The Real Reason Behind Off-shoring

This isn’t appearing in any of my books, it is just some thoughts I had today.

There has been a lot of discussion on-line and in the trade press about offshoring. What is surprising to me as I read through the IT news is that everybody bit at the smoke and nobody saw the fire.

Currently you read about the tens of thousands of programmers who have been let go so management could “cut costs” to artificially inflate the values of their stock options. You read the fraudulent stories about shortages of IT professionals in this county. These articles use doctored up numbers which don’t include the tens of thousands of IT professionals who have been laid off so long they are no longer counted in the unemployment statistics.

Yes, everybody is taking a swing at the smoke and nobody is paying attention to the fire. As smoke screens go, this was a good one. So thick it bowls most people over. The flames are showing up in articles nationwide, but nobody has put it together.

What flames you ask? Take some time and scan through the weekly trade press and business news for the past 5-6 months. Skip over all of the articles about H1-B and offshoring. What is left? You will find many articles covering Sarbanes and companies running afoul of it. There will be articles about mega-million dollar fines and penalties handed out because some agency seized or attempted to seize e-mail. Articles talking about various individuals getting in trouble due to data destruction.

Do you see the flames yet?

The real reason behind offshoring is criminal intent and/or prison avoidance. If your e-mail server is located in a country which has no extradition treaty with the U.S. it can never be seized by government agents. If all of your e-mail clients are configured to store their messages on the server only, there is no evidence inside of this country which can be used against your company. If your entire programming staff is in such a country and working through a third party they can never be compelled to testify in a court in this country.

One thing is becoming abundantly clear in the weekly trade press. The vast majority of offshore projects either fail or cost more than they would have cost to do inside of this country. The smoke screen about saving money is quickly fading. Eventually the true magnitude of these failures will become self evident as they will have to appear in financial filings. Some already are appearing as companies yank back multi-million dollar projects and have to issue huge checks for cancellation fees.

These stories leave the reader questioning why companies are still pursuing the offshore model for cost savings when it apparently is providing none. The real cost savings can only be explained in terms of avoidance fees. One company in the news over the past year has been handed multiple fines for e-mail issues. How many millions would they have saved if they had contracted a third party in a country without extradition to host and store all of their e-mail? I don’t have an answer, but it is a thought provoking question. Could they have side stepped the entire issue or most of it by pointing to that other company in a different country and sent the feds after them?

From time to time IT workers are asked to develop things which are less than legal. On some occasions the IT worker takes it to the legal department for a second opinion, but on other occasions they don’t know it is illegal and do it anyway. How many of you reading this has ever heard a programmer for an offshore company ask if something they have been assigned to do is legal? I never have, but perhaps you have.

As an IT professional, how many times have you personally been given a project which just “smelled wrong”? Be honest now. Of those projects, how many did you run past the legal or regulatory department and tell them to give you a “get out of jail free” card? The IT profession itself had little in the way of regulation prior to the Sarbanes-Oxley stuff. The industries we serve can be highly regulated. The financial, health care and pharmaceutical industries have mass quantities of regulations. We cannot hope to understand them all, but if we work in those industries we have to have a sense of the really important ones. More importantly, we have to know who to ask. Does your offshore company have a staff of legal and regulatory professionals fully versed in all U.S. law and regulations pertaining to your industry? Do they have access to your companies staff?

We are standing at the edge of a great chasm and being told the march forward is good for us. I personally don’t see it that way.

Here is a question for the legal minds, and it is one they better answer before this and the other trends go any further. All of the industry analysts are getting behind the sales pitch for SOA (Service Oriented Architecture). All of the industry analysts have at one point or another proclaimed offshoring as a “mega-trend”. If you can believe the visions, we will all have itty bitty Web access devices with no storage and own no software. All services, even word processing, will be hosted on the Web somewhere. If this comes true and the companies have this all hosted on computers residing within the borders of a country with no extradition treaty, how do you obtain their records for a criminal trial? How do you prosecute them for failure to produce e-mail?

This entry was posted on August 14, 2007 at 5:10 pm and is filed under Information Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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