How outsourcing is reshaping your job description
By John BresnahanThe Washington PostAs outsourcing firms like Deloitte and McKinsey are expanding their reach and the role of outsourcers in the modern economy, they are also taking on new customers: those who are seeking the lowest price possible.
The outsourcing boom is transforming how companies assess how much to charge and how much it would cost to do business with them, experts say.
And it is disrupting the way most companies do business.
As the cost of doing business with outsourcer firms is rising, some firms are seeking to shrink their customer bases, and others are turning to their own outsourcing contractors to do the work.
These companies are becoming more like the outsourcing companies that have long dominated the job market, said John Sargent, a professor of management and business at the University of Michigan who specializes in business and technology.
They are increasingly using a mix of consultants and freelancers, who often do the grunt work and often can’t speak directly to the companies they are working for.
The work is often not even done in-house, he said.
And while the consultants may be paid well and the freelancers get paid fairly, they have been unable to negotiate the best price.
They have been pushed into a corner where they must negotiate prices with customers, who are often the most likely to be willing to pay the lowest cost, he added.
The shift to outsourcing has created a new set of competitive challenges, with companies that once focused on quality being forced to shift to cheaper labor, said Mark Reiner, director of the Wharton School’s Wharton Center for Entrepreneurship.
He said outsourcing is now more about making the work seem as easy as possible, a shift that is likely to create a backlash from some customers.
The companies that are embracing outsourcing are offering much cheaper work, said Jeffery Tompkins, the founder and CEO of the outsourcing firm C3.
C3 has expanded into a range of other services, including providing software services and digital marketing for companies such as Amazon, Walmart and Target.
But he has also expanded his focus on working with outsourced contractors.
When he first started, he was hiring out of-house consultants to do some of his work.
But those work often came with hefty upfront costs and limited opportunities to interact with the clients.
He was looking for a way to save money, and outsourcing seemed like the best way to do that, he explained.
“We’re able to do more of the work ourselves,” Tompkin said.
But outsourcing isn’t a free option for all companies.
Many have found that the outsourchers and freelists they hire often cannot speak directly with customers.
And some of the consultants who work with outsources also don’t speak with customers and must work through contractors, said Richard J. Anderson, a senior vice president at C3 and a consultant at the consulting firm JB Anderson & Schmitt.
For those who have to hire consultants, it is a costly proposition, Anderson said.
For companies that need to work with outsourcing firms, there are advantages to outsourcing.
Outsourcers typically can offer the companies better wages, lower prices, and better quality, he noted.
And outsourcing is also much cheaper for customers.
Outsourcing means working from home, and it allows companies to save time and money that they otherwise might spend on human resources.
The new challenges have created a lot of new business opportunities for outsourcing companies, said David Hochman, a partner at law firm Hogan Lovells who specializes on outsourcing.
But there are also a lot more hurdles, and some of them are beyond the control of the companies, Hochmann said.
And in some cases, outsourcing can be costly.
The outsourcher is an outsourcheerer, Anderson explained, who can negotiate a deal that is better than the company could have bargained for.
If you want to pay a lot, the outsourced worker has to make a lot.
And if you can’t get the outsourcing company to pay for it, you have to go back and forth and renegotiate.
If you have an outsourced consultant, you are really at a disadvantage,” he said, because you’re not in the driver’s seat.
If your outsourcing company is getting a lot for the outsourcing, that is a good thing, Hocman said, but it’s not necessarily a good deal.
It’s about what the customer wants and what the outsource company is willing to do.
And, of course, there is the cost.
Outsourced work typically requires a lot less than in-person work, and there are more opportunities to reduce costs by outsourcing, Anderson noted.
Companies like Delositte and KPMG have a special brand for outsourcing, said Hochmans partner, David Berenson.
Delosité is known for creating jobs, but for those who want a little more, KPMB is the place to go.