This past week, SearchCIO-Midmarket Features Writer Karen Goulart explored the trend of IT insourcing. It was perceived by our readers as a feel good story, but I’m not sure why. One of the biggest issues that pops up when discussing offshore IT outsourcing surrounds ethics. Senator Chuck Grassley wrote in a letter to Microsoft Inc. CEO Steve Ballmer, “Microsoft has a moral obligation to protect these American workers by putting them first during these difficult economic times.” Apple Inc. has taken criticism for offshoring to gigantic facility Foxconn the manufacturing of iPads and iPhones by the millions. Working conditions at Foxconn are allegedly inferior to what would be legal in the U.S.

One has to wonder whether there’s an apples-to-oranges conflagration. While jobs truly are being eliminated on U.S. soil in exchange for new positions created in foreign markets, in practicum, it’s not usually a one-to-one relationship. Jobs are often eliminated due to a financial need to reduce costs and stay competitive in the marketplace. While it’s an emotional subject, the fact remains that the typical U.S. worker demands a higher salary than a similar worker in Bangalore, Shenzhen or Mexico City. By offshore IT outsourcing, the company is able to retain the same productivity at a lower cost (in theory, at least).

If, say, the U.S. government ruled that offshore IT outsourcing were illegal, it’s entirely possible that we’d see a reduction in workforce to align with those budgetary constraints while the workers who remained would be tasked with more work to fill the gap. Of course, associates who are retained after a blitz might argue that they are still filling a gap even with the relocated offshore IT support. The justification for small- and medium-sized businesses (SMBs) is that, by sending a portion of the jobs overseas, they save whatever jobs remain in the U.S.

Obviously, outsourcing IT services makes sense in many situations. But in outsourcing a task, production or an initiative, the where is often under the advisement of the CIO. For instance, whether an SMB decides to go with a local company to produce its new mobile customer engagement application or to a Silicon Valley producer is entirely a matter of what makes the best sense.

Offshoring as a national concern

In the 2012 U.S. presidential election, offshore outsourcing became the demon that everyone liked to invoke, but the truth is, it’s not as simple as an ethical dilemma, and I’m not entirely sure that it should be one. Capitalism, by definition, requires the purchase and acquisition of goods at a lower price and then the sale of those goods or services at a higher price. In a perfect world, we would all understand exactly how each and every piece of the supply chain gets produced, and we would have a rock-solid understanding — ideally gained through first-hand experience — of how the workers are treated in those facilities. The moment that those goods and services are produced and performed outside of U.S. borders, you can no longer trust what you’re seeing.

The only way to ensure U.S.-grade working conditions is to retain U.S. production facilities at U.S. pay grades. Period. You can’t have it both ways.

Nobody likes to talk about this, but how likely is it that offshore providers who are treating their workers inhumanely would neglect to create a smokescreen to hide their less-than-desirable facilities? The only way to ensure U.S.-grade working conditions is to retain U.S. production facilities at U.S. pay grades. Period. You can’t have it both ways.

Instead, let’s talk about what’s right or wrong for the U.S. economy — you know, that thing that drives a business’ sales and growth. What CIOs (and CEOs) should be wondering is how eliminating a portion of their U.S. workforce will affect the state of the U.S. economy and their potential U.S. customer base. Shifting those jobs to other economies to fix this one is like fixing a leaky boat by poking more holes in the bottom to let the water out. There’s an assumption that by shifting money into foreign markets, those markets will eventually shift that same capital back to the U.S. However, one has only to look at the U.S. trade deficits — upwards of $500 billion annually and growing by the minute — to suspect that might be poor assumption.

How can CIOs support the goals of the business — one of which is ostensibly to earn revenue — while sending their customers’ income overseas? And if there’s not a direct impact on their particular customer base, the income stream certainly impacts other businesses, which are in turn potentially offshoring customers of still other business. Pardon me while I get all Elton John, but we’re talking about the circle of life here as it pertains to wallets and take-home pay. You start sending the money outside the circle and other facets start to weaken.

This is where CIOs have the opportunity to support the business’ bottom line by thinking nationally but acting locally. While selective offshore outsourcing is a facet of today’s business, it pays to cultivate innovation closer to home. You can bank on it.

What do you think? How has offshore IT outsourcing worked for you? Are you finding it worthwhile? Have you seen any negative impacts of offshoring IT? Let’s start a discussion in the comments.

Source:http://searchcio-midmarket.techtarget.com/opinion/Offshore-IT-outsourcing-Economy-not-ethics-is-big-question-for-CIOs

Robots vacuum floors. They pick and pack boxes in warehouses. They win at Jeopardy. And soon they may take IT and business process work away from offshore outsourcing providers.

Take U.K.-based startup Blue Prism, which makes a software development toolkit and methodology designed to enable business users to create software robots to automate rules-driven business processes.

Blue Prism calls it “robotic automation.” James R. Slaby, research director for sourcing security and risk for outsourcing analyst firm HfS Research calls it “the newest labor option in the global business services toolkit” and “offshore killer.”

“It’s the automation of various business functions: taking work traditionally done by humans and implementing it in software. And that resulting software runs largely unattended to execute those functions, as opposed to requiring human interpretation and input of data,” Slaby says.

It’s best-suited for routine work that doesn’t benefit from the value that the human brain provides, such as completing a benefits application that requires accessing three different systems, but no human analysis, says Slaby. “The routine kind of work you might entrust to low-level data entry clerks or entry-level IT staffers are good places to start.”

The software robots “replicate the work of real human beings–trained in the same way and subject to the same systems controls as users to protect transactional integrity and physical security of customer data,” says Pat Geary, Blue Prism’s chief marketing officer.

Unlike technical scripting tool kits or “macros” for performing basic functions, Geary says Blue Prism’s offering is focused on scalable enterprise process automation for “the world’s largest back offices.”

But it comes at a much lower cost that flesh-and-blood enterprise software development. “Traditionally, a project would have been scoped and then a solution designed, built, tested and deployed by developers and dedicated specialist IT resources. The governance required of these projects makes it uneconomic to service the ‘long tail’ of automation requirements,” says Geary. “So in reality, the only option available to businesses was to outsource or offshore the workload, to reduce input costs.”

Blue Prism says its robot full-time equivalents (FTEs) cost a third of offshore FTEs. And once the customers learn the system, which takes two to four months, they can scale up virtual FTEs instantly. Currently Blue Prism has 1,000 robots up and running at customers including Telefonica, Fidelity Investments and Experian.

People Today, Robots Tomorrow

Meanwhile, New York-based IPSoft, which calls itself an autonomic IT service provider, says that the “infrastructure of tomorrow will not be managed by people, but by expert systems.”

The company’s self-governing IPCenter has the capability to detect, diagnose, remediate and escalate events and incidents, to learn from what it experiences, and to assimilate that learning into a shared knowledge library. And the company is expanding into business process automation as well.

“Autonomics have the ability to absolve mankind of mundane chores,” says Jonathan Crane, IPsoft’s chief commercial officer. “This is true not only in IT support, but in any systematic business process. The Indian vendors have thousands of staff doing similar work now with high rates of turnover and rising costs due to inflation. Autonomics are making the offshoring of tasks–so often considered the solution to optimize ITO and BPO tasks–irrelevant.”

Within a year, one enterprise customer with more than 10,000 servers previously overseen by humans had automated 75 percent of management and troubleshooting and reduced its infrastructure headcount by half, according to Crane. A financial services firm integrated IPCenter into its trading platform to diagnose and fix failed income trades, reducing troubleshooting time from 40 minutes to 40 seconds.

Companies like IPSoft and Blue Prism are a serious threat to outsourcing providers, says Slaby of HfS Research. “But it’s also a huge opportunity for the outsourcers that get on board with the technology early enough.

The work these robots and autonomics do are the sweat shop tasks that occur in the back-office and IT–”the kind that contribute to the outsourcing industry’s horrible employee churn problem,” says Slaby. “And it provides another labor-arbitrage tool to help outsourcers compete for deals on price.”

Indeed, both Blue Prism and IPSoft count IT service providers and consultancies among their customers, who use the technology to quickly and cheaply automate business and IT processes on behalf of clients. And new competitors are cropping up in the space. “It’s a logical extension of the development of ever more sophisticated software development environments, of increasing levels of abstraction from machine code,” says Slaby.

Danger, Will Robinson

But robotic automation faces several challenges. “Its novelty and the relatively small size of the vendors promoting it makes it tricky to introduce into staid, risk-averse enterprise environments,” says Slaby. And enterprise IT may not take kindly to the tools. “They don’t usually like the idea of software being produced outside of their control, and it has the potential to make them look slow or unresponsive to business unit needs,” Slaby says.

Finally, not every IT or business process is suitable for automation. “A business process requiring human perception or nuanced human judgment based on years of experience is less suitable,” says Slaby, “which, of course, is a good thing for those of us humans who still want to contribute valuable work to our employers.

Source:http://www.cio.com.au/article/442313/it_robots_may_mean_end_offshore_outsourcing/?fp=4&fpid=15