This Week's Herman Trend Alert

Unintended Demographic
Consequences

 

  The Herman Trend Alert

February 15, 2000

Outsourcing Will Increase

320 days until January 1, 2001

For various reasons, employers will outsource more and more tasks customarily performed by regular employees. Corporations, not-for-profits, government agencies, and educational institutions are all climbing on this bandwagon.

Part of the impetus comes from the labor shortage. When you can't find the people to staff a particular function, it becomes prudent to simply outsource the function and put the problem in someone else's lap. If another function needs a lot of staffing during certain periods, but not during other times, letting an outside contractor worry about adjusting to the fluctuations makes sense. If high levels of expertise or specialization are needed, contracting with a firm staffed by experts assures support by people who know what they're doing.

With these rationales, and others, in mind, employers are finding more and more tasks to outsource. With support functions handled by outsiders, leaders can concentrate their energies and resources on the organization's principal work. The intensified focus on the core business facilitates greater return on investment, greater return on resources.

Security, maintenance, transportation, and in-house food services are typical outsourced functions. More employers are outsourcing payroll, benefits administration, records management, training, and even employment and exit interviewing. Management information systems (MIS), shipping and receiving (including mailroom operations), and helpdesk services are hot industries for outsourcing and insourcing (placing outside employees inside the client workplace). A number of employers outsource the entire workforce through employee leasing.

While these moves benefit the employer, there's another side to this picture. The expansion of the outsourcing/insourcing practice stimulates the growth of emerging industries of providers of the services being contracted. As new firms are formed to provide assistance ranging from concierge services to leased executives, creative approaches to doing business are developed. Some of the new firms are virtual, some are home-based, all are relatively agile and highly responsive to clients, trends, and technology.

This developing sector of our economy will grow rapidly, moving at different speeds through the maturation process. Most businesses of this type will undergo constant change, continually evolving, defying static descriptions and consolidation. This arena will be fluid for quite a while.

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