My organization has been outsourcing jobs for 30+ years and we are now 20/80 employees to contractors. I still have yet to see an actual cost reduction. On paper to appears the cost savings will be material but in reality the outsourcing ends up costing more.
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Nope. All that IT stuff we outsourced to IBM? Costing us a fortune. And now we can't get new services turned up because it has to go through a Cloud review to justify it.
Ask Boeing...
Billing was outsourced to Accenture. It's more work for us att employees to fix and monitor their work. No savings..
Our org has hired full time permanent employees to perform the work that was once outsourced and guess what, T is realizing a savings of $2M per year and that’s with health benefits and other overhead costs associated with employees. Bottom line, outsourcing costs aren’t the end all cure all answer to labor costs.
Depends on who you ask.
No, of course not, Outsourcing (or contract vendor) is all the same bs... Here's how it works..
T management is "always under pressure " to reduce labor costs, in come the Outsourcing companies vendor salespeople (Accenture, IBM,WiPro etc) riding in on their white horse telling T management how awesome the savings will be over FT staff. The have all these pretty charts and projections and emphasize that T can scale up/down work force as needed without need for any long term entanglements. T management signs off. Sales folks get a fat commission check and the cycle continues.
Then the actual work starts accruing all kinds of charges , That are nested deep in the consulting contract, delays happen, finger pointing begins, all the while the meter is running... Then even when the project is completed (or terminated) , consulting company made nice profits and the savings are minimal to negligible, and often times the end result is shoddy work,most of the decision makers have moved on, after all they got theirs..
Then no one ever goes back to look at how much "savings" actually happened....wonder why..
BTW ..this big "move to public cloud" is going down the same path...
no it doesn't and stank knows it. I now for a fact stank was shown proof in the early to mid 2000's that IT was ran cheaper with in house employees than outsourcing.
He still ran outsourcing IT down everyone's throat.
He treats people sub-human and is not a good person.
Ask someone here with their daily whine and of course the answer is no.
Our AVP outsourced the organization to Accenture and then retired a couple of months later. Guess who he works for now? You got it, Accenture and is handling the AT&T contract!!
Outsourcing and using contractors are not the same thing. Contractors should be used when a skill set is needed but not present in the existing labor pool. Contractors should be short term. Outsourcing is replacing employees and shifting the labor cost from fixed to variable. It reduces costs on the front end. But often operational challenges caused by the lowest bidder eat away at the savings. Most public companies only plan for the present not the future and their executives are paid that way.
You asked:
Does outsourcing really reduce costs?
The simple answer:
No
Outsourceing from an accounting perspective is a savings. The loaded labor rate is less than 1/3 the cost of full time employee. Also the cost is a direct expense with no long term cost associated.
Agree, they make the ROI look positive because that is what the VP wanted to see but once the outsourcing vendor starts billing they quickly find out the ROI was not achieved.