The option of staying stateside

When Wesley Bertch, IS director at Life Time Fitness, dipped his toe in the offshoring pool last year, he got a cold, unhappy surprise. Bertch, a strong believer in the benefits of free trade, hired a tier-one offshore vendor in India to augment his internal, 15-person software team, which focuses primarily on J2EE applications.

Bertch's idea was to start off with a small pilot project to test whether Life Time Fitness, a health-club chain, could add offshore capacity effectively without sacrificing quality. He went to great lengths to set the stage for success, working with leading analyst companies in vendor selection, sorting through individual developer resumes, and picking a low-risk pilot application. He even agreed to allow the offshore vendor to control all aspects of the project, including analysis, design, development, quality assurance, and documentation so that they could ensure successful delivery.

And the result? "The project failed, didn't work at all," recounts a frustrated Bertch. "It didn't meet the requirements and was fundamentally replete with defects. Our postmortem revealed that [the developers'] lack of experience was the No. 1 factor. And this was an organization that claimed to have high levels of quality and process."

Against the flood tide of IT work moving offshore, a small stream of work has been coming back to the United States as some U.S. companies have concluded that offshoring, for a variety of reasons, is not as much of a bargain as advertised. 

Second Thoughts

For example, smaller companies that can't afford the necessary up-front investment in processes and relationships have fallen short on success. So too have application-development projects that require close links with end-users, lots of innovation, or industry-specific knowledge. Politically sensitive projects and those requiring very high data security are also proving they may not be well-suited to go offshore.

In Life Time Fitness' case, the culprit seemed to be poor performance on the part of a specific vendor. But Bertch believes his experience is symptomatic of an offshore application-development industry that has grown too fast. 

The average worker assigned to his project had two years of experience, Bertch claims, and even senior managers had only three or four years under their belts. "These kids are right out of college with very little savvy and maturity in the biz world," Bertch says. "We concluded that to be successful offshore, we would have to control the processes and send our management over there. There's no royal road to offshoring. The Indians require years of mentoring, training, and experience before they add more value than they cost -- just as would be the case with hiring U.S. labor."

As a relatively small company, Life Time Fitness couldn't justify the necessary investment. Bertch says he instead chose to hire low-cost developers out of the University of Minnesota who were able to get the job done for half of the $30 per hour the offshore companies were charging.

Bertch encourages IT managers, based on his experience, to look hard at the onshore option. "U.S. businesses already have a built-in cost advantage over any other non-U.S. labor source: they're local," he says. "There's a huge bias among U.S. management [that posits] offshoring cuts costs without sacrificing quality, even though this usually proves not to be the case. IT management has a hard time communicating the lack of ROI with offshore because they come across as trying to protect their jobs."