Generations ago (computer time), Information Technology/Computing was the place to be. It seemed that if you had a degree in computing, a job was assured. And that was correct. While I saw teachers, airline pilots, dentists, struggle through recessions, I was inured to this because I worked in IT.
Then, in the late 90s, the boom-crunch cycle started to accelerate for those of us in the business. It used to be 3-4 years between boom and crunch. Now, it’s more like 3-4 months. I’m writing this because I recently found out about the oil company, Shell, sacking 3,200 of its IT staff this year. In an effort to cut costs by GBP250 million a year, Shell is essentially outsourcing its entire IT infrastructure. Both J and I have been through restructures, retrenchments, reassignments. You can call it whatever you like, but it all boils down to reduction for all concerned … reduction in salary, responsibilities, career opportunities. Sometimes it means nothing more than termination.
I don’t give a lot of sympathy on this blog, but my heart goes out to all the Shell employees who’ll be affected by this. Doubly so because this is a dumb-ass decision and time will vindicate all of us … but not before a lot of lives are thrown onto life’s rubbish heap.
There have been a few spectacular IT blunders over the past few years. Well, too many to name, but I’ll focus on two of my favourites.
Number one, China. Do you remember when China was the Hot IT Destination? When companies wet their pants waiting to “penetrate” the giant Chinese market? At that time, both J and I were managers with large IT companies and, at the weekly meetings, we both (independently) used to tell our employers the same thing: China is a trap. The culture and way of business is different. You’re stepping in their territory which puts you at a disadvantage. Chinese companies will take whatever you do, replicate it and undersell you under your very noses. You don’t have enough people who know the language and you can’t trust the blanket loyalty of those local staff you hire. Given a choice, we said, invest in south-east Asia, where you’re a bigger player and are more likely to have more influence in negotiations. In south-east Asia, governments will want to work with you; in China, they’ll want to analyse then compete against you on the world market.
Blackberry wanted to enter the Chinese market. Lots of angst ensued as RIM tried to negotiate penetration protocols with the Chinese government. Tried, failed, tried, failed. It finally succeeded in getting an okay date for the middle of 2006…only to find the Chinese got there first with their—get this—Redberry. J and I laughed so hard we pissed ourselves. It didn’t stop there. Patent disputes, trademark suits. What did RIM expect? A level playing field? In China? Now we’re finding that companies are slowly backing away from the behemoth. Oh, they’re putting a lot of spin on it, but it seems they’re finally using some of that caution that was so absent when they were thinking with their “little heads”.
Number two, outsourcing. I don’t get it. Even economics professors are touting the benefits of outsourcing. But how can it possibly be profitable? In the money sense, you now have at least two companies having to justify the one budget, and all the companies involved want a profit. They want profit, they want growth. In the medium- to long-term, this can only mean a ballooning of expenditure, even if the initial Powerpoint presentation looked damned fine and contained many impressive animations.*
Okay, say you outsource to some mob in the Asian sub-continent, as Shell are doing. Costs are down. But so is customer service. There are technical, infrastructure, cultural and language difficulties. And as much as people like to bash the Asian outsourcing, even if you choose a Western company, you still have problems. The time to problem resolution is greater. Efficiency and productivity, naturally, falls. As more than one commentator to the Shell news notes, jobs for customers that used to take a quick 5 minutes will turn into 6 months of contract negotiations and project specifications, with appropriate cost/time/resource blowouts.
And how do you effectively manage such situations when Shell’s management is sitting several levels above (and geographically away) from the coal-face workers? But, then again, why should top management care, as long as they pocket their insanely large end-of-year bonuses? And you just know what each level of the ensuing bureaucracy is thinking: “I don’t need to oversee the expenditure directly. I’ll just hand it over to my good friend over here and he’ll do it. Oh, after I’ve taken my cut, of course.” Outsourcing, human nature and creative accounting. It’s a combination that goes together like lamb and garlic, bacon and eggs, or roti and curry.
It’s my belief that the same thing will happen with outsourcing as is happening with China. That is, the rosy spectacles will fall off and companies will start to wonder what the hell they were thinking for so many years, and start building up their in-house expertise again. In the meantime, though, how many workers will be destroyed?
* I bet it has to do with accounting. When an organisation is in-house, it’s an operational cost, but when it’s outsourced, it’s a tax deduction. In which case, it logically follows that the bigger the bill, the bigger the deduction. I think I’m right … does anyone know for sure?