Friday, January 09, 2009

A Truth Revealed...

If you've done any offshore work, and I do mean really done the work not just been near the work, you know what a house of cards some of the industry players can be. Finally it seems we are getting more details on exactly how messed up this market can get.

Just recently the head of one of the larger organizations, Satyam Computer Services, released a letter detailing the ongoing fraudulent activity that was riddling the corporate books. If you've ever competed against these guys you have invariably asked yourself, "How are they making money?" as they priced you out of a deal with ridiculously low costs. Now you know: They Didn't.

You can read more in the New York Times and elsewhere on the web.

The near term impact means that there will be quite a few companies including GE, GM, Nestle, Caterpillar, Coca-Cola, Microsoft, Pfizer and the US government who will be looking for new IT providers pretty quick. The real downside is that those companies have been budgeting for years using unrealistic offshore rates. Shifting that burden to more realistic rate schedules on short notice could be quite a jolt to many corporate bottom-lines. The ripple effect is that it will take money away from advancements, growth and sustainability just when we need this type of spending the most.

It's a fun thing to be able to say "I told you so." when you find out a company who consistently undercut the market in extremely detrimental ways finally comes clean. Unfortunately, it's not very satisfying. You see, we have the same experience in many markets and segments of our economy. Rather than paying what something should be worth and recognizing that money spent is money that feeds our nation, we continually strive to cut costs and do things on the cheap. Commoditizing high-tech doesn't help anyone, anywhere. Not in this country, and not in the country you are moving the work too. And besides not helping in the short-term, the long-term effects of depressed rate structures create unrealistic expectations and remove incentives for growth. They have ripple effects throughout the economies and cultures involved and can do irreversible damage when reality finally does come crashing down.

This situation is not unlike the consumer credit crisis or the disease that is WalMart. If people think they can pay less, they will. Even if it isn't best for them or anyone in the long-term. In many cases, even if it isn't best for them in the short-term! That's why people spend multiple dollars in gas to drive to a further store and save a few pennies. That's why people buy organic food that has to be shipped from another country to a horrendous environmental detriment instead of recognizing that industrialization is VITAL to a sustainable civilization. But I digress.

In the future, we won't always get such a clear explanation of the full cost of those ludicrous deals we take advantage of every day. Sometimes it isn't just plain-old fraud that's at the root. But there are always costs and impacts and we should try and understand the big picture instead of being naive consumers. Remaining ignorant about the supply and service chains that provide everything we consume and rely on is a surefire way to create an even bigger mess in the future (like we need a bigger one than gas prices?).

Next time you see a deal that seems to good to be true, remember the old adage and realize: It Is.

No comments: