Date: Fri, 19 Dec 2003 14:06:50 -0800 From: Norm Matloff To: Norm Matloff Subject: Mercury News "Offshoring labor savings don't add up" To: H-1B/L-1/offshoring e-newsletter Here are some excerpts which illustrate what I've been saying all these years about the infeasibility of offshoring: Long nightly computer chats between engineers in Sunnyvale and Hyderabad often left open as many questions as they answered. ... Ultimately, Sattar decided there was little advantage to doing major development work in India -- especially as he watched his launch date slip from March 2003 to December and now to next month. I've especially warned about the problem of missed deadlines, which we see here and in my posting the other day, titled "I told ya so." However, there is this: And he realizes that his company's move is a tiny exception to a huge rule. ``This tide that we are in,'' he says, ``it's not going to stop.'' Norm http://www.bayarea.com/mld/mercurynews/business/7529123.htm San Jose Mercury News Fri, Dec. 19, 2003 Offshoring labor savings don't add up By Mike Cassidy Mercury News Uzair Sattar had heard all about the beauty of moving work overseas: cheap labor, round-the-clock operations, bigger profits. Offshoring was the thing to do, the wave of the future. So, when he launched his business software company two years ago, he hired three engineers in Hyderabad, India, to develop his product. He quickly expanded to seven engineers. ``Then things didn't go so right,'' says Sattar, chief executive of Proteligent of Sunnyvale. There have been a gusher of stories about tech companies moving thousands of U.S. jobs to India, China and other countries where labor is cheap. But it turns out, offshoring brings with it its own business problems. ``There is definitely a lack of communication,'' Sattar says. And, he says, there are cultural differences that can wreak havoc. Deadlines seen as hard-and-fast in the hurry-up culture of Silicon Valley were seen as much more flexible in India, Sattar says. Long nightly computer chats between engineers in Sunnyvale and Hyderabad often left open as many questions as they answered. Today, Proteligent's development team is back in Sunnyvale, with the exception of two engineers in India who helped start the project and are vital to finishing it. ``For a small- to medium-size company, we have to rethink to what level we can continue to do it,'' says Sattar of offshoring. Yes, Sattar says, there are things he could have done to smooth out the global project, which is aimed at building software to monitor computer networks and systems at smaller businesses. But they all cost money. He could have regularly flown engineers back and forth from Sunnyvale to India to better weave together the cultures of Hyderabad and Silicon Valley. He could have invested in emergency generators in India to avoid power outages that sometimes left the Sunnyvale team wondering into the night why they weren't hearing from India. But does that make sense? ``The whole purpose of going offshore is for cost-saving purposes,'' Sattar says. Sattar says he discovered that India's best engineers were anxious to work for tech's big-name companies -- companies like Oracle, Microsoft, Sun Microsystems and the like. And the offshore boom has made top talent in India more expensive and harder to find. ``The cost facing employers in India, where we have the office, has tripled in the last three years,'' he says. Like many start-ups, Proteligent, a 14-employee company, is working on a shoestring with no sure source of new money. Ultimately, Sattar decided there was little advantage to doing major development work in India -- especially as he watched his launch date slip from March 2003 to December and now to next month. Proteligent joins a handful of companies that have moved work back to the United States. Most notably, Dell recently moved some tech-support operations back. But none of this is cause for U.S. tech workers to relax. The Dell move, for instance, was meant to appease valuable corporate customers who'd complained about poor service. Dell spinmeisters were quick to point out that the company was not abandoning India and that its overall workforce there would not be reduced. Those comments no doubt were meant to calm investors, who want work done cheaply no matter where it's done. Even Sattar realizes that business reality. And he realizes that his company's move is a tiny exception to a huge rule. ``This tide that we are in,'' he says, ``it's not going to stop.'' _________________________________________________________________ Hey! Have an only-in-Silicon-Valley story? E-mail mcassidy@mercurynews.com or call (408) 920-5536.