Why Offshoring Software Development Will Fail

Despite the faddish enthusiasm for sending software development overseas, cultural and logistic factors limit its real value.


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Posted November 12, 2008

John Miano

John Miano

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In a previous article, The Myth of the Interchangeable Programmer, I discussed the flawed Software Management Formulas (SMFs) that form the basis for many decisions in computing. The SMFs suggest to anyone foolish enough to use them that the cost of software development is primarily dependent upon the per hour cost of programmers. Thus, the SMFs suggest the best way to reduce development costs is to find cheaper programmers.

The ultimate manifestation of the SMFs within industry is the current offshore outsourcing (“Offshoring”) fad. To find the cheapest programmers, one moves operations to the lowest wage countries he can find. The hype on offshoring is so frenzied that experience in offshoring has become a mandatory requirement for nearly any senior level computing management job.

Offshoring often gets marketed with ridiculous claims. These include “24-hour software development” where programmers in the U.S. start working on a problem and, when they go home for the night, programmers on the other side of the world pick up they left off – something not practicable until Star Trek mind transfer machines become available. There was even serious discussion of the ridiculous concept of putting programmers literally offshore in cruise ships.

There is much fear that the bulk of U.S. computing will eventually be moved overseas, just as the manufacturing of sneakers has been. Under the new model, the U.S. will retain the high-level system design and architecture while the “low level” programming jobs will go offshore.

I do not share this grim view – at least for the long term. Although, over the near term, I expect much pain for U.S. workers until the offshore lemming parade runs its course, herded over the cliff by consultants and hucksters who have established themselves as offshoring experts.

Who would have guessed a half century ago that it would be nearly impossible to find a “Made in the U.S.A” sneaker today? Still, there is a major difference between making sneakers and making software. A U.S.-based shoe company can have its creative people in the U.S. They can create the designs here. They can build the prototypes here. Then they can ship those designs to Timbuktu to have low wage workers turn out sneakers at the lowest possible worker-per-hour manufacturing cost.

Which brings us to a key reason why software is nothing like making sneakers: For software there is virtually no manufacturing cost. Nearly all the cost for software comes from the development stages prior to production. Stamping out CDs of finished software is nearly an incidental expense in the overall costs.

For years companies in the financial industry could have saved money on labor costs by moving software development from New York to Peoria. Peoria has many advantages over going “offshore,” including fewer time zone changes, no visa and travel issues, more stable infrastructure and better communications. Still, the heart of the financial software development is New York. The reason for this is the need for software developers to be close to their users. To do software development effectively, your developers have to work closely with the people who will eventually use the software. New York is where the financial people are so New York is where the financial software developers are. If Peoria was too far to move 20 years ago, why is moving half way around the world any better today?

Last year I encountered an interesting example of the culture clash caused by offshoring. I called my credit card company to get a copy of a bill. I was unable to convince the overseas agent of the need for me to get this before April 15th. Though not a software offshoring issue, it illustrates the lack of perspective you may be inheriting through offshoring. (This is now my former credit card company.)

Remoteness becomes an even greater issue as computing grows in importance for business. It becomes more difficult to anticipate market changes when your computing organization is removed from its industry and the organizations it serves. When the operations are offshore, you eliminate any possibility that your programmers will be sharing ideas with marketing over lunch.

Of course in the ideal offshoring model, the high-level design work remains in the U.S. Then where do the skills to do high-level design work come from? If all the programming work is moved overseas, there will be no place to learn the software development process and reach the point where one can be a software designer.

We see the same narrow view on Wall Street where they believe they would be able to be the center of deal making if the U.S. offshores everything but Burger King and lawn services. I know of a management consulting company whose “offshoring practice” produces glowing reports on the benefits of offshoring to the U.S. economy. The same company has produced a report on why America needs to protect Wall Street from being offshored. (Would America be better off with a solid manufacturing base and Wall Street offshore, or offshored manufacturing and a Wall Street in need of bailouts?)

Continued: Cultural problems with offshoring

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Tags: programming, software, management, developers, offshoring IT

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