IT Lessons From Microsoft Outsourcing Woes

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Who's had a month like Tiger Woods? Microsoft Corp. (Nasdaq: MSFT), that's who,[link widoczny dla zalogowanych]!
It's been only one month since the honchos in Redmond apologized when it turned out that a freebie Windows 7 USB/DVD Download Tool violated the terms of a popular open-source license.
On November 13, Peter Galli, open source community manager for Microsoft's Platform Strategy Group, stated in his blog: "While we had contracted with a third party to create the tool, we share responsibility as we did not catch it as part of our code review process."
Okay, fine. But now the vendor faces embarrassment again: It seems that Juku, a Twitter-like service Microsoft released last month in China, contained code lifted from software startup Plurk. After Plurk complained that an estimated 80 percent of Juku "code, design, and UI elements" were apparently taken wholesale from its programs, Microsoft once again acknowledged its, er, transgression.
Again, the finger pointed to a third-party developer, this time one that Microsoft said had been enlisted by its MSN China joint venture to help with the coding for Juku, which was still in beta when Taiwanese programmers caught the similarities to Plurk. And again,[link widoczny dla zalogowanych], Microsoft apologized:
We are obviously very disappointed, but we assume responsibility for this situation. We apologize to Plurk and we will be reaching out to them directly to explain what happened and the steps we have taken to resolve the situation.
In the wake of this incident, Microsoft and our MSN China joint venture will be taking a look at our practices around applications code provided by third-party vendors.
Microsoft had no further comment to offer in response to an inquiry on the situation at press time.
Redmond's apology hasn't calmed Plurk, though: "We are still thinking of pursuing the full extent of our legal options available due the seriousness of the situation. Basically, Microsoft accepts responsibility,[link widoczny dla zalogowanych], but they do not offer accountability," said Plurk's management in a statement.
What's the upshot here? Is this a situation where Microsoft has once again dropped that ball it keeps fumbling lately?
While that's surely part of it, this story also should serve as a cautionary tale for anyone looking offshore for IT development work. After all, if it happened -- twice -- to Microsoft, who's to say it couldn't happen to any other firm? And what can be done by Microsoft and any other company to ensure it never happens again?
"In retrospect,[link widoczny dla zalogowanych], it's clear in this case that someone at Microsoft dropped the ball in terms of oversight," states Illuminata Inc. analyst Gordon Haff. "You'd certainly have thought that if Microsoft contracted to create a competitor to a service that someone would have noticed the striking similarity and dug deeper before things went live. That said, when you pick an outsourcer, you write contracts, but, at some level, you have to then trust that they won't engage in unethical or illegal behavior."
That trust should be made legally binding, and in the view of Wikibon founder David Vellante,[link widoczny dla zalogowanych], it calls for a commitment of resources: "This is a major issue. What many organizations do is appoint an 'outsourcing czar' who is solely responsible for a global [software development] strategy vis-a-vis sourcing," he writes in an email. "He or she spends lots of time on planes -- following the moon -- and building partnerships with reputable firms. Again lots of lawyer interaction for this poor soul."
Other experts agree there's no substitute for project management of the hands-on variety. "I continue to hear more about outsourced failures than successes," states David Silversmith, VP of information technology at FirstBook.org. "I think the challenge is that companies try and save too much money. When outsourcing you need to factor in the costs for good account management/project management to ensure communication... Likewise you need to budget for testing."
Bottom line? While firms outsource to cut costs, they'll often get what they pay for -- or wind up paying for what they get, however inadvertently, as a result.

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