The 2008 Democratic National Convention (DNC) is history and the 2008 Republican National Convention (RNC) is finally underway, the RNC being delayed a bit thanks to Hurrican Gustav. 

As I watch the RNC, I wait with bated breath (really!) to hear Senator McCain and how he will reduce outsourcing and turn around the US economy.
 
But we heard what Senator Obama had to say at the DNC about outsourcing.  He said “he will stop giving tax breaks to companies that are sending jobs offshore and instead give them to companies who create jobs in America”.
   
(Various online newspapers reported responses from CEO’s of Indian companies who have made millions from outsourced US jobs and I had to chuckle at some of them. From claiming that America will be hurt if outsourcing is stopped to claims that America just doesn’t have the skills to meet the demands of the jobs that are being outsourced, there has been some interesting noise post the DNC.)
  
But there’s another aspect to this job loss for Americans that I want to discuss here.  That aspect is that of the H1B Visa and the cap on it. 

Not only are jobs moving offshore to countries like India, there is a mass import of low cost labor into the US through the issuance of H1B visas (temporary work permits or visas). There are many who argue that H1B visas don’t create new jobs in the US and thus reduce jobs that would be offshored.
 
I for one don’t completely understand that argument.  When an H1B visa holder comes to the US, he or she is taking away a job that could go to a local worker. This creates increased competition for fewer available jobs and wage suppression due to H1B holders accepting jobs that are lower paying than what an average American would.  The H1B workers take lower paying jobs in the US because they still will make more than what they would make in their own countries.

Senator Obama and for that matter Senator McCain have both voted to raise the H1B cap which is currently at 85,000. 

But if we raise the H1B cap, doesn’t that means that more low cost resources will be able to come to the US, causing even more competition for US employees?
 
Is incentivizing companies to create local jobs enough?
 
To turn around the American economy, don’t we want companies to not just create jobs, but to create jobs that will adequately compensate Americans who have the skills, experience and expertise necessary to get the job done?

As the US economy dips lower and lower, businesses continue to explore outsourcing as a survival technique. But horror stories about failed outsourcing projects can deter even the most determined business owner. 

The NY Times today published an article on “13 best practices for IT outsourcing” but I feel they missed the boat on some of the more ”operational” best practices for IT outsourcing:
 
So here are three more that I believe are very important:

1. Best practice #14:  Don’t just communicate (as stated in # 6), be sure to communicate daily and at length. Ask pointed questions, ask them to repeat what you explained to make sure that they heard what you said and didn’t interprete it another way. 
2. Best practice # 15: Manage scope, don’t just list objectives and retain responsibility, make sure that you manage scope.  Suppliers too often agree to an increased scope to please a customer and customers too often ignore the impact of scope creep thinking they were insignificant.  Next thing you know is that the project has missed most of it’s deliverables and scope creep that was never quite documented becomes a bone of contention between you and supplier.
3. Best practice # 16: Understand the culture of the country your supplier is from. Understand that a “yes” doesn’t always mean agreement and that cultural styles may prevent a supplier from challenging you when you impose unrealistic deadlines.

There are probably many other “operational” best practices that you may have encountered so feel free to list them here. Together we can make the NY Times list more operational…..

Outsourcing comes with a lot of risks, information security  being one of the most serious risk of all.  My clients have shown concerns regarding security for even something as simple as a static business website.  
 
So the news that a hacker from India hacked into one of the top hotel chain computer systems is serious and comes as a rude wake up call for all of us in the business world.
 
The hacking of UK’s Best Western Hotel Group’s online booking system by an hacker from India is certainly going to heighten the awareness regarding hacking.
 
Last week, a hacker from India hacked into the UK Best Western Group’s booking system, stealing details of millions of guests.  The hacker was able to introduce a Trojan virus which allowed him to access personal information.  This information was then placed on a website operated by a branch of the Russian mafia. 
 
Ugh, sends shivers down my spine just thinking about the impact of this crime.

Of course, there is a lot of dialog going on about this on various sites.  Some morons are actually proud that a “smart” Indian was able to pull this off. (What’s wrong with these people?) 
 
Crime is crime people, and this is NOT good news – especially for India who continues to be a dominant player in the outsourcing industry.  This image courtesy of www.rupnagar.nic.in says it best….

  

 

Ok, so even I was thinking that this blog doesn’t quite hit the mark in terms of what people should expect from it.  I kept thinking, should I talk about my experiences or should I report news related to outsourcing? Or should I discuss specific examples and provide insights into making outsourcing work for small and large businesses?

As I’m thinking about this, I received feedback, offline and online, confirming what I already felt, that the blog wasn’t quite that interesting.  People suggested that I make this blog more interesting with personal experiences and tidbits of how outsourcing can work in a real business setting.

So I’ve decided to take your feedback.  After all,  after having worked with offshore suppliers and teams for almost a full decade at a domestic OEM, I should be able to share a lot of anecdotal experiences.

So thanks to all for responding, I’m working to make this blog more interesting…..so keep reading and do send me your feedback, good, bad, or indifferent.

The State of PENNSYLVANIA is serious about international trade. Their website proclaims “International trade—it’s not just the wave of the future. It’s a necessity for businesses to remain competitive”.

They have 23 international offices covering more than 50 markets, including an office in Bangalore, India.

Ohio has 13 international trade offices, including a main office in New Delhi, India along with several branches in India.

Michigan has not yet opened a trade office in India, although given our skilled work force, our need to retool our automotive industry, and the need to revive the economy, I believe that Michigan is not too far behind in opening a trade office in India. Or at least, I hope that they aren’t too far behind.

Still looking for data on the other states and their international trade office footprint….

Meet Copal, a company located in Gurgaon, India which provides equity, fixed income, and trading information for several Wall Street companies. These Wall Street companies take the information provided by Copal, repackage it, and provide it to investors/others under their own name.
 
And why are they doing this? For “cheaper” labor!  Banks are also looking at their cost structures and trying to find those jobs that can be done offshore with lower cost labor.
 
So once again we have an example of “cheaper” labor and yet time and time again, people claim that they are moving jobs offshore because of the availability of talent. Not!

Morgan Stanley has 500 people doing research and statistical analysis in Bangalore, India. Goldman Sachs has more than 3000 people working in India, and 100 of them are doing investment research.
 
And Citigroup, which laid off more than 11,000 people in 2008 thus far, has hundreds of people working in investment research out of the 22,000 or so they employ in India.
 
So, offshoring is no longer just for IT and call center related services. Wall Street is becoming more and more enchanted with “low cost labor”.
 
All you Wall Street Executives beware, your jobs are next to get offshored. After all, with technology, your clients can all be serviced remotely, your presence may no longer be a requirement!

Well, here’s more good news. HCL America (a wholly owned subsidiary of HCL Technologies) will open a US delivery center in Wake County, North Carolina.

Where’s Wake County, NC, you ask? Click here and you’ll find out like I did.

Kudos to North Carolina Governor Easley for making this happen through a state “Job Development Investment Grant”.

The grant will help HCL America invest $3.2 million dollars and create more than 500 jobs in the next five years.

Now HCL states that it chose NC due to the availability of skilled work force and the proximity to its US clients. But my home state Michigan has a LOT of skilled workers. 
 
By November 1st 2008, what with all the buyouts and involuntary separations being offered by the big three, approximately 50K jobs will have been eliminated. 

Those workers could use the help of the governor and officials residing in Michigan. How can we attract companies to Michigan because we have a skilled and educated work force which most companies desire?

I spoke with a friend who worked at EDS until last week.  He told me how his job was moved to Malaysia and he had spent the past month or two training the Malaysian people who were going to replace him. 
 
But along with the outsourcing trend that continues, is there a new trend called insourcing?  Insourcing or bringing jobs back to the US is slowly happening it appears.

I read that Monster (the employment website) is going to open a facility in South Carolina bringing back about 300 jobs to the US after having outsourced them in the past.

Also, companies like Tata Consulting are creating new jobs in the US to be “closer to their customers”.
 
But some experts state that insourcing or bringing jobs back to the US may be difficult because companies may not be able to find a skilled work force to hire because people are shying away from engineering and technical jobs. 

What hogwash!

Now although that may be the case to some extent, I know for a fact that there are plenty of “trained”, “skilled” and “experienced” workers sitting at home looking for a job that will meet skill set. The problem appears to be that the jobs that are coming back are not “skilled” jobs. Those highly coveted jobs in engineering, R&D, and programming don’t appear to be coming back to the US. The jobs being created are customer service type jobs which people with highly technical skills are not going to want.
  
Any company that is hiding behind the argument of “we can’t find enough skilled workers to bring jobs back to the US” should contact me because I can personally put them in touch with about 50 people who could use a highly skilled and technical job right now. 

Remember, those outsourced jobs were already being performed here by skilled and experienced workers who have either taken lower paying jobs or have moved to other careers.  That means that those workers do exist.  We just have to find them and place them in jobs that do fit their skill sets.

Deutsche Post, the parent company of DHL has backed out of multi-year, multi-billion dollar deal with HP as reported by Information Week.  Although Deutsche Post signed a Letter of Intent in January 2008, they spent the past six months evaluating their business and the risks, benefits, and challenges associated with outsourcing.  After weighing all their options, they found that the targeted savings of at least 1 billion euros in seven years was just not achievable. 
 
Deutsche Post management clearly also stated that their decision had nothing to with a lack of confidence in HP as the supplier which is good to note.  We all know why HP acquired EDS for $13.9 billion.
 
Heads will probably roll with this lost deal with Deutsche Post that HP thought was a done deal. Too bad for all involved in this at HP as it won’t be an easy loss to get over. 
 
And I don’t feel so bad over losing two deals this past month that I think I had closed, because compared to HP’s loss, mine is a small nit in this big ocean of business.

Well, Senator Obama just gave a whole new spin to the outsourcing debate.  When Senator Obama spoke at a campaign rally in Missouri today, he stated that the advancement of technology is the reason why companies in the US began sending good jobs offshore using the Internet.
 
And since Al Gore discovered the Internet - - the whole outsourcing problem can be blamed on him, right?

But joking aside, Senator Obama is correct when he says “We can choose to do nothing about disappearing jobs and shuttered factories for another four years, or we can encourage job creation in the United States of America.”