Disadvantages of Indian Outsourcing
We provide this article for the Indian developers and development companies that call and email us persistently and Australian companies that are considering outsourcing to India. Here is the long explanation as to why we do not and will not outsource work to India.
We specifically single out Indian developers for this article because of the high number of phone calls and emails that we receive from India and because we have personally experienced Indian programming.
It is a myth that outsourcing to India is always cheaper or better.
Don't believe everything you read in the papers - outsourcing has more disadvantages than advantages and many Australian companies fail to make a proper assessment of the risks and real costs associated with outsourcing programming projects.
Myths
- Outsourcing to India is cheaper. This is not necessarily true. We have seen Indian programming with no structural integrity or proper checks as to what can be deleted in a system (we are talking about systems that cost hundreds of thousands of dollars and tens of thousands of dollars in ongoing licensing). A system with no structural integrity will eventually crash and lose critical data. Poor programming is not isolated to Indian developers, but because Indian programmers are "cheap", there is no incentive to build efficient systems with good system architecture. Why bother when you can get a dozen programmers to patch up a program, make it look good and patch it up again when the first patch falls off. More man hours working on a project equates to higher cost and inefficient systems that are prone to errors and inefficiencies, especially as the size of database grows. Most articles and analysis about the benefits of outsourcing are based on large enterprises, few consider the true cost of outsourcing to small to medium sized projects, which cost more to outsource because of the extra time required to communicate between the client and the programmers is not offset by savings from mundane programming tasks. High staff turnover in India has to be factored in to all projects but high attrition has a larger impact on small and medium sized projects, where a loss of a central developer can be disasterous.
- Outsourcing to India is easy. Communication problems and cultural differences hinder development. It is difficult enough to translate technical and programming concepts to clients and establish feasible project goals without having to provide clear instructions to Indian programmers who have a different grasp of English. Misunderstanding happen, projects evolve but not necessarily in the right direction. The true cost of poor development may vary from a financial loss from system downtime to a system that collapses and loses critical data. Outsourcing creates an environment that breeds misunderstanding because communication is not as direct as it would have been with someone that understands your business and your needs, ideally from the same country or culture.
- Indian programmers are better. Though there must be some excellent Indian programmers, the vast majority are hired to churn out code. We have a term for it, it is called spaghetti programming because it works by looping round and round but should anything go wrong, it is difficult to fix. Whether Indian programmers are better is very difficult to judge because there are a lot of average programmers of all nationalities. Because of the law of supply and demand, the better developers are hired by banks and large software companies and the less skilled left for everyone else. Attrition rates for Indian programmers is particularly high - so you are less likely to get a good developer to work on you long term than you are if you hired locally.
Disadvantages of outsourcing to India
- Licensing and copyright issues. Outsourced projects may be copied and sold again to one of your competitors. This leads to serious issues with regards to licensing and copyright.
- Time lost managing project. Any financial gain must be weighed against the time spent having to manage the project from half way across the world. Communicating to the client and then having to translate requirements to the Indian programmers and back and forth. Paying for airfares, accommodation, visas, etc need to be factored in.
- Poorer standard of work resulting from poor communication and cultural differences. Financial losses that result from competitor's having better systems.
- Political instability - It is a fact that India is not as politically stable as Australia. Assassinations can lead to street unrest that can shut businesses down for days.
- Lack of quality control. Outsourcing a project requires a great deal of trust because the quality of programming varies considerably. Most problems do not surface till later on, and unless a project is written well, it is expensive to fix. Patch after patch is applied to dodgy programming.
- Customer service. Pushy sales people are always a sign that something is not quite right. If in presales, Indian developers call and email persistently, refuse to accept 'no' for an answer and continue to speak about how great their company and developers are, then what happens in the middle of a project, when something needs to be fixed, will they listen then? Establishing a relationship, is more than - 'we can get you a better price' - it is about working together to achieve a common goal and this means being able to listen and provide thoughtful answers, not just sales rhetoric.
- Risks to confidential data and personal data. The world may becoming a global village but laws that protect privacy and personal information are locally based. Once you outsource your data, you have very little control about what happens to that data. http://www.sqlsummit.com/Trends/Terrorism.htm
- Increasing long term costs. According to Forbes magazine's article "The Coming Death of Indian Outsourcing" India's cost advantage, which is currently 1:3 in 2007 will disappear by 2015, because of Indian wages are rising at a rate of 15% a year.Companies that choose to outsource to India, need to budget for long term increased costs, and provision for time to manage the project as well as budget for the risks of outsourcing.
- System crashes. Could outsourcing be contributing to the spate of internet banking system crashes. http://www.news.com.au/business/story/0,23636,22410493-14334,00.html
- National security - entrusting critical systems like banking and government systems to a foreign country would have been unheard of many years ago but today, private companies who hold government data and banks outsource their systems and data to foreign countries for profit. Confidential information is shipped overseas, with no thought about what happens if India decides that Australia is a threat.
- Economic insecurity and fraud - $1 billion dollar fraud in India's fourth largest software provider reveals how difficult it is to judge a company's economic viability and their ability to provide long term support by looking at a balance sheet http://business.theage.com.au/business/world-business/indian-software-giant-admits-scam-20090107-7bx4.html
Finally
An excerpt from a client email. The reason why we have used this email is because it highlights some myths about outsourcing and certain common traits that we have experienced, having observed first hand companies that were disadvantaged because they chose to outsource development, rather than develop inhouse or hire a locally skilled developer.
"I was aware from the beginning that I was working with East Indians but I actually thought that was a good thing. I know they are supposed to be very good programmers. I didn't realize that the work would be outsourced to people who couldn't speak or write English. When the website was initially submitted to me there were many grammatical and spelling errors and I almost felt bad about listing them all. However, it doesn't look very good for a website to have errors like that and when I went to the developers site they obviously cared enough about their own site not to have any there. If you look at their site they appear to be very knowledgeable and professional. I was led to believe that my site would be custom built for me but when I actually received the first draft it was very apparent that the shopping cart was a (very) cheap template with very few of the features mentioned on the developers site. I would imagine that the changes they made to it were just pieced in. Wouldn't it make more sense to just have a good template with all of the promised features instead of starting with a bad one and adding from there? As bad as it sounds, I will be very cautious about dealing with east Indians in the future. I was treated poorly and I suspect it may have been because I am a woman. He actually yelled at me on the phone one day. Looking back I can't believe I let it go as long as I did."
We have received some abusive emails from Indian developers about this article. We have posted some of the emails received below. We think, the emails speak for themselves.
"It's because few people like you which is destroying the image of Australians worldwide..What do you guys think yourself about your junk country ? Since you guys cannot deliver even 5% of what an ordinary Indian developer can achieve, you have no absolutely no permission to post such insane comment on your crap business website. Just look at the US and other european economies, how much Indian population are ruling at top positions and prospering their economies.....At least in this century, open up for minds you close-minded people. Nothing can be arrogant than this what you have posted....Just go and read the book, The World is Flat and stop being jealous about rest of the prospering nations.Just go and sit under the closed doors and run your utmost irrelevant and most useless business and keep reading the disadvantages of Indian outsourcing while your neighbors grab the opportunity and prosper..P.S. This is a VERY Important Notice to one of the Australian Stupid and Backward thinking fellow!!!"on
"your website u mentioned too bad things about Indian. its not fare...........
i understood urs skill level when i saw ur web site. its too poor.
if u don't believe pls ask from me of our developed site address.
ur mind is very needy."
Australians should be very concerned that their bank accounts, credit and personal information is in foreigner hands and under foreign control. How so? Most Australian banks and large numbers of semi government departments outsource software development to India. Corporate greed means that the decision makers in a company have every incentive to cut the bottom line, rather than investing in the future prosperity of their business or country.
The share price goes up, when profits are high - so outsourcing makes sense. One by one, corporations follow each other down the outsourcing road but where does the road end. Do you trust your banking, critical systems and data to a country where the assassination of a movie star can cause businesses to be closed for days because of riots? Or a country which is always on the brink of nuclear war with Pakistan?
It is easy for Indian developers to play the race card and say that Australians are racist to not use their outsourcing services. Australia is a multicultural and tolerant society - choosing to outsource or not to outsource to India is a business decision. Business is about investment and taking risks and in our opinion, the risks of outsourcing to India is not outweighed by any benefits.
Other Comments
I myself am a Indian..am telling you my take about it..I have been abroad in many countries..Indian outsourcers are comprised of tcs, infosys, etc..
They do get programmers to work in cheapest of cheap rates..they mostly are semi skilled..They dont have the right skills..
They have just become a sort of mafia where they affect the it persons rate..I myself had been abroad..but be whatever the case wont work for any indian it company..
They just like sitting in between to take or grab the money..while the indian it ..expert even if he is a expert has no chance in india..cause all they want is cheap rates...so they can make money in between..
What i am trying to do is contact a company directly..i do have the skills required..
luckily countries like uk , australia and in europe..they need the guy to be among top of something..its only then the recrutiers there start paying attention to you..
Most of the biggies here have formed a mafia...I myself am contracting....Trying to do project in client place..will later make a blog against these outsourcers..
For example..i know this is what accenture did..(now if this can happen with accenture what about other indian companies (where their programmers are even ready to do data entry for money data entry for 5 months and then they will be some project lead.) accenture recently took some indian guys to some project in europe..
The company charged the client 500 euros a day while the indian it guy was paid a mere..
50 euro a day..!! The guy will happily accept it why ..cause he was semi skilled in his own topic..
So if big companies like accenture can do this nonsense what about unethical indian companies..
Anyway life is tough..i will just enhance my skills ...make it sharp and sharper and hope to get one last permanent company in europe ..This is where i had been abroad.. I mean while dont plan to work in any of the indian companies.."
Reply
Unfortunately, where ever there is money there is corruption. The idealism of excellence has been lost in pursuit of making the most amount of money for the least amount of effort. The IT industry is taking lessons from global financiers, hedge funds and merchant bankers on how to make profit destructively.
All comments to manager@passioncomputing.com.au