Bringing those dollars home

The idea that off-shoring IT work saves money, is, for most of us, over
Written by Paul Murphy, Contributor on

If I were an American, I'd have a "Doni for Presi" bumper sticker, but since I'm not I'll settle for quoting what Slate described as one of his poems:


The Unknown

As we know,
There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don't know
We don't know.

Feb. 12, 2002, Department of Defense news briefing

To me that makes perfect sense, but then I work in IT, and it's the unknown unknowns that get us every time.

And it's not just the users who know with perfect certainty things that are neither true nor knowable, it's that blue guitar effect Wallace Stevens talked about: things we know we know, that aren't so - anymore.

The failure to recognise when progress, or at least change, has obsoleted the expertise we base our judgements on is probably the primary cause of the economic difference between what IT could be contributing to the organizations we work for, and the communities we work in, and what we actually contribute.

Sometimes the changes obsoleting our known knowledge affect other people first, and the fact that the change doesn't immediately affect us actually makes it easier for us to adapt simply because it doesn't first provoke a defensive reaction.

There's one of those going on in the United States right now - inshoring: the next generation of economic change. Here's what that comes down to: the more automated a production process is, the less labour content the final product has, and correspondingly the less weight a labour cost advantage has in the decision about where to locate production.

Basically what's going on is that American productivity gains, mainly achieved through automation, have reduced, or are reducing, the labour cost differential from off-shoring to irrelevance relative to other key concerns - including taxation, manufacturing risk, product marketability, and transportation.

To put this in an IT context: a big insurance company can probably outsource COBOL code maintenance to an organization in India for 5% of the cost per line of doing the same work in the United States - but it could also choose to revisit the underlying business process and replace the entire COBOL/360 infrastructure with a modern architecture using cheaper hardware, fewer support staff, and one five thousandth as many lines of maintenance requiring code.

Go from COBOL to LAMP, and the Indian cost advantage on labor will amount to a few dollars -peanuts relative to the gains in flexibility, responsiveness, auditablity, and security you get from having the expert live in your community and work down the hall from you.

Bottom line? the known known, that off-shoring IT work saves money, is, for most of us, over - and the biggest opportunity open to American IT managers with off-shore contracts in place today, is to follow the trend in factory automation: switch to higher level tools and bring the work home.


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