Offshore Dot-Bomb

Why are we offshoring IT? I've puzzled over that question ever since I spent a day last month at a conference for lawyers on IT offshoring. The lawyers, of course, were focused on how to write good outsourcing contracts -- struggling to figure out how to deal with foreign laws, privacy, security, due diligence and all the other unfamiliar complications offshoring brings.

But why go to all this effort for something that, for corporate IT at least, is really untried, uncertain terra incognita? And it finally hit me: IT offshoring agreements aren't being done as conventional business deals on the usual business basis.

They're being done on faith. It's like dot-com mania all over again.

Don't laugh. True, there's none of the dot-com hoopla here. These days, most companies won't even talk publicly about their offshoring.

But they're doing it. And as with the rush to Web commerce, there's more faith than fact driving the march to outsource -- even though the numbers, the expertise and the experience aren't there to justify that faith.

With the dot-coms, we didn't know whether a Web-based business model would work at all -- or if it did, what kinds of businesses it would support. We didn't know how fast business could shift to the Web, or whether dot-coms really could transform retailing. All we knew was that bits cost less than bricks, so we figured everything else must cost less on the Internet, too.

A scrap of data, an untried business model and a lot of faith: That was the dot-com way, and we all chased it.

And offshoring? We know offshore programmers get paid less -- they're the bits-cheaper-than-bricks part of the scheme.

But we don't know what kinds of corporate IT projects can be effectively offshored. Or what happens to quality levels as offshoring volume ramps up. Or whether outsourcing will leave us with the flexibility and agility to adjust to rapidly changing business conditions, take advantage of new market opportunities and quickly respond to new user needs.

We don't even know if we'd all be better off leaving offshoring behind in favor of component development, packaged applications and improved management tools.

We just don't have the experience to tell us those things. Or the expertise to choose the right projects to outsource and then successfully manage from half a world away. Or the project results -- the hard numbers -- to give us confidence in the decision to outsource.

Then why all the IT outsourcing? It's faith, not fact, that drives it: the faith of CEOs, CFOs and CIOs that there has got to be a better way to do IT, and offshoring might be it.

Which explains why, as I learned at that conference, even though roughly half of offshoring projects fail, customers don't bail. Instead, they renegotiate their deals. They have faith, and offshoring gets a second chance.

It explains why cultural and legal quirks get forgiven, complications are accepted and extra overhead -- such as the cost of getting and keeping lawyers up to speed on how to write offshore outsourcing contracts -- is taken in stride. Sure, these might be permanent problems that will get worse. But they might just be teething pains that will work themselves out.

Most of all, it explains why offshoring seems to march on regardless of logic or practical considerations or early results.

Yes, that bubble of faith in offshoring will burst eventually. When that happens, as with the dot-coms, some offshoring approaches will disappear and some will survive. Experience will let us sort it all out, and the offshoring that survives will seem a lot more sensible in hindsight.

But until then, all we can do is struggle to figure it out -- and hope we survive this offshoring act of faith.

Frank Hayes, Computerworld US' senior news columnist, has covered IT for more than 20 years. Contact him at frank_hayes@computerworld.

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