How Offshore Outsourcing Failed Us

[Your Special Friend]

http://www.nwc.com/showitem.jhtml?docid=1421f3

F E A T U R E

How Offshore Outsourcing Failed Us

Oct 16, 2003
By Wesley Bertch

What are my options if my highly productive, 15-person software team
generates only one-third the output our customers demand? I was
certain that augmenting our team with offshore development was the
right answer. It wasn't, at least for a small project we recently
outsourced to an Indian firm. Here's our story.

I lead the software development group at Life Time Fitness, a
high-growth, nationally expanding health and fitness chain. We're more
than just health clubs--we have spas and salons; cafés; member
services, such as personal training and swimming lessons; a division
that produces a nationally distributed magazine; a division that
formulates and distributes energy bars, powders and other consumer
goods to national retailers; and a corporate wellness unit that sells
products and services to thousands of companies. In addition to
supplying these departments with systems, we provide software services
to Life Time's internal real-estate group. Keeping pace with the
growing software needs of so many diverse business units is a huge
challenge.

From almost every angle, offshore development appeared to be the ideal
solution. We needed to augment our internal team cost-effectively,
without sacrificing quality. Judging from what analyst firms and the
media were saying about Tier 1 offshore developers, with their CMM
(Capability Maturity Model) qualifications, Six Sigma quality
experience and "proven" low-cost development model, how could we go
wrong?

Personally, I was excited about the promise of offshore outsourcing.
If it worked, we'd be heroes to the business. Philosophically, I view
free trade as highly beneficial to its participants.

We met the key criteria for offshoring: centralized IT, process
maturity and years of experience working with Indians both in the
United States and offshore. We had executive sponsorship. We had IT
commitment. We even had the perfect project to test the waters: a
small, low-risk Web application for our real-estate division. The
application's purpose is to provide screens for entering new location
information. The application isn't complex: The back-end database is
Microsoft SQL Server; server-side Java components implement business
rules; and Java Server Pages (JSPs) are used for the front end. We use
BEA Systems WebLogic as the application/Web server and Concurrent
Version Systems (CVS) for source-code control.

The Tier 1 Indian vendor we invited to implement the project was
successfully supporting our Siebel 7 sales-force-automation
implementation, so both sides thought this project would be a slam
dunk. The vendor agreed to take on the project for a fixed fee of
$20,000, with a nine-week time line.

To avoid finger-pointing, everyone agreed that the vendor should
perform all phases of the project, from gathering business
requirements through QA (quality assurance). Life Time's internal
staff would monitor and participate in every way necessary for the
project to succeed. If the project proved successful (defined as
anything shy of disaster), we promised a small fortune in project
work.

[habshi]

One military contract that India just signed with Britain for
over $1.5b is worth three times what the Brits have lost to
outsourcing and similar huge deals are in the pipeline with US
military.
So the west will make a huge profit from these deals and be
able to employ all the displaced people and more in leisure and
knowledge industries.

[Tim Keating]

Post by habshi
One military contract that India just signed with Britain for
over $1.5b is worth three times what the Brits have lost to
outsourcing and similar huge deals are in the pipeline with US
military.
So the west will make a huge profit from these deals and be
able to employ all the displaced people and more in leisure and
knowledge industries.

Why would they do such an insane act?

They have already determined that going offshore is a preferred
method to make additional profit. Why would they stop?

[anon]

out of that 1.5 b, atleast 0.5 b went into channel island
accounts of indian arms dealers, politicians and bureaucrats.

Post by habshi
One military contract that India just signed with Britain for
over $1.5b is worth three times what the Brits have lost to
outsourcing and similar huge deals are in the pipeline with US
military.
So the west will make a huge profit from these deals and be
able to employ all the displaced people and more in leisure and
knowledge industries.

[Peter Lawrence]

Post by habshi
One military contract that India just signed with Britain for
over $1.5b is worth three times what the Brits have lost to
outsourcing and similar huge deals are in the pipeline with US
military.
So the west will make a huge profit from these deals and be
able to employ all the displaced people and more in leisure and
knowledge industries.

That's like saying that in the 18th century the Enclosure of the Commons
meant enough gains that the landowners of the newly private land had enough
over to be able to hire all the expropriated peasants. That was true, but
they didn't actually do it for more than a few servants - since they
preferred to keep the gains rather than hire all the peasants. So peasants
did indeed end up worse off, despite the economy as a whole gaining. The
aggregate just didn't break down the right way.

In the same way, the "west" will indeed make a profit and be able to employe
etc. etc. But what counts is whether it actually DOES - and it probably
won't, since the incentives don't go that way. There are externalities
involved, which I go into in some detail in the material at the site I link
to via my signature below. There are also all sorts of time scale issues and
so on to complicate matters (also described at that site). PML.

[habshi]

Thanks to outsourcing and the Iraq war , US growth has jumped
to 8% !! (thetimes.co.uk) .
Millions of new jobs plenty for everyone and well paid too.

In India most are quitting call centers . Working 12 hr shifts and 3
hour commutes every night (9pm to 8am) for 6 days a week makes the
Indians tired , pale and drop dead .

[anon]

india is wasting its time if it thinks it can have a decent economy
by satisfying US demand. US is just printing money and grabbing
all it can overseas, before the whole thing collapses.

india should try to produce goods and services which raise
local productivity and standard of living. this requires
that all indians be productively educated in practical
disciplines, not just a few speaking english over a phone
or writing code to some US designer's specs.

Post by habshi
Thanks to outsourcing and the Iraq war , US growth has jumped
to 8% !! (thetimes.co.uk) .
Millions of new jobs plenty for everyone and well paid too.
In India most are quitting call centers . Working 12 hr shifts and 3
hour commutes every night (9pm to 8am) for 6 days a week makes the
Indians tired , pale and drop dead .

[Mr. Anonymous]

Post by anon
india is wasting its time if it thinks it can have a decent economy
by satisfying US demand. US is just printing money and grabbing
all it can overseas, before the whole thing collapses.

The US has been "printing money" since the 1930s with nothing backing
it but paper. Haven't had any problems with "the whole thing
collapsing" yet, don't forsee it anytime soon. The bond market is a
lot smarter than you or me, if they believed that the "the whole thing
collapsing" was a possibility, the prices for bonds would be vastly
different.

Post by anon
india should try to produce goods and services which raise
local productivity and standard of living. this requires
that all indians be productively educated in practical
disciplines, not just a few speaking english over a phone
or writing code to some US designer's specs.

Couldn't agree more. Indians just aren't risk-loving enough to do
something like this. They're so risk averse that they've got to have
American masters telling them each and every step along the way.
Kinda like a country with 1 billion poodles living in it. Pee in the
streets, don't bathe, eat the same thing every blessed day...Just like
a poodle.

[anon]

Post by Mr. Anonymous

Post by anon
india is wasting its time if it thinks it can have a decent economy
by satisfying US demand. US is just printing money and grabbing
all it can overseas, before the whole thing collapses.

The US has been "printing money" since the 1930s with nothing backing
it but paper. Haven't had any problems with "the whole thing
collapsing" yet, don't forsee it anytime soon. The bond market is a
lot smarter than you or me, if they believed that the "the whole thing
collapsing" was a possibility, the prices for bonds would be vastly
different.

these days, US bonds/USDs are being stabilized by currency manipulating
foreign central banks. The problem with that is that China has already
allowed its citizens to hoard gold. Chinese money supply is tied to
the dollars they hold (increasing at an alarming rate).

The idea of gold as a currency is the death knell of the dollar (especially
if the FF interest rates are 1%, when inflation is running some 2.5%).

Unfortunately, gold as currency is gaining ground (Islamic block and Russia
main supporters). Russian central bank is the only one which has refused
to follow the general practice of selling gold holdings (it has said it will
increase its gold holdings). Russia has even started talking about pricing
oil in
euros - largely symbolic, but might have major psycholigical impact in the
Arab world.

The smart Foreign Central Banks are trying to bail out of the dollar. The
ones
tied to US demand (Japan, China) are forced to buy US bonds to keep
their currencies low.

US dollar's magical international status (a kind of farce after the US govt
broke the gold peg in 1970), is fatally flawed. Those who find out last
will be left holding the green paper.

BTW, the Fed's foreign exchange reserves ( non-gold ), are some
80 billion (USD equiv) . About the same amount as the Indian Reserve Bank.

[Mani Deli]

Post by Mr. Anonymous
Couldn't agree more. Indians just aren't risk-loving enough to do
something like this.

Many are excellent business men.

Post by Mr. Anonymous
They're so risk averse that they've got to have
American masters telling them each and every step along the way.
Kinda like a country with 1 billion poodles living in it.

This is what ill informed provincial American jerks want to believe.

Post by Mr. Anonymous
Pee in the
streets, don't bathe, eat the same thing every blessed day...Just like
a poodle.

The guy has about as much education as his dog.

Tired of Modern Art? check
http://www3.sympatico.ca/manideli/

[Mr. Anonymous]

Post by Mani Deli
Many are excellent business men.

Then why are they not creating NEW jobs instead of stealing American's
jobs?

Post by Mani Deli
This is what ill informed provincial American jerks want to believe.

Then why are they not creating NEW jobs instead of stealing American's
jobs?

Post by Mani Deli
The guy has about as much education as his dog.

Must say a lot for the idiot Indians who want to take the job I do.
If I'm so stupid, what does that make them?

[Chris Stiles]

Post by Mr. Anonymous

Post by Mani Deli
Many are excellent business men.

Then why are they not creating NEW jobs instead of stealing American's
jobs?

Oh, most of them are. Given the numerics the vast majority of Indians will
still be doing their 'own' jobs, even if 3 million or so 'American' jobs move
over there. In reality, all they've done is worked out how to do these jobs
better than they are done at the moment - and before you object, there are a
number of measures of 'better', including making more money for the
corporation they work for.

Post by Mr. Anonymous

Post by Mani Deli
The guy has about as much education as his dog.

Must say a lot for the idiot Indians who want to take the job I do.
If I'm so stupid, what does that make them?

Smarter than you.

[Tim Keating]

Post by Your Special Friend
http://www.nwc.com/showitem.jhtml?docid=1421f3
F E A T U R E
How Offshore Outsourcing Failed Us
Oct 16, 2003
By Wesley Bertch
What are my options if my highly productive, 15-person software team
generates only one-third the output our customers demand? I was
certain that augmenting our team with offshore development was the
right answer. It wasn't, at least for a small project we recently
outsourced to an Indian firm. Here's our story.
I lead the software development group at Life Time Fitness, a
high-growth, nationally expanding health and fitness chain. We're more
than just health clubs--we have spas and salons; cafés; member
services, such as personal training and swimming lessons; a division
that produces a nationally distributed magazine; a division that
formulates and distributes energy bars, powders and other consumer
goods to national retailers; and a corporate wellness unit that sells
products and services to thousands of companies. In addition to
supplying these departments with systems, we provide software services
to Life Time's internal real-estate group. Keeping pace with the
growing software needs of so many diverse business units is a huge
challenge.
From almost every angle, offshore development appeared to be the ideal
solution. We needed to augment our internal team cost-effectively,
without sacrificing quality. Judging from what analyst firms and the
media were saying about Tier 1 offshore developers, with their CMM
(Capability Maturity Model) qualifications, Six Sigma quality
experience and "proven" low-cost development model, how could we go
wrong?
Personally, I was excited about the promise of offshore outsourcing.
If it worked, we'd be heroes to the business. Philosophically, I view
free trade as highly beneficial to its participants.
We met the key criteria for offshoring: centralized IT, process
maturity and years of experience working with Indians both in the
United States and offshore. We had executive sponsorship. We had IT
commitment. We even had the perfect project to test the waters: a
small, low-risk Web application for our real-estate division. The
application's purpose is to provide screens for entering new location
information. The application isn't complex: The back-end database is
Microsoft SQL Server; server-side Java components implement business
rules; and Java Server Pages (JSPs) are used for the front end. We use
BEA Systems WebLogic as the application/Web server and Concurrent
Version Systems (CVS) for source-code control.
The Tier 1 Indian vendor we invited to implement the project was
successfully supporting our Siebel 7 sales-force-automation
implementation, so both sides thought this project would be a slam
dunk. The vendor agreed to take on the project for a fixed fee of
$20,000, with a nine-week time line.
To avoid finger-pointing, everyone agreed that the vendor should
perform all phases of the project, from gathering business
requirements through QA (quality assurance). Life Time's internal
staff would monitor and participate in every way necessary for the
project to succeed. If the project proved successful (defined as
anything shy of disaster), we promised a small fortune in project
work.

end of Page 1...

Additional info from subsequent pages... Page 2..

"The project got off to a good start. The vendor's business analyst
met frequently with the real-estate division's users and, with the
on-site liaison, worked furiously to document all the functional and
user interface requirements within four weeks."

"By week three, however, our internal lead business analyst threw up a
red flag. His review of the functional specs exposed problems in the
requirements, particularly in the interface specs. For example, the UI
as laid out forced the users to re-enter data they had previously
entered. Plus, the screen flow was illogical and confusing. The
on-site liaison countered that though the UI had problems, it
ostensibly complied with the documented business requirements."

"To ensure that we would get what we needed, we extended the project
time line, agreed to a cost increase of $7,000 to allow for additional
analysis and better interface design, and dedicated internal Life Time
analysis and UI people to guide the final version of the
documentation."

and Page 3..

"From Proud to Dejected"

"Once offshore, however, the project started down the slippery slope.
Upon receiving the offshore company's database design, Life Time's
lead data architect declared it to be the worst he'd ever seen. There
were so many critical database flaws--more than 100--that our
architects were unable to log all of the defects within the scheduled
one-week review period."


"In two short weeks, the offshore team had gone from proud and eager
to embarrassed and dejected. Once the stark reality of our logged
defects sank in, the team knew there was no way they could straighten
out the code design and then code and test the applications within the
set time frame. Frustration levels were high on the offshore team, and
the on-site liaison became increasingly defensive. The internal Life
Time team was disappointed and annoyed as well, but we accepted the
fact that mistakes were bound to happen on our first end-to-end
offshore project."

"To the Rescue?"

"Not long after our trip, the offshore team delivered the tested,
"finished" application. According to the on-site liaison, all we now
needed to do was perform a ceremonial user-acceptance review, sign off
on the project's successful delivery and celebrate."

"Not so fast. We instead decided to perform a little QA of our own. In
less than a day, one Life Time tester and one developer found more
than 35 defects, many of them showstoppers. Screens randomly went
blank, "saved" data was lost, functionality was missing, the interface
wasn't consistent and data validation didn't work. The offshore team
categorized the hundreds of newly found defects as "in scope" (these
they fixed) or "out of scope" (these were deemed Life Time's
problem)."

Page 4..

"Root Cause #1 -- Inexperienced Labor"

"Indian software labor is highly educated and dedicated, to be sure,
but we found that workers lack the technical and people skills that
come only with experience."

"Root Cause #2 -- Overemphasis On Process"
"Root Cause #3 -- Project Performance Metrics Masking Problems"

[David Fabian]

"Tim Keating" <***@directinternet11.com1> wrote in message news:***@4ax.com...

Earlier Root Cause #1: U.S. corporate management's
greed, idiocy, arrogance, and treachery.

Obviously, since the Indian IT industry boom is a recent
phenomenon, most Indian programmers are novices.

[Chris Stiles]

Post by David Fabian
Earlier Root Cause #1: U.S. corporate management's
greed, idiocy, arrogance, and treachery.
Obviously, since the Indian IT industry boom is a recent
phenomenon, most Indian programmers are novices.

I think a lot of outsourcing flounders simply because of the way the
outsourcing teams are structured. If your developers are in India and your
project managers and architects are in the US, chances are very high that
you'll run into communication and motivational difficulties,
This approach is more prone to succeeding where the outsourcing
company has local arrangements for personal management that try and mitigate
these problems.

The best approach is to not just treat the outsourcers as a bodyshop, but
actually outsource your whole development organisation over there. Or even
better, to 'insource' development but locate it over there. This is what the
likes of Cisco, IBM, Sun, etc are doing.

As for most Indians programmers being novices, that largely goes with the
territory of body shops. The valued added outsources - the likes of TCS,
Wipro and Infosys - have plenty of programmers with experience.

[l***@gmail.com]

Post by Your Special Friend
http://www.nwc.com/showitem.jhtml?docid=1421f3
F E A T U R E
How Offshore Outsourcing Failed Us
Oct 16, 2003
By Wesley Bertch
What are my options if my highly productive, 15-person software team
generates only one-third the output our customers demand? I was
certain that augmenting our team with offshore development was the
right answer. It wasn't, at least for a small project we recently
outsourced to an Indian firm. Here's our story.
I lead the software development group at Life Time Fitness, a
high-growth, nationally expanding health and fitness chain. We're more
than just health clubs--we have spas and salons; cafés; member
services, such as personal training and swimming lessons; a division
that produces a nationally distributed magazine; a division that
formulates and distributes energy bars, powders and other consumer
goods to national retailers; and a corporate wellness unit that sells
products and services to thousands of companies. In addition to
supplying these departments with systems, we provide software services
to Life Time's internal real-estate group. Keeping pace with the
growing software needs of so many diverse business units is a huge
challenge.
From almost every angle, offshore development appeared to be the ideal
solution. We needed to augment our internal team cost-effectively,
without sacrificing quality. Judging from what analyst firms and the
media were saying about Tier 1 offshore developers, with their CMM
(Capability Maturity Model) qualifications, Six Sigma quality
experience and "proven" low-cost development model, how could we go
wrong?
Personally, I was excited about the promise of offshore outsourcing.
If it worked, we'd be heroes to the business. Philosophically, I view
free trade as highly beneficial to its participants.
We met the key criteria for offshoring: centralized IT, process
maturity and years of experience working with Indians both in the
United States and offshore. We had executive sponsorship. We had IT
commitment. We even had the perfect project to test the waters: a
small, low-risk Web application for our real-estate division. The
application's purpose is to provide screens for entering new location
information. The application isn't complex: The back-end database is
Microsoft SQL Server; server-side Java components implement business
rules; and Java Server Pages (JSPs) are used for the front end. We use
BEA Systems WebLogic as the application/Web server and Concurrent
Version Systems (CVS) for source-code control.
The Tier 1 Indian vendor we invited to implement the project was
successfully supporting our Siebel 7 sales-force-automation
implementation, so both sides thought this project would be a slam
dunk. The vendor agreed to take on the project for a fixed fee of
$20,000, with a nine-week time line.
To avoid finger-pointing, everyone agreed that the vendor should
perform all phases of the project, from gathering business
requirements through QA (quality assurance). Life Time's internal
staff would monitor and participate in every way necessary for the
project to succeed. If the project proved successful (defined as
anything shy of disaster), we promised a small fortune in project
work.

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