Outsourcing: Where's the Big Deal?
These days most companies want their executives to focus on strategic issues rather than back-office work. Many, however, still choose to outsource specific functions piecemeal.
Now a few big companies have become early adopters of “end-to-end HR outsourcing.” They've uncovered the usual synergies, to be sure, but direct cost savings and dramatic headcount reductions have proved even more rewarding.
Outsourcing, so often presented as a cure-all for companies that sign on for it, may not be so healthy for companies that offer it. In July, one company in USA announced that it was withdrawing from consideration for a massive outsourcing contract. It said that the risk and accounting issues associated with long-term contracts were its main concerns, and that its simultaneous plan to lay off 2,000 workers was not a factor.
In USA traditional IT outsourcing has long been a business marked by headline-grabbing deals ranging from 5 to 10 years in length and hundreds of millions if not billions of dollars in value.
That hasn't completely changed. Customers are now more interested in jobbing out discrete pieces for shorter time frames. Increasingly, they don't want to parcel it out at all, but prefer someone else to come in-house and run it as a “managed service.” Outsourcing is now an established and well-understood way to cut costs. One big industry change, however, is that services such as “E-business on demand,” in which customers buy only the computing functionality they need, have more momentum than traditional deals.
And on the plus side for outsourcers is the virtual disappearance of the per-user, per-month pricing system that was once the chief selling point. Today outsourcers may be doing less for clients, but they do get paid. And with outsourcers eager to satisfy clients' desire for more flexibility, companies clearly have more leverage than before.
To Outsource or Not to Outsource: Four critical factors to consider before deciding whether to outsource a project.
Most companies want their executives to focus on strategic issues rather than back-office work. Many, however, still choose to outsource specific functions piecemeal.
Now a few big companies have become early adopters of “end-to-end HR outsourcing.” They've uncovered the usual synergies, to be sure, but direct cost savings and dramatic headcount reductions have proved even more rewarding.
It begins by addressing four distinct categories—cost, benefit, flexibility and risk—and then wades into each one for a closer look. While the method in its entirety is too detailed to present here, a summary appears below, and the accompanying example provides some further insight.
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