| QUESTION & ANSWER |
An Offshore Conversation: Author and IT veteran responsible for FleetBoston's offshoring |
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By Mark Brunelli, News Writer
08 Nov 2004 | SearchCIO.com |
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The public's reaction to the growing U.S. trend of outsourcing low-level IT jobs to countries like India has been icy at best. The idea of ever- increasing numbers of displaced American workers just doesn't sit well with the populace. The backlash has been so bad that in some cases companies have opted to shroud their offshoring programs in a veil of secrecy. But despite the public perception, there are some who believe that offshoring is a necessity for companies that want to remain competitive. Tandy Gold is one of those people. An independent consultant and twenty year veteran of the IT industry, Gold is credited with initiating and executing the former FleetBoston Financial's offshoring program and is the author of the upcoming book,"Offshore Application Development: Making IT Work." Gold is also the founder of an informal group of offshore program managers at Fortune 100 companies who meet several times a year to discuss issues related to overseas outsourcing. In part one of this SearchCIO.com interview, Gold tries to clear up some of the "misunderstandings" she feels people have about offshoring, and discusses some of the challenges of setting up an effective offshore program in a hostile political environment.
What was the biggest challenge you encountered in setting up Fleet's offshoring program?
Tandy Gold: It was one of the more challenging roles that I've had to play primarily because of the public perception of threat. While I was at Fleet there were layoffs going on because of the general economy but none were due to offshore. I made sure of that. But offshore was still the poster child, so to speak, for a lot of fear and concern. One of the things that I like to do when I conduct these interviews is talk about that right up front. I think there is a lot of misunderstanding that is kind of fostered through the media related to that.
What are some of those misunderstandings?
Gold: I think if you were to read a newspaper article on offshoring, there would be a lot of generalities about people's concerns for IT jobs, but there wouldn't be a lot of the specifics. Two of the specifics that I'm pointing out are that (offshoring) really only impacts the Fortune 100 and above. So, for most small and medium sized companies where a good majority of people are working, it hasn't been a factor. The other piece is that nine times out of ten, you're really talking about displacing consulting resources, not employees. So, where you might have employed 40 people from say, IBM, to do programming in Trenton, New Jersey. You take a snapshot five years later those jobs might be handled by (Infosys Technologies Ltd.) or (Tata Consulting Services), one of the large offshore firms.
Other than lower labor costs, what are some of the problems with traditional onshore outsourcing practices that are driving companies to look overseas?
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There is a whole body of literature that basically states that the reason the U.S. has had the successful economy we've had is because each industry in turn has created wealth in this way.
Tandy Gold
IT consultant, author
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Gold: Traditional outsourcing is where a company goes to an IBM or an EDS and says, 'take over my whole IT organization." The problem with that traditionally, and they've had some relatively high visibility failures, is that over time you lose the ability to collaborate between your business lead and your IT people because if IBM or EDS takes over your IT organization, they're going to do a good job with what is defined now. But they're not necessarily going to be really looking for ways to improve your business through IT. They're really not that motivated. Blue Cross & Blue Shield is a really good example of this. They ended up outsourcing their entire organization to EDS and seven years later, I actually went in for a job interview. It was like dinosaurs. There were bones everywhere. Nobody (at EDS) really understood the business. They knew how to execute what they're doing now, but you need a lot more creativity and knowledge. You need to always be adding value.
It seems that offshoring conceivably could make this problem worse. How come it hasn't?
Gold: The strength of offshore has been that companies have been able to get a lot of savings without having to give up strategic partnerships. They did this through something called co-sourcing. Co-sourcing means that people at the top of the IT skills pyramid stay at the company the low IT skills pyramid jobs go offshore. So, you're getting the best of both worlds. You're getting someone who used to get $100,000/year as a programmer now making $15,000/year doing the same job or better or better job in India. Yet, you still have your project manager onshore. You still have your design person onshore. You still have your program manager onshore. It's been a real win/win for a lot of companies.
Can you tell me a little about your Offshore Interest Group?
Gold: It's a group of program managers who meet once a month. These are hands-on offshore project and program managers. We basically share ideas, we share concepts and we keep in touch. We talk about everything from risk management (and processing visas for projects) to career management, the whole nine yards. For awhile, I was very active on the conference circuit and I used to meet people and invite them. So I have about 40 members. At any given time we'll have somewhere between six or seven and up to 12 participants in a conversation. I think the thing that we tend to find about offshore is that companies tend to be very (quiet about offshoring.)
Is this because of a public perception of injustice?
Gold: Well, I think that the public perception is that something is being done that is not good for America. I think if you really look at it, and a bunch of economists have talked about this… If you have a group of people that can do something for $15/hour we're doing it for $100/hour, and they're doing it as well or better than we are, there is no way that is not going to have an impact. If you look at other industries, like the shoe industry which went through this, in the long run it creates wealth. There is a whole body of literature that basically states that the reason that the United States has had the kind of successful economy we've had is because each industry in turn has created this wealth in this way.
Click here to read the second half of the interview.
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