We all will agree to the fact that the original driver for outsourcing was labor arbitrage, delivering as much as 40 percent savings compared to the UK. Outsourcing made sense at that point of time. Specialized companies provided their services to many client companies at lower prices than the client companies could do the work in-house. Both companies, the service provider and the client, profited from the arrangement. Unfortunately, outsourcing got carried to extremes. Companies began outsourcing work to the lowest bidder and lost sight of the effect it had on the company except for finances. There are also non-financial costs to businesses from outsourcing, including lowered public perception and reduced morale/productivity from remaining staff.
It is equally inadvisable for a company to shift their work locations to India to save money if they lose more than that from customers who stop buying their product because they can’t communicate with the call center representatives because of heavy accents. Outsourcing makes sense only if it truly saves money at the bottom line.
As seen in this paper, when a project is carried out of an offshore location like Pune, it resulted in bank saving around 64 % in costs when compared to it being carried out of UK. Offshore development has saved Barclays money, but it can also create software quality challenges. In addition, it’s difficult for Barclays to use more agile development methodologies since it have geographically dispersed teams.
One issue with outsourced development can be increased defect rates. Projects that are multi-shored pose greater challenges in optimizing because of communication between geographically disbursed teams, resulting in project defects actually rising. In order to ensure quality Barclays is following lean principles. To make agile practices work for distributed or offshore teams, following tips are being followed in Barclays:
• Focus on short iterations and quick feedback cycles.
• Do upfront testing, i.e. test-driven development and unit testing.
• Incorporate a high degree of automation, particularly around regression testing and continuous integration.
• There is a high degree of communication and coordination involved with distributed teams.
• There are late night/early morning handoffs between teams, a lot of conference calls, one-on- tools up to date.”
We also recommend rotating team members between on-shore and outsourced locations, so they can meet the clients and be more involved with planning. Making sure rotations of outsourced employees coming onshore and onshore employees going offshore really helped in terms of transferring the body of tacit knowledge and interpersonal relationships.
After going through the pros and cons of on-shoring and outsourcing & the way, it’s been followed in Barclays Bank PLC, we all will agree to the fact that the basic motto behind outsourcing is cost saving. As much as 40 to 65 percent of money could be saved out of a project if it’s been carried out of a low cost location. Companies tend to outsource work to the lowest bidder and lost sight of the effect it had on the company except for finances. While outsourcing companies needs to understand that they should not opt for those service providers that are providing them the services at lower prices. Rather than they should opt for providers that provide good quality at a reasonable price. This will help the organization in the long run. There are also non-financial costs to businesses from outsourcing, including lowered public perception and reduced morale/productivity from remaining staff. At the same time companies should keep a track of the deliverables of project from quality perspective.