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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 76.04-0.3%Nov 26 3:59 PM EST
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To: Elroy who wrote (67596)4/14/2005 7:11:59 AM
From: RetiredNow  Read Replies (1) of 77400
 
Elroy, it's because IT departments aren't very good at measuring long term costs of outsourcing. All they and the Finance departments see is the fact that wages in India are 1/3 of what they are here. So to them it is a no brainer. But the real problems come later, when you realize the number of bugs per code unit (e.g. bugs per class) is much higher in India. Then there are other hidden costs, such as technical architecture that is completely inflexible and won't stand up to repeated requests for new functionality. The smarter companies (my own included) typically get our American engineers to do the architecture including detailed object models, class diagrams, data flow diagrams, etc. Then we offshore the coding part, the fleshing out of the architecture, to India. But if companies are leaving the architecture to India, then they will be disappointed, because there are a lot of hidden costs involved there. They will find themselves having to rewrite entire architectures and all the code that goes with it to accommodate future new functionalities. This is where lower wages start to get offset by increased maintenance costs over the longer term.

Again, however, IT depts and Finance depts don't typically included maintenance costs in their final analysis of whether outsourcing was worth it or not. Thus the false sense of money savings.
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