Outsourcing

The whole point in outsourcing is for companies to save money. But companies seem to ignore the basic issue of whether or not there is actually scope to save money.

The basic logic behind outsourcing is:

"Our company makes twiddlits. We are experts in making twiddlits. We are not experts in cleaning toilets, running a canteen or changing lightbulbs. The best people to change our lightbulbs would be a lightbulb-changing company, skilled in changing lightbulbs. Their expertise, efficiency and economies of scale will save us money."

So off the company goes and outsources to the ACME Lightbulb Changing Corporation.

Now if there really were significant cost reductions to be had from the expertise, efficiency and economies of scale, this argument would be good. But all too often, it's just nonsense. Tasks like building maintenance, catering, travel management, cleaning and IT support just have to be done. It takes a certain number of people and it costs a certain amount of money. So the only way for the sub-contractor to save money is to lower the quality, pay less or use inferior materials. And this, as everyone who experiences outsourcing knows, is the reality.

A typical example of the truth about outsourcing was when the UK National Health Service started outsourcing domestic jobs like cleaning. All the cleaning staff were sacked, then re-employed by the sub-contractor, but on lower pay and worse conditions. But at least they still tried their best to do a good job because of an emotional attachment to the job and a good work ethic. Then, gradually, they are replaced by other workers who don't care about the job and the hospital, and managers who work to the letter of the contract and not a drop more. Eventually, people start dying from superbugs brought on by dirty hospitals.

The bottom line is you don't get something for nothing. You can't save money where there is no money to be saved. And if you pay peanuts, you get monkeys.