Outsourcing not always a money saver

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As I predicted months ago

This is exactly the same thing that happened in the recession of the early 90s. As the recovery began, companies were laying off U.S. workers and outsourcing like crazy. It was the hot trend. Then as the recovery progressed, I started seeing stories in the newspapers with almost the exact same headline "Companies find that outsourcing doesn't pay off". They said then, as this article has said now, that some companies ended up spending more than they would have spent had they kept the staff they laid off. I guess the lesson is that what we learn from history is that we don't learn from history.

I predicted months back, when many IT folks were very worried that they were going to lose their jobs forever, that many companies were going to find out the hard way that outsourcing doesn't save them any money. And so it has come to pass.

If you add up the figures that this article cites, almost 30% of the companies that tried outsourcing achieved no gains from it. About 20% achieved significant gains. That leaves the other 50% who only achieved nominal gains.

As I said before, I don't blame companies for attempting to outsource things in an effort to cut costs. Everybody has had to get creative in tightening the belt. Inevitably in this process, people make mistakes in judgement, and they end up not saving anything. It's just been the practical reality. Some approaches have worked, and others have not.

It's unfortunate that people get hurt in the process, but when you're working for somebody else, you are in a sense at their mercy. In life you end up making decisions based on what things are worth to you. If you want to be your own boss, then basically you need to start up your own business. Some people just aren't cut out for this though, and so it's better that they work for someone else who manages the business, deals with the finances, pays the corporate taxes, tries to hire the right people to do the right job so that the business can continue and flourish, and most importantly organizes things in a way so that the business can attract customers and keep them coming back. This is not always so easy either. What you risk in this case is getting sued, or going under, and depending on your financial management skills, having to deal with creditors and investors who expect your business to pay up.

Sometimes it's just easier to come in 9 to 6 (or do overtime) and focus on a specialty that contributes to a business that someone else runs. It's your choice, and once you've made it, you need to plan for the ups and downs that will always come, and live with your decision.

Posted by: Mark Miller   Posted on: 11/17/03 You are currently: a Guest | Members login | Terms of Use

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