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Thread: Creating an outsource instead of a department

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    Diamond Member Corzhens's Avatar
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    Default Creating an outsource instead of a department

    In the olden days, it is forbidden by law to outsource any work that is regular. Companies can only outsource for temporary jobs. But now, outsourcing for any kind of job is legal and is accepted by the business industry.

    Yesterday, the technician came to check on our cable connection. In a casual chat, I learned that his team is employed with company B which is an outsourced company by the cable company. But the catch is this - company B is owned by the cable company. So obviously the cable company has an advantage in doing that. The technician admitted that he is under contract with company B although he seems permanent because when the 5-month contract expires, it is automatically renewed. From my viewpoint, I can see that the cable company has saved a lot since they are not paying any benefits for the technician.

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    Default Re: Creating an outsource instead of a department

    The outsourcing of jobs is rapidly becoming a global practice. The hunger for achieving greater profit margin is causing many companies to apply this method of employment. The worker works for a certain company but he or she does not have an affiliation with the workplace other than having to abide by its rules. The recruiting is done by what is usually called a management company which is responsible for paying the salary providing uniforms and safety equipment and ensuring that the worker abides by the rules of employment. The worker is employed on a contractual basis and most likely will not be given any fringe benefits.The manufacturing companies do this because It will pay out less money than if the worker was directly employed, and the welfare costs and benefits would be eliminated, hence the company would achieve huge operational cost savings.

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    Default Re: Creating an outsource instead of a department

    I basically have a long-term outsource strategy, not a business strategy. I think one of the keys to entrepreneurial success is realizing how loud money speaks in foreign markets, especially since I can earn in USD, but the same is true for most western currencies. I think the next 10 years is gonna be this huge shift of value from the west to a more global value of currency, specifically because its so easy to profit from outsourcing right now.

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    Default Re: Creating an outsource instead of a department

    Based on experience, though, the types of work being outsourced these days are back office (i.e. clerical, customer service, other non-frontline services) and skilled labour. It's easy to outsource factories for manufacturing goods because of cheap yet competent labour available in developing countries. Frontline tasks such as dealing with investors and operations cannot be outsourced, however.

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    Default Re: Creating an outsource instead of a department

    I've had the same conversation with our internet and cable technicians and I was also surprised to hear they were just companies being outsourced by larger ones. It made me kind of frustrated as a consumer knowing that my problem wouldn't easily be traced back to only one company and instead would have to be dispersed within multiple smaller ones but at the end of the day I think their system was good enough that the communication between the head company and the subcontracted ones were working well enough together that it was indistinguishable that they were indeed outsourced. I think that would be the best case scenario and the right way to execute if ever a large company were to outsource one of their departments.

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    Diamond Member Corzhens's Avatar
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    Default Re: Creating an outsource instead of a department

    Another reason for outsourcing a field of work like the mentioned cable tv technician is the liability in case of an issue. The responsibility would first lie on the outsourced technician and also to his company before the mother company could be blamed. But in fairness to the cable tv company here, their outsource are only in name because they act as permanent employees of the mother company with full access in the office. The outsourcing issue is just a trick maybe to save expenses on the benefits of the employees.

    Big companies normally do the outsourcing for maintenance people like janitors and messengers and also security guards. But for technical people, they are not starting to emerge since outsourcing is getting to be an industry already.

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    Default Re: Creating an outsource instead of a department

    There are companies I know which outsource their "grunt work." They don't need to hire someone overseas. What they do is offer temp jobs to workers when they a lot of work that needs to be done but they wouldn't want to offer anyone a permanent job for these jobs. Others hire skilled workers for some work, pay them on contract basis. That way, they save money because when they have no work for such skilled workers they won't be paying anyone to lounge around in the office.

    I think in future more businesses will be hiring fewer in-house workers and become heavily dependent on outsourcing to cut operation costs.

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    Bronze Member joshposh's Avatar
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    Default Re: Creating an outsource instead of a department

    In the old company I use to work at they would pay someones daily wages and then on the back office it would come our to almost $10 usd an hour for that persons benefits and health insurance. So outsourcing is the way to go. You pay a large sum and need to not worry about health insurance and benefits, which is a significant savings.

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    Default Re: Creating an outsource instead of a department

    I don't like this business model at all. I have worked for many employment agencies in my past that have done the same thing. They claim to have contracts with employees of temp agencies, but they never expire so the companies are not forced to hire the temps.

    They use this method in order to prevent paying many things like insurance for example to their workers. It sucks for the temp workers, we get much lesser pay for the same work.

    I was a batch maker for one company and made $10 dollars and hours many years ago, while the permanent employees enjoyed $21 dollars an hour with the best benefits.

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