With the massive demand for web services versus the terrible lack of hire-able skills in industry, companies find themselves in a position of only being able to outsource work to companies that have the necessary resources to meet their client’s demands.
As one company outsources work to another, the receiving company is likely to outsource the work to yet another company and so the chain is constructed. Everybody wants a piece of the pie and this precise chain of piggybacking greed is going to result in large costs and poor delivery. We live in a day and age where technology keeps us all connected easily and constantly, enabling us to communicate quickly. However, as the client, when you need an answer and the question has to go through 4 or 5 chains of command, all via email, you’re going to end up waiting at least several hours for a response, praying that the response you receive is accurate and doesn’t require further explanation. The concept of broken telephone comes to mind.
It worries me to think that this very trickle effect is going to land us all in a position where costs are excessive and deliveries are weak. If this is the case, we’re going to experience a huge setback in terms of evolving as a country in the online space, and might find ourselves damaging relationships with international business partners.
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32 Responses to “The proverbial lion that is the outsource chain”
“As one company outsources work to another, the receiving company is likely to outsource the work to yet another company and so the chain is constructed.”
This assumption seems tenuous - can you elaborate, or provide reasons and/or proof?
I agree that the statement is rather slender, I sat for a long time thinking of how I could make it more sound and the only way would be to provide proof by naming companies, which I cannot do as it would be unfair.
I’ve been working in this space for many years and have been involved in a huge number of projects and based on my experience, I’ve seen many projects going south due to the chain effect I have spoken of.
The market is so very saturated at the moment that finding resources is near impossible, based on this, one company out sources to another until a resource is found. It would be easier if people weren’t greedy and didn’t want to involve themselves as middle man.
What worries me more than multipal-outsourcing of a job is where you have people/companies in the chain that don’t really know what they are doing or don’t completely understand what is expected from the solution.
This is going to continue to be a trend in SA for years to come, until the generation of youth that eat, breath and breed IT comes into the workplace. 20 - 30 years I reckon.
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That’s a good point Chris - Playing middle man is not the hardest job, but should be person in the middle not have the knowledge, it would slow things down even more.
I agree with you, hopefully in a few years time when the youth become of ‘industry age’, we might be able to avoid this saturation I have mentioned.
Extremely thought provoking article. Who better to comment on the state of the industry than one who sits in the belly of the beast. Personally I feel that there is indeed a space for all. Educating yourself in an industry that commands it is a given. The concern Christopher C has is apt and disconcerting, but one that I have had to accept as commonplace. Complacency seems to be a South African trait…lack of service as well. There are few people who are able to deliver service expectations along with tech savvy. Thus, I believe this chain could be vital to make up for the skills shortage and compensate for an even bigger concern, the shortage of expectation management and service delivery!
That’s an interesting way of looking at it Nadah, I guess the chain could result in employment opportunities in the future based on how our youth evolves into the market space.
I guess my point was not really meant to say that it’s completely a bad thing, it was more to say that it could become a very bad thing unless something was done about it and I foresee the solution being the youth..
Agree with simonB - management is definitely the make or break for outsourcing.
Something i quite like about outsourcing is it opens so many opportunities for the ‘back yard’ design/developer to get a foot in the door in starting his own business. Outsourcing definitely offers the possibility of more small business to rise - which economically is good for SA.
Good article. However, I feel that you have tended to lean more towards the negative aspects of the chain.
As stated by other comments, well managed chains and employment opportunities within the chain system has its overall benefits. I have also seen a large amount of knowledge sharing using this system. This knowledge sharing of course leads to an overall increase of technical ability on the ground, further adding to the boost in SA technology minds being outsourced by the European and American markets.
@ChrisZA - Absolutely, some of the less fancy, well known, companies/freelancers will get a chance at working on some decent projects. And yes, it does give smaller companies a chance to evolve nicely amongst that larger dominant ones!
@Dee - Agreed, after reading these comments and then reading over the article again, I realise that it might have come across rather focused around the negatives, but it was not really my intention. My intention was to create an open discussion around the topic of out sourcing and South Africa, which I feel it has done nicely.
Ultimately there need to be standards in this industry. If you build up a network of people you can trust and who work well together on a freelance/contract basis you can still deliver a decent end product. Quite a few of the best designers coders and SEO people I know have gone freelance and I would work with them without hesitation and know that if a client is charged more at the end of the day they will have the best product they could possibly get.
Many of these projects fall apart because of poor communication and management rather than because of outsourcing.
I agree Wendy, if you can build up a reliable source of out sourcing candidates, then you’re A for Away. Not everyone has the ability to do so and when an opportunity comes around, they’re likely to get involved to make some extra cash, not realising that they are alluding to the negativity, which I talked about.
So all in all, it does boil down to establishing relationships and managing projects correctly, but there are a lot of people who feel they’re capable of this, and actually aren’t.
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I think that as skills become more scarce and expensive not to mention that more and more companies are finding that SA’s labour law is incredibly onerous, we will see more and more companies not only outsourcing but taking advantage of off shore outsourcing. And the skills available in markets such as India are going to change the landscape in so far as you will now be competing globally for a local position.
Off shore outsourcing will always be an option, especially places such as India or Sri Lanka, which offer good quality skills at reduced rates. At some point though, these countries will become saturated and we’ll be pushed back into our local chain reaction.
Well young Christopher, the problems you speak of only arises when you (if “you” were the client) approach the wrong firm. There are a lot of mediocre supposed “web guru’s” in South Africa who sub-contract to even more mediocre designers and developers. The product / project would be doomed from the start.
As someone who runs a successful company that uses an outsource-based model I must just point out that in almost every case there is not enough talent of sufficient quality in South Africa to achieve world-class results, we aim to deliver. It’s the ugly truth.
The problem is not with the concept of outsourcing, it’s people not choosing the right firm for the job.
Outsourcing allows us to deliver results as good as any of the major firms like Generator, HC, Gloo etc. for a fraction of the price because we don’t have resources collecting dust and large overheads and expense accounts, a cost which the client inevitably picks up anyway. We prefer to utilize as “as-needed” or “usage” based model in order to give our clients the best price possible to deliver world-class solutions.
I stress the point again, the model isn’t the problem, if you don’t hire a good firm, you’ll get bad results. Period.
Mr Luckysocks, I agree that the problem is not with the outsourcing, but I don’t totally agree that it’s the clients fault for choosing the incorrect firm. Most of the times, a client would not know what to look for in a firm and could easily be persuaded due to lack of understanding.
I guess it’s very debatable and opens another big discussion, one which would only be really answered with a great deal of proof, etc.
Fair enough, but consider this. I don’t know how the sound system in my car works, and the people I originally hired to fit it (I found out yesterday) did a piss poor job. I then hired professionals to re-wire and re-fit it all and now it runs much, much better.
You live and you learn, sometimes this is a costly exercise but what is your alternative, really? Our business is 100% referal and that’s the way we like it. If I have any advise for folks out there, it’s talk to people, ask them who the best firms are. People like you, Chris, have been in the game long enough to know who these firms are.
So I guess (to coin a bumper sticker) “Just ask Chris”
Your comparison makes sense, and I agree with you, but remember that one side of the story here is keeping costs down. More money will allow you to use the best of the best, who will deliver correctly, but not every company has the money to hire the best of the best. It’s an ideal scenario.
Referral is definitely the biggest thing and that’s a whole model in itself now that I think about it.
Christopher around 10 years ago I thought the same thing. However that has not proven to be the case.The worrying condition in Southern Africa is the brain drain within IT. So I am more relieved by India offering outsouced services than threatened. Point is though that if the trend continues those who wish to stay in SA and have a career in IT are going to have to compete with offshore skills.
SA had a great opportunity at providing outsourced call centres and BPO, for a while I was really encouraged by this trend but I know of at least a half a dozen large international orgs who have chosen India over SA as a result of South Africa’s labour policies and BEE ownership.
In most of these cases they were prepared to work within our labour law but they were not prepared to indulge black/local ownership.
geejay, sounds like you actually do agree with what I am saying? Yes, I think that successful careers in IT will be driven by offshore ventures in terms of out sourcing.
Interesting, sounds as though you’ve spent a lot of time looking into all of this and this is the exact thing I was hoping someone would comment about
Being on both sides at times, I treat the situation as follows:
If I am asked to do something I have no knowledge about, I will pass the client onto someone I know that can do it properly. I’ll then leave it to the referred party to choose to give me a finder fee or not. This depends on the industry, the numbers we’re talking etc. I’m not going to blink over no comm. on a R1,000 job. If the referred party makes R100,000, I suppose something would be nice. Else I might find someone else next time
When I am approached to do a job for someone who is being outsourced to by someone else who is outsourcing to them (repeat as necessary), I normally decline politely, unless there is a good reason for this. Especially if the person has no clue about what it is that I do, and even worse, if they won’t allow me to communicate directly with the decision maker.
Outsourcing can be messy, and the greedy middle men need to be exposed for what they are. I have no problem with agencies, as they tend to specialise in what they outsource/resell, so as with most things, it’s not black and white, but rather shades of grey.
Could this entire entry not have been rewritten as: “Excessive outsouring may impact on South Africa’s reputation and ability to deliver low cost tech skills in an increasingly globalised world.”
If it’s saying anything more than this, I’m struggling to see it.
Ah, looks like some interesting comments are flowing in. Ross, I love your comment: “Maybe if it was a tweet” ~ Had a good chuckle over that!
@Dom - See, one thing, which I aimed for, was to create a topic to open discussion, it wasn’t to write a read-and-move-on post, like so many are, I wanted it fairly broad and open, which is clearly what I acheived..
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Christopher Mills is a highly experienced SEO and Web Development guru. With an impressive track record in blogging, web design, development, and web optimization, not to mention experience in hardware, operating systems, programming and networking makes him a Dalai Llama of computers.
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“As one company outsources work to another, the receiving company is likely to outsource the work to yet another company and so the chain is constructed.”
This assumption seems tenuous - can you elaborate, or provide reasons and/or proof?
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