Slowing Economy Shifts Managers Back to Outsourcing
August 2001

It’s a new fiscal year with a limitless new budget-- NOT! But somehow you need to get more done with less money and fewer people. Doesn’t quite seem fair.

Of course, the economy is directly affecting your company dollars. Budgeting creatively is necessary these days, and these decisions are currently driving the outsourcing industry.

In the ‘90s, executives turned to outsourcing to alleviate their need for staff during times of low unemployment. Now, the continuing outsourcing boom is due to its savings impact on daily operations. Although budgeting restraints have over-shadowed staffing concerns, any manager knows company costs are affected by staff salary, benefits and turnover. The goal today is to not just find employees but to contain costs while staffing as efficiently as possible.

OffSite Works, a Middle-Tennessee company, began providing ‘on-call’ support services 6 years ago when worker shortages inspired owner Denise Gore to create a virtual workforce as an operational resource. Now, she says the demand for their services is no longer driven by managers looking for personnel, but by CFOs looking to trim the budget.

Gore claims, “The popularity of outsourcing business processes is due to the cost savings of an as-needed arrangement.” Dennis Marr, manager of data center operations for Broadcast Music Incorporated (BMI) and one of OffSite Works’ clients, says, “The greatest benefit comes in savings in employee salaries and benefits. From a management standpoint, that is a tremendous asset-to not carry a complete staff to handle peak work.”

As companies have sought new ways to reduce costs, they have increasingly hired temporary workers to reduce the wage and benefit costs associated with full-time employees. This trend has fueled the growth of all contingent services. According to Fast Company magazine, a contingency workforce of about 33 million people has developed and consists of 16.5 million free agents, 3 million temporary workers, and 13.5 million micro businesses.

The computer and data processing services industry-which relies heavily on outsourced employees-- has grown dramatically in recent years, and employment is expected to grow about 117% by 2008, making this the fastest growing industry in the U.S. economy according to the Department of Labor.

Outsourcing has been proven to be a popular way to contain costs, but before you grab the closest vendor to take over your accounting, IT, transcription, or HR… wait. Whatever form of outsourcing is considered, a company has to analyze the project or task at hand not only for cost comparison, but to clearly identify the details that cannot be compromised. In other words, to contain costs, a total strategic view of your business is required. Good vendors will want to understand your company mission and outsourcing goals.

When you decide to outsource work, always follow these rules: 1) research outsource vendors, 2) set clear expectations on the results, 3) review your costs regularly and 4) assign an in-house manager to monitor the process. This approach will allow you to get the most for your company dollars, and spending wisely is what will help your business survive in this economy.                            # # # #