still going strong.  Unfortunately, I think that this is entirely the wrong question.  The problem is that it’s based on people writing reports and position papers who are completely missing the fundamental issue.

Offshore software outsourcing is clearly a mainstream practice and that it is going to continue to grow.  Even if there are some temporary setbacks, issues like the coming shortage of skilled software engineers in the west and the necessary drive to improve efficiency will inevitably drive more offshore outsourcing.  The real question that everyone should be asking is definitely not, “Is this the end of offshore outsourcing?”

The right question, is, “How do I create the most efficient process possible for creating and maintaining my software?”  The real objective is increasing your organization’s competitiveness by achieving the optimum tradeoffs between costs (both for engineers and management overhead), time to market and available skills.  Offshore resources will probably be a component of the answer, but they may not be.  If your process depends on high bandwidth frequent communication during work hours, offshore resources may not be appropriate.  Also various regions may be better suited for some problems and types of work than others.  For example, China’s outsourcing teams are often great at testing.  Some teams in eastern Europe are wonderful at development.  India, as the established leader has great processes, but it also faces the challenges that come from its success (attrition, skilled resource shortages & increasing costs).

My point is, we’re damaging offshore outsourcing by focusing purely on the cost per hour.  We should be looking at the impact on overall team productivity and efficiency.  As more organizations understand how to evaluate the role that offshore outsourcing can play for them, the trend will definitely be up and to the right.  In the meantime, we will experience some setbacks, and people will be asking questions like, “Is offshore outsourcing dead?”

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