MRO Magazine

Story and study reveal the benefits and concerns of outsourcing

A recent survey has studied the outsourcing habits of small- and medium-sized enterprises (SMEs). Results indicate that most U.S. companies plan to increase the volume of outsourced project work in th...


September 1, 2001
By Bill Roebuck, Editor

A recent survey has studied the outsourcing habits of small- and medium-sized enterprises (SMEs). Results indicate that most U.S. companies plan to increase the volume of outsourced project work in the next year. With similar economic situations in Canada, many companies here can be expected to do the same thing. The study was conducted by eLance, Inc. of Sunnyvale, Calif., a profession- al services marketplace for web-based outsourcing.

“Outsourcing project work … is a recession-proof concept that adds value, both in times of economic growth and slow-downs — it helps overburdened staff, and allows businesses to use money and resources wisely,” said Eric Roach, head of eLance. “This survey is proof that outsourcing is becoming broadly adopted as the smart way of doing business — the norm instead of the exception.”

However, outsourcing does come with challenges, as the case history of the Longueuil water filtration facility points out on page 23 of this issue. Here, maintenance staff is kept to a minimum to reduce expenses, and contractors are called in as needed. But the maintenance department has learned a variety of techniques to make sure it gets quality, value and reliability when it outsources. It also has learned to keep strict control over contractors.

It’s a lesson worth knowing, as half of all respondents to the Outsourcing Survey indicated that they outsource project work and expect to outsource more project work (56 per cent) or to maintain current levels (38 per cent). The study found that, in particular, 19 per cent of engineering and CAD projects were being outsourced.

Like at the Longueuil facility, respondents to the survey reported that the primary reason they hire contractors and consultants is because they need specific expertise they do not have in-house.

The second reason the respondents outsource project work is because their company’s workload exceeds internal resources. It’s safe to say that many organizations prefer to outsource instead of hiring an employee.

Referrals from professional networks (80 per cent) and friends and family (40 per cent) are the leading sources used to find contractors and consultants for project work. On-line web sites were the third most-cited source (25 per cent), followed by temporary agencies (17 per cent) and advertisements (14 per cent).

The survey reported mixed results regarding employee morale as a result of outsourcing projects. Employees sometimes resent contractors for their suspected higher rates of pay, their independence or for the possible impact on a permanent employees’ job.

However, the majority of respondents indicated that employees welcomed outsourcing projects. Contractors were seen as providing ideas, services and solutions that would not otherwise be available to a company. In fact, responses suggest that if employees are well-informed about the decision to outsource projects, they welcome outsourcers.

Three distinct types of unexpected rewards and benefits from outsourcing were reported: cost savings/ efficiency, added resources/new ideas, and increase in business.

Among those who mentioned cost savings and efficiency, benefits seen were the timely completion of projects, a lower cost — without payments for taxes, payroll, equipment and supplies, and the fact that a consultant’s expertise frees in-house talent from investing time in a learning curve for certain projects.

Other respondents focused on the additional resources and new ideas that outsourcers provide, because they bring experience from outside the company and help generate new ideas.

The study make it clear that outsourcing has many benefits, but to be successful, it requires careful management and a strict attention to detail.