Outsourcing is not a surefire route to bigger profits and corporate bliss:
Not long after five graduates of the California Institute of Technology (Caltech) founded automated error prevention software provider Parasoft, the fledging company turned to offshore outsourcing to moderate its development costs. To the privately held company, founded in 1987 by the research team that developed the first parallel computer, Poland looked like a pretty attractive place to source low-cost IT professionals.
"I was looking for a way to find cheaper developers than you find in the US," says CEO Adam Kolawa. "In 89 Poland switched from communism to a 'normal' system, and there was a great opportunity, because they were really, really inexpensive. We're talking about prices lower than you find in India."
But looks can be deceptive, and since offshore outsourcing was barely on most organizations' radar back then, there was no one to warn Kolawa about any hidden costs.
The upshot was that for the first five, or even seven years, Parasoft got very little out of the arrangement. The Polish developers, he says, did not understand the need for a process and infrastructure to back their software development efforts. Corruption was endemic. The developers were overly inclined to stick to contract specifications, and ill-prepared to show the flexibility needed to put quality ahead of specifications. Overall, the culture was just plain wrong.
The company did continue to outsource to Poland, but others have shipped duties abroad, only to ship them back again. It shows that companies will experiment with what works, and they'll come to find that outsourcing works only in certain situations.