Outsourcing saves less than claimed

[spinbaby]

AMSTERDAM (Reuters) - Outsourcing of information technology and business services delivers average cost savings of 15 percent, a survey found on Thursday, disproving market claims that outsourcing can reduce costs by over 60 percent.

After professional fees, severance pay and governance costs, savings range between 10 percent and 39 percent, with the average level at 15 percent when contracts are first let, according to outsourcing advisory firm TPI.

"This research proves that the promise of massive operational savings is unrealistic when you take into account the costs of procurement and ongoing contract management," Duncan Aitchison, TPI's managing director, said in a statement.

"In our experience, outsourcing arrangements which focus solely on delivering huge savings often fail to meet client expectations," he added.

http://tinyurl.com/qlwrz

[aden_nak]

1. As someone who's helped outsource his own job twice. . .

Yeah, seriously. Nothing like being tech support and having the task of setting up a secure network with outsourcing firms in India that provide, oh yes, tech support. I'll be the first to admit, that's problem number one. You have to figure out how to swindle the old staff out of their jobs and knowledge (for me it was easy, since the job was so terrible half the staff wanted to be laid off). But the cost in time, money and effort of keeping that connection and communication regular and reliable is much higher than it looks on paper. Simple things like time zones (managers not keeping the same hours) can make a task take three days instead of one. Any new activity, or any new problem, becomes exponentially larger because of the outsourcing model. I've seen it first hand often enough to know that it's the truth.

[Skittles]

22. I declined to assist via TDYs overseas

I told them I am not an offshore whore :)

[applegrove]

2. I believe that outsourcing high-tech is not in the best interests of us

all in North America. But outsourcing other jobs - at a huge costs, but the cost that we will have to adjust to changing jobs and not our kids.. is a good thing. When oil hits $100 a barrel all the remaining factory jobs will go south (east - weat). Unlesss they is some catch like American Apparel (as in marketing, or expertise). So, I would not want to direct a child into that as a career. But high tech? Things that do not take up a whole lotta oil? yes - those jobs we should fight for!!

[RaleighNCDUer]

4. I think you've got that backwards.

As oil prices explode, the most successful businesses will be those with the shortest supply lines. It will be cheaper to in-source all phases of product development and keep the product closer to the consumer. It will be too expensive to manufacture part A in Indonesia, part B in Taiwan, and have them assembled in Vietnam then shipped to the states.

Just a guess.

[applegrove]

7. Sorry but the first things to go will be civil goods. That new carpet?

That flower pot? That new paint? Those new clothes? When the oil shock hits it will be useless stuff that goes. Better that the chinese produce useless stuff. America will still be growing crops (has comparative advantage). You will still be clothed, have paintings on your wall, access to paint, and all. It is just that you will not even pay a local truck to bring you a new lawn chair when you can cut up that dead tree in the back yard and build your own. You want beige underclothes? you will use tea to die your old white underclothes beige like your grandma did. You will not be at wallmart to buy the beige undergarmets. Someone will build a bra that will last a thousand years out of nanotechonology. You will dye that - a lovely shade of earl grey (which will be grown outside of your city in the coop).

You want all your people and all your kids in businesses that are about health care, nanotechnology, high-tech, science, etc.. all jobs that will not be lost - if you fight for them. Because what they discover and sell can cross the world and be sold to that huge middle class in Asia, 10 times bigger than all the west (USA & Europe) ever was, and make a profit. While using no oil. All it takes is an email to license. Better your kids be in a business whose productivity will rise, than a business that has failing productivity.

In North America we never lived in an unproductive environment. There was huge expances of land to steal and make productive (3 generations did nothing but move rocks in their free time don't forget). Then there was oil - the cheapest fuel ever. In the future it will be gone or priced as if it was a luxury.

North America still has productive land. It still has great climate (for how long.. who knows...). Perhaps fallow will return. But you will not be buying shit for shit. Like you are now.

[Breeze54]

12. Are you 'dealing with a full deck'??

"But outsourcing other jobs ...... is a good thing."

:wtf:

Are you totally 'tapped'? :crazy:
Short one sandwich for your picnic lunch?
:silly:

[applegrove]

13. Not for you - for your kids. Cause the factory jobs will not exist when

oil hits $200 a barrel. They will disappear overnight (or slowly). So you make the change in your lifetime and you send your kids to school in science instead of as tool & die makers.

So your kids don't have to make the change.. and the change from industries that will not be profitable in 5 or 10 years..are no longer the focus. And you do all this while your country is still bueyed by wealth. And before the centre of the universe turns to Asia where there will be a middle class market ten times greater than the western one is now.

The Bush WH is concentrating on old "oil" as energy and not making the USA the leader in alternative fuels. That is a crime. So too - regressive taxes make it hard for people to adapt.

I'm not saying I am happy jobs are lost. But they are gone. And you can make the change now - with this generation of kids or you can make it when it is so obvious everyone in the world is turning from manufactured goods to local ones. Why wouldn't you want your kids to be way out there in front?

I wish for sure Bill Clinton was in charge these days.. while the change takes place. Kick ass science in public schools would be on the agenda today for sure!!

[davekriss]

16. I disagree, when oil tops $200/bbl...

...shipping costs will render the labor differential moot and local manufacture for local markets will make more sense. Toyota and Honda will add to their plants in the U.S., but so will GM and Ford. And it will make sense again to build toasters and router hubs and apparel and TV sets in the US of A again. Unfortunately, due to USG Republican policies, many of the companies building product locally will be foreign owned, so a portion of value the American worker creates will flow into the coffers of an offshore owning class that has little concern for the political/policy-determined quality of life of the American worker. They will focus solely on earnings per share and lobby the USG to ensure it is maximal, regardless of local consequences. It amounts to giving up a share of our sovereignty.

The good news for the owning class is that this period now, before peak oil starts to constrain the easy flow of raw materials, sub-assemblies, and final product, will result in the growth of middle classes outside the U.S., meaning massive new markets for them and thus opportunities for capital to make profit. For the most part, though, this "good news" will have no positive impact on the bottom 90% of our population. That segment has been all but abandoned by the transnational firm, which looks overseas for growth.

The neo-liberal Globalist self-serving meme is that all this is inevitable; that jobs must be offshored, and cheaper workers in-shored, it is an inevitable working out of economic laws as unalterable as natural laws. So the American worker is supposed to acquiesce, just take it, and not clamor for political reform or create strong unions to oppose transnational policies. But the truth is we have the power to oppose the Globalist. We can insist on policies, regulation, and law that evens the playing field and maximizes benefits for ourselves.

For example, if a nation decides its workers will work 12 hour days, suppresses labor unions by torture and murder, does not provide health care, treats their workers as disposable commodities, to be thrown away and replaced when one is torn up in an unsafe machine, then we, the US, through our State, can erect a "fairness tariff" to any good or service imported from that nation (or any final assembly that includes components from that nation), one that levels the playing field so that our workers do not have to give up the hard won benefits and protections it has earned over the last 100 years to retain jobs.

We need to change the rules of the game to those that protect all American interests, not just a thin sliver at the top. And that amounts to sustained struggle, organization, and battle against the socioeconomic class that is content with things as they are.

[CrispyQ]

3. I worked for a company that outsourced it's manufacturing to Mexico.

Five years later, they were still not saving the money they thought they would. They had problems getting supplies from China into Mexico, they had a shipment of final product hijacked -- at quarter's end no less -- man did that screw up their quarterly numbers! The additional insurance they had to carry was astronomical. They had to hire two bi-lingual managers who lived in Texas but would cross over to Mexico to oversee things -- they had offices in Texas & Mexico. Because the manufacturing process was so far removed from quality assurance, there were frequently times when pallets of product would be manufactured before a quality problem was identified. All that product had to be re-worked or scrapped. The CFO told me it was the worse decision they ever made.

The really sad thing about it was prior to the decision to move mfg to Mexico, the mfg was done in our town & most of the mfg employees were Asian. They started at approx $9 per hour, all employee received stock options & benefits & many of the Asian's worked their way into management jobs. Many of them took advantage of the company's tuition reimbursement plan. Three of them ended up in our engineering department, two in finance & one in marketing. The company contributed so much to the local community by having those jobs here.

[havocmom]

5. More than just the immediate $$ issues

I firmly believe corporations want Americans desperate enough (and hungry enough) that WE will insist on the gutting of protection laws for:
Workers benefits
Safety (equipment, materials, worker ratios to jobs)
Environment (to get rid of all regulations on resource harvesting, extraction, emissions, and contamination)

It isn't just about payroll. Corporations do not want ANY sort of rule/regulations on what they can do and what they are liable for.. They want workers to have lots of rules. They want consumers to have lots of limits. They DO NOT want any rules for themselves. They will happily let us go hungry to get us over the notion that they should be decent members of society.

[Daphne08]

11. Yep. It's all about wages, benefits and union busting. n/t

[lovuian]

6. I've been waiting for this the repercussions the Anger and the

corruption... when you go overseas the way people compensate their wages is stealing and corruption...

Bribing all the officials and whats obvious is that overseas they all want more... so yes I'm smiling may all of them who went overseas get their justice...

I laugh when I get telemarketers from India... like I would buy your product ... Goodbye...

I think its the worst decision they made too...

[mcscajun]

8. Well, DUH!

NOW they figure it out. Too late and no comfort for those of us forced out by outsourcing and offshoring.

[Spinzonner]

9. Doesn't matter

What really counts is the dough it puts in CEO and other executive pockets.

Wouldn't be surprised if there were kickbacks is some deals.

[Brigid]

10. Hmmm . . .

Kickbacks. I hadn't thought about that before, but now that you bring it up, I wouldn't be surprised either.

[applegrove]

14. I agree that CEOs should not be getting the kitty for doing things that

don't actually create something. Seems they are being re-warded for outsourcing and not for any new idea. Which puts "new ideas" at the back of the pack when it comes to financing and jobs and growth of the "new idea" industries.

[Jose Diablo]

15. 15% is not that much cheaper

So the bean counters probably made the numbers fit the agenda the CEO's and the cheap labor conservatives wanted. As said above, reduce costs of labor here by busting unions, eliminate social security, gut workers safety and environmental regulations, thats the real agenda.

Cooking the numbers to fit a plan already made is a game played by corporate planning organizations as long as I can remember. I can remember running engineering economic studies to 'test' the plan. In most cases, if the numbers didn't work for the executives plan, run the numbers again with altered assumptions, until the numbers fit the plan.

It's called Engineering Economics. I called it BS when they pulled it. But it didn't make me anymore money, fact is, it cost me money trying to do it right. "Doesn't work well with others" is how it was worded. Or another was, "works well under supervision". It's all just so much BS.

This is corporate America. This is part of the faith based versus the reality based world. And it's been going on since at least the early 80's. The executives don't want truth, they want confirmation of 'their' truth.

Edit to add: This is why I get pissed-off at these DLC corporate types, right here. They spout about profit and how workers are so much cheaper in China or India. And for all their intelligence, they are just a bunch of ignoramuses, so called moderates that have drank the kool-aid. They don't know jack shit about anything.

[anotherdrew]

17. outsourcing was never about saving money in reality

it's about gutting the class of people who do those jobs and putting them under as much stress as possible. IT's about driving down wages for high-skilled work so we don't have so muhc money to give to politicians. All kinds of pro-GOP reasons for outsourcing. There's a lot of libertarian types in IT but a hell of a lot of "Liberals" too, conservatives all end up in management of course. that's how the Bully System works in the US.

[Kolesar]

18. Why do you use tinyurl?

Does that somehow mask your net address? I really don't know.

[mimitabby]

20. tinyurl

makes a link small enuf to read and copy easily.

[mimitabby]

21. great thread, guys.

[Kolesar]

23. DU concatenates long urls for the sake of screen width

But tinyurl plus six letters makes plenty sense. I had to type a forty letter url today with lots of - and / in it.

[UrbScotty]

19. So why did Dick DeVos do it at Amway?

www.whatyoudontknowaboutdick.com