Thought-Provoking Commentary for the Lawson Software Community
Lawson’s India Flap
October 1, 2003Posted by on
By far, the biggest news this month on the Lawson front may be its most controversial. In conjunction with an announcement of some development layoffs, Lawson announced that, over the next 2 years, it plans to move some development jobs offshore to an as-yet-unnamed organization in India (see http://news.mpr.org/features/2003/09/22_horwichj_lawson/).
This news was a bombshell to many in the Lawson community, and most clients and users were disturbed, to say the least. It wasn’t the layoffs necessarily, but the shift to using offshore resources that has the users disgruntled. The Topica and Yahoo message boards were quickly ablaze with anti-American sentiments about Lawson, proclaiming them as sellouts.
The India offshore news leaked just a couple days prior to the quarterly Lawson Mid-Atlantic Users group meeting, which included a surprise visit by Dean Hager, Lawson Executive Vice President for Emerging Markets. Hager was quickly put on the defensive about the layoffs and offshore development. He explained that, thanks to some realignments and acquisitions, there were some job redundancies that could be safely eliminated.
I questioned him about the layoffs, and in particular, asked why Lawson-that often touts itself as an employee-friendly company-was not able to redeploy more of these employees to other positions rather than lay them off. He assured us that more than half of the employees who were initially targeted for layoffs were actually redeployed, and that the others were closely evaluated, and, in some cases, were let go for performance and other reasons. So, this sounds more like a periodic housecleaning, and not necessarily a sign of bad times at Lawson.
He also touted the strengths of the Indian offshore developers in structured methodologies, particularly their levels of CMM compliance, as one of the primary reason to start moving some development offshore.
The move to offshore resources certainly didn’t surprise me. It’s purely a cost issue. For years now, other software developers have been moving in this direction: Oracle, Microsoft, IBM, etc. In fact, one of the reasons I shifted from software development into consulting is that I simply didn’t want to compete with the cheap offshore labor pool. You simply get more bang for the buck. Or do you?
One of the statistics I’ve seen is that there’s a 1:5 to 1:10 cost ratio for using offshore resources. In real dollars, this means that for every $100 spent in the US, the same work can be down for $20 or even $10. But, beware the hidden costs of offshore work.
The truth is, no one really saves 80 percent by shipping IT work to India or any other country. Few can say they save even half that. As just one example, United Technologies, an acknowledged leader in developing offshore best practices, is saving just over 20 percent by outsourcing to India (see http://www.cio.com/archive/090103/money.html).
There are other hidden costs as well, particularly understanding the cultural differences, and managing people who are halfway around the world (i.e. not just a few time zones away). You also have to deal with the "Anti-American" issue. While it’s a shame that we have to ship jobs offshore, at least they haven’t moved the headquarters there. That’s when I’d be really worried!
Will this work for Lawson? Well, I can’t predict that. A lot of companies are making it work. We’d all like to see it work, and for Lawson to become a stronger company offering ever more robust solutions. So, we’ll see. I know a whole lot of people who will be watching.