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The Disastrous Impact of IT Outsourcing to the Motivation of Software Developers

IT Outsourcing or the transfer of business functions to an external service provider is a common practice in almost all large companies and a standard tool in top management consulting. Sometimes, it is seen as the only way to solve current problems in a company. There are a lot of good and sometimes bad reasons to do outsourcing of IT and/or software development. Main drivers are cost reduction, over aging of staff and missing qualification. 

But, just the discussion and/or rumors about a possible outsourcing has bad effects. The impact to the motivation, decisions and daily work of software developers and middle management is in most of the cases disastrous. Unfortunately, in a lot of organizations the top management is not aware of this negative impact or just don't care.


One problem is, that the higher management can't see the direct impact this de-motivation and the fears of the employees. There are just negative the long term effects on productivity, quality and maybe worse results in the yearly satisfaction surveys. To give a better understanding of what happens, I'd like to tell you a short story (or let’s call it case studies).   

Maybe you know that I have three children, so imagine that I drive home after a long day of work, sit down at dinner table and say.

Micro Case Study #1 - Cost Cutting

"My dear children, the times are hard and everything is getting more and more expensive. We have to save money and mother and I think about having a shorter holiday this year and maybe less toys for you. I'm sorry but there will be better times and we will overcome this crisis together as a family."

Most likely results:

- S. (girl, 10 years old) will say: "I understand you daddy, maybe we can also cancel some riding lessons for me this summer".
- K. (boy, 5 years old): "Daddy, I saved some money (8€ are in the piggy bank). You can have it."
- Q. (boy, 3 years old): feels good, because everybody else is in a good mood.

Micro Case Study #2 - Outsourcing

"My dear children, the times are hard and everything is getting more and more expensive. Mother and I are discussing that if we like to keep the standard of living we have to give one child away in the orphanage. At the moment nothing is decided, so don't be concerned. Mother and I will manage this in a very professional way."

Most Likely Result 1:

- S. (girl, 10 years old): will just leave the room and cry
- K. (boy, 5 years old): is shocked and cries
- Q. (boy, 3 years old): feels bad and cries, because everybody else is in bad mood
In the orphanage case (#2) the commitment and motivation of the children will be poor. No one will trust mother and daddy anymore. Children have usually not the opportunity to find other parents. You can't generalize all what happens in this case, but we are all humans and our emotions are the same at home and during working hours.


Software developers which have fears to lose the job due to IT outsourcing, often react with unproductive behavior like:

- design and implementation for résumé,
- find a new job during working hours,
- complaining to peers (and spending some extra time coffee kitchen),
- no extra hours and/or weekends to fix a bug, etc.,
- sometimes a kind of 'I don't care about … anymore' feeling
  (quality, maintainable solutions, etc.). 

These negative impacts are not directly visible for upper management. I assume in most cases there is a huge pressure to investigate IT outsourcing, but in my opinion is should be done just if there is absolutely no alternative way. Maybe an enterprise can save 15-25% of cost with an outsourcing. If the remaining team loses more productivity than this value, the complete outsourcing is not a good deal. Managing with fears is stupid on the long term and brings in the best case short term success.

Change History

 Revision  Date  Author  Description
 1.0  Apr 27, 2012  Markus Sprunck   first version
 1.1  Aug 20, 2012  Markus Sprunck  improved layout for tablets
 1.2  Feb 2, 2013   Markus Sprunck  picture added and some improvements
 1.3 Dec 11, 2014 Markus Sprunck fix typo and improve structure

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