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Outsourcing Overhead

Outsourcing Overhead

Outsourcing Overhead

My company is in the process of outsourcing (or eliminating) many of our overhead positions.  For instance:

-HR was outsourced last year.  Our local HR representatives were all fired and we now get HR guidance from someone in another state, whom we've never met.

-Local IT support is downsizing.  The remaining local support is pretty sure they're going to get canned in the not too far future.  We now need to submit an online request that our computer, software, or printers don't work and hope someone gets back to us sometime.

It's sad to see long time 35 plus year employees sacked in the name of "efficiency".

What has been your experience with the downsizing of overhead positions?  What is the eventual outcome?  Do companies that engage in those practices eventually start firing client billable employees?   

RE: Outsourcing Overhead

Accountants making the decisions in an engineering firm...never works well...long term result is demise of the firm....I've seen it more than once.

RE: Outsourcing Overhead

I've been outsourcing for years - that's what the sewer bill is for.  

Apparently the idea is catching... unfortunately, as you point out.

Mike McCann
MMC Engineering
Motto:  KISS
Motivation:  Don't ask

RE: Outsourcing Overhead

The outcome is always the same.
The company is doomed.

Mike Halloran
Pembroke Pines, FL, USA

RE: Outsourcing Overhead

I see the outsourcing continuing to the point of outsourcing the client billable employees and replacing them with "cheap" client billable people (read foreign engineers) and/or where the quality disappears and all services during construction are conducted in a foreign language.

RE: Outsourcing Overhead

Well consider yourself lucky. You could always start your own firm and run it the way you want, Structural and Civil engineers still have a decent chance at doing that.  Compare that to say engineers at Boeing or Lockheed when they do rounds of layoffs, its a bit tougher to just start your own aerospace company, Burt Rutan notwithstanding.

Step back for a minute and think also about what you are seeing.  HR gets sent outside to an HR firm.  IT gets sent to an IT firm.  I'm sure your janitorial staff isn't on the payroll either but rather a 'service'.  That is just the next logical step in the transition from vertical to horizontal structure in many modern companies.  Managers want to focus their people on whatever their specialty is with a minimum of other overhead.  How many structural engineering  and architecture firms do you know that employ their own fitters, welders, plumbers, electricians , etc.  Specialists work in increasingly narrow-focus companies that are parts of an ever increasing web of dependence.  Your HR people have to either find a local HR place to work, start their own HR firm or move to work for one elsewhere.

This strategy is certainly not a one size fits all solution though for the reasons the OP mentions.  What happens when a critical project is on the line, your computer network takes a dive, your IT is 1000 miles away and the local IT contractors are busy with "bigger" accounts?  Or when the spouse of one of the billable employees develops cancer and suddenly finds out the HR department in the next state screwed up the coverage paperwork?  

Outsourcing takes the control away right along with the pesky overhead of having local staff.  Some companies get this to work well, others implode and a few survive long enough to realize their mistake and start bring more areas back 'in-house'.



RE: Outsourcing Overhead

To Gregtirevolds point, not all outsourcing is going to foreign countries. In fact most stays within the same country, especially the ones that OP mentioned.

In most cases, the "job" is not disappearing, but someone else does it. If you have the skills and experience you can still work for the those outsourcing service providers. Just the employer changes.

If some companies make bad decisions, they will disappear. Companies disappeared even before onset of "outsourcing",  for many other reasons. The "work" will go to some other company, most likely in the same country and not a foreign.

I believe some of the fear and conception is misplaced. Plus in the end economics, demand and supply will take care of itself. We need to learn to adapt. Survival of the fittest still works.

Also global economy works both ways, you get a chance to do access foreign markets, and others will have access to your markets too. Just sell what they need, buy what you need.

Rafiq Bulsara

RE: Outsourcing Overhead

I actually fail to see how any company could survive without outsourcing.

We are only a small company but we outsource all of the following.

The manufacture and sale of all computer based goods, laptops, PC's, servers, plotters, printers, scanners, monitors, etc.

The manufacture and sale of all office supplies, paper, pens, ink, envelopes, Office furniture, tea, milk and sugar (probably the most important) etc.

The supply and maintenance of all utilities, gas, electricity, water, sewage removal, etc.

The supply and maintenance of all company vehicles, including consumables like petrol and oil.

Various professional services, like accounts, lawyers, patent attorneys, architects etc.

All insurance, professional indemnity, public liability, motor vehicle, office contents, etc.

All communications, the supply and manufacture of phones, mobiles, ISP, phone line rental, etc.

The list would just go on and on, I have no idea how much it would cost to buy out all the companies and supply chains they use or to set up in direct competition with them but I think it would stretch the budget a little.

I would argue the other way that it is impossible to run a company without outsourcing, however big or small it is.

RE: Outsourcing Overhead

We have several multinational clients who have outsourced their accounts payable departments to subcontract accounting service firms.  The management of the large client firms love this, as it not only takes folks off the company payroll, it also delays the payment of all subcontractors and suppliers, keeping the company's money in the bank for a longer period of time.  Invoices go missing more often and take longer to process.  Few of the vendors have the stones to cease to do business with them due to late payment.

RE: Outsourcing Overhead

This argument will go the way of the licensed vs. unlicensed engineers...we'll discuss it ad nauseum with no agreement or resolution....a conundrum for engineers if there ever was one!

As ajack points out, no company is fully self-sufficient or self-reliant.  The problem in our profession is when the fundamental premise of OUR work is outsourced in a firm that should maintain such in house.  That's commoditizing our services, decreasing the stature of the profession (after all, if our company doesn't consider the service worth doing in house, then our clients will equally devalue the service), reducing the value of the service, compromising supervision and control of the process (keeping in mind that many of our services not only depend upon the end product, but the process of getting there...both the journey and the destination are important), and generally driving our business from the professional ranks to the level of technicians cleaning drains, changing the oil in our cars, or doing the lawnwork.

Greg....what is overpriced?  Is it OK to charge $100/hr (US) for an automotive technician to repair your car(...and the time charged is taken from a flat rate manual for the task...not recognizing the potential efficiency or inefficiency of the individual technician or considering his experience level), but not OK to charge $100 to $125/hr for an engineer who has spent the last 8 to 10 years becoming licensed to protect the health, safety and welfare of the public?  These inequities are rampant.

Where do you draw the line between "outsourcing" and subcontracting?  Is there a line to be drawn?  Who knows?


RE: Outsourcing Overhead

I just think that they need to make sure that they have understood the hidden costs of these actions.

There is definately a lot of benefit to having a discussion face to face with HR or IT.

RE: Outsourcing Overhead

I don't have a problem with outsourcing Human Resources. HR is really a generic skill, and my experience of in-house HR people is that they aren't really all that helpful anyway. It seems like HR really means health insurance manager.

Outsourcing IT to a local computer shop can make sense. The only thing that is really unique about IT in an engineering office is the analysis and CAD. Management can't be too stingy with allowing access to the tech's. If you have an urgent issue, you need someone close and responsive.

Outsourcing engineering at an engineering firm is just wrong!

RE: Outsourcing Overhead

Quote (Gumpmaster):

-Local IT support is downsizing.  The remaining local support is pretty sure they're going to get canned in the not too far future.  We now need to submit an online request that our computer, software, or printers don't work and hope someone gets back to us sometime.

   Is this safe?  Do you trust your soon to be ex-BOHFs?


RE: Outsourcing Overhead

I actually do trust our IT folks, personally.  

It would be a question though for upper management on trusting employees in general.  When you create an uncertain future for people, it may inspire some of them to jump ship.  I would hope that no one would try and poke holes in the ship before they jump, but I guess we do live in a flawed world.  

None of the people that have been sacked have been given much prior notice, but if you look at the trend, it would be scary to be an overhead employee.

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