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 dotcom mania all over again.

Don't laugh. True, there's none of the dotcom 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 dotcoms, 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 dotcoms 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 dotcom 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.

We don't even know if we'd all be better off leaving offshoring behind in favour 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.

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 learnt 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.

Yes, that bubble of faith in offshoring will burst eventually. When that happens, as with the dotcoms, 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.

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