Based on anecdotal evidence from my own range of contacts in enterprise sized companies, I am starting to notice a trend towards bringing business processes back in house.

In fact this is not just about off-shoring.  Even local outsourcing is being affected.  Companies are starting to realise that most business processes can be done more efficiently in house, especially with the aid of technology.

This is leading to a new wave of efficiencies, and just as importantly, local control of business priorities.  It is leading to a new ability to manage the ever changing business landscape.  This is leading towards the nirvana of increased business agility.  Powerful stuff and I am happy to say that Blue Prism is playing its part in delivering the vision.

Lloyds has a history of progressively off-shoring IT, call centre, and back office jobs to India, so one can only presume that they know what they are doing and understand the full impact of off-shoring.

I just hope they are doing it for the right reasons and not just to save cost.

What frustrates me most is that we have the means to be so much more efficient in our own country without having to ship jobs to distant, remote locations. Perhaps the problem is one of misguided management, and management turnover, combined with pressures to report results in ever shorter cycles.  If I was a middle manager in a bank, and was targeted with short term cost savings, knowing that in two years I will be in a different job, so my third year measures won’t count against me, then I guess I would take a short term view too.

In the UK where IT off-shoring has been prevalent but not quite to the same degree as the US we wait to see if the same trend emerges.

Maybe we are getting to the stage where work will be placed for reasons of skill, geography, culture, convenience, service and team motivation - not just for cost reasons.  Or maybe work will just start transferring to the Far East, Russia, and Africa.  UK and US universities have plenty or representatives from these regions so the skills must be emerging.

Of course, I am referring only to the IT sector.  The Independent reports Indian call centre wages still significantly lower than in the West, although staff turnover is starting to spiral.  Smart companies who have outsourced important customer service operations (to the detriment of customer service), should take note before this turns into another wage spiral and eats up their ROI.

However, outsourcing does not necessarily prevent co-location (outsourced staff can remain on your site), so in theory at least, using agile software development is possible.

But what about corporate allegiances?  Once they were part of your organisation.  Now outsourced staff, at some point post-contract (and it can take a while) have to go native and support the outsourcers corporate objectives – which include making money out of the client.  This doesn’t sound very compatible with creating mutual respect between business and IT and it especially doesn’t sound like an environment conducive to delivering a high quality solution that meets business needs.

So in my view, outsourcing is generally a bad idea.  Really it’s only a replacement for poor internal management since, if done properly (the management), there should be no outsourcer that can save you costs.  The only remaining reasons to outsource are to get a share of a unique skill-set on an intermittent basis, or to provide flexibility in resource usage (OK so just outsource those bits then!).

<Aside>…….I am feeling like a rant about the quality of IT management now which I think is still suffering from “promote your best developer” syndrome.  The classic management error which loses you a good developer as well as gaining you a person unsuited (and usually uninterested in) management.  But let’s save that for another post.

If outsourcing is bad, then where does that leave off-shoring?  I have argued previously that off-shoring software development is not good and let me amplify why.

Put together a team based not only on different corporate allegiances but also on different time zones, different geographies and different languages and cultures and that hardly creates a business environment where great things will happen.

“But the staff are only one third the cost!” is the cry from the CIO.  “They would have to be dreadfully inefficient for this not to be a good deal!”

Guess what – not only are they are dreadfully inefficient, they are disconnected, and whilst individually keen they are never going to be motivated like your own staff.  If they are also geographically disparate they are mentally not part of the team – you can expect rubbish results which (pun intended) will trash your business benefits.

What sort of a short termist do you have to be to not see the sense in this argument?

The shocking (not) conclusion was that Young People Don’t Trust Offshoring.

It’s very clear that customers do not like off-shored services so why do it?

The obvious answer is to save cost.  But our research showed that the maximum cost saving you could expect to realise is about 35% of the addressable workload.  Then work out how many extra complaints handlers you need in your own country, and an extra layer of management and there isn’t much left of the savings.  Is it worth upsetting your customers for such a small saving?

If you are a global organisation with distributed business processes across the globe then there is common sense in having presence in low cost locations relevant to each time zone and geographic region – but this isn’t off-shoring.  Or at least it’s not off-shoring to reduce cost, it’s off-shoring to improve service.

But what if your competitors are off-shoring anyway, and you are under pressure to cut your own costs, are there any alternatives to risking your customer experience by off-shoring your customer facing staff?  Of course there are…

Six sigma/Lean and other process improvement initiatives can yield 5 to 25% cost savings (of the departmental budget, not just the addressable workload).  I bet you can quickly Google a local consultant to help you out/get you started.

Local process automation using tools like Blue Prism Automate, Intersystems Ensemble, Jacada, or Openspan can save 10 to 20%.

Automated IVR, email and SMS systems offer up to 15% savings.  I particularly like Adeptra (automated voice) and Numero (automated email interpretation and handling) in this space.

There are many other initiatives I could probably name if I thought hard enough.  The thing about the cost cutting measures above is that they actually improve customer service.  Off-shoring rarely does this.

I’ve seen very few successful off-shoring experiments.  At Blue Prism we do not off-shore any software development.  We have a very small team who produce 5 times the quantity of code that a much larger team could produce and it’s top quality too.

The reason is that the bigger the team, the more remote, the further from the business unit, the more the mess.  Less control, less motivation, less focus, less accountability and you need a park sized office for your QA department.

This is the reason why offshoring is generally a bad idea.  A bundle of hidden costs emerge that trash the upfront savings.  Mostly this relates to putting things right that have gone wrong.  It’s not always the offshore workers’ fault of course.  A bad spec is a bad spec but at least locally it can be queried and discussed efficiently and accurately.

So if you want to reduce costs (and contemporaneously increase the quality and quantity of your software) then reduce the size of your team.  It also helps to create an atmosphere conducive to teamwork, set some seriously challenging assignments and give people some ownership and accountability for what they build.  Keep the jobs local and watch the quality code flow!