Offshoring for the right reasons

As with an outsourcing deal, offshoring should be used as a solution to appropriate problems. When you apply offshoring to the wrong problems, offshoring can easily become a major liability. Let Andreessen have his taxes prepared in India or wherever. I’ll have mine prepared right here.

“[Offshoring] fundamentally reduces the cost of goods and services for Americans. . . . If I can get my tax return prepared for less money because the offshore labor is cheaper than the domestic labor, then as an American consumer, I’m better off.”Marc Andreessen, chairman of Opsware (Atlanta Journal-Constitution, March 23)

You’ve got to love it: The browser wunderkind Marc Andreessen supporting offshoring with one of the lamest examples I can think of.

To say Andreessen is naively positive about offshoring is an understatement – check out the transcript of Andreessen on “Lou Dobbs Tonight” (appearing after the interview with Vicente Fox).

Consider the risks. Would you want your personal data to be sitting in a database in India or wherever, protected by privacy laws that might or might not apply to you? I didn’t think so. It just isn’t that simple.

Anyway, Andreessen has little need to worry about the cost of getting his tax returns prepared – he is a multimillionaire who made his money by creating companies (Netscape and now Opsware) that made money for him but not for investors. But I digress . . .

If anything is likely to discredit offshoring I think Andreessen’s naive support along with the political furor surrounding the topic could well do the job.

But let’s be clear: Offshoring is simply an economic consequence of the high cost of skilled labor at home compared with the low cost of skilled labor elsewhere, and therefore it can be an opportunity to save money. Note though, that I said “can be.”

For certain jobs offshoring could well be a good solution. But when offshoring is used to save money and at the same time degrades critical business attributes such as quality, reliability, integrity and security, then it is not just a bad solution, it can easily become a financial and PR disaster.

Why do you think Dell pulled its offshored corporate support services back to the U.S. from India at the end of last year? Because it was a bad idea that simply didn’t work. It is hard enough to run a good support center at home let alone run one that is thousands of miles away in another country where the support representatives are hard to understand.

As another aside I can’t for the life of me figure out why Dell didn’t just quietly make the transition from offshoring corporate support to, er, on-shoring it again. Considering how much negative publicity offshoring has received and how much criticism Dell’s offshoring attracted, wouldn’t offshoring have been a topic you’d have thought the company would want to avoid talking about?

Unfortunately for the hoi polloi Dell only pulled back corporate support, leaving consumers to deal with foreign support representatives whose training in problem solving apparently involves laboriously and mechanically tracing a fault tree to its bitter end – an approach that can be done as badly here as anywhere else just more expensively.

The fact is that offshoring can work and work well if you are going to use it appropriately, for example, to do data entry or develop highly structured, well-defined code over a long period. But try offshoring development of even moderately sophisticated systems and you are more likely than not going to be dreadfully disappointed. And out of pocket.

My point is that offshoring is neither the threat to life, liberty and the pursuit of happiness that some pundits and many politicians would have you believe, nor is it some kind of wonderful general solution to cost cutting that the other pundits and Andreessen would have you believe.

As with an outsourcing deal, offshoring should be used as a solution to appropriate problems. When you apply offshoring to the wrong problems, offshoring can easily become a major liability.

Let Andreessen have his taxes prepared in India or wherever. I’ll have mine prepared right here.

Offshore your thoughts to backspin@gibbs.com.