[snip]
> What it came down to, in the end, was the fact that
> the labor cost of a firm using coders in Bangalore,
> India was tens of times lower than a domestic firm.
> So, they could reduce the cost by hundreds of
> thousands of dollars for the client.
>
> The pressure to match this sort of competition is
> tremendous upon middle management, who, after all, are
> in their seats because they can produce the numbers
> the owners like. If they can preserve the desired
> profitability, but lower their labor costs
> dramatically you know they'll do it.
[...]
I've lived through this. Our manufacturing firm sent much of our development off to India, with terrible results. Many of the laid off workers have come back. Management realized that there is a difference between the quality of work coming from India versus in-house talent. Rather, customers noticed, and were furious. The failure of the first outsourcing meant my group (support and services) survived and outsourcing of us was halted.
I believe that while upper-managers think they are saving costs, a true due diligence shows they are not. That is what saved us. When low-level managers got involved in the RFP, and crafted it to accurately reflect the service being provided, even the third-world firms couldn't match the price. They may have freshly trained talent from local schools but that doesn't imply competence.
Of course, in today's hit & run style of managerial capitalism, where upper managers seldom are around for more than 3-5 years, the cost savings they gain in the short term are all that matter, from their perspective. Growing the business is not even on the table.
Matt
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