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I have been in the Information Technology business for over 20 years, and have ridden the wave of outsourcing through its ups and downs.

The fallacy with outsourcing is an easy one to see, although many business managers ignore it.

The costs for almost any business are about the same, when doing the same business, unless it involves special equipment, or skills. The only way that another business can do something cheaper, is by paying employees less, and/or reducing the level of service.

What happens in most outsourcing is that the level of service is reduced. Sometimes this is not bad for the company, especially if it is an older company with a lot of excess overhead.

The major problem is that the customers of the company often choose the company because it provides a higher level of service than its competitors. A good example of this is a major computer company that has quietly pulled its corporate support call centers back to the USA, after losing business because their customers did not like dealing with the overseas call centers.

The best type of outsourcing approach I have seen is where the internal folks get to compete against the outsource companies. Normally the result is that the costs for the internal folks are very close to the external folks.

The reason this works, is because the internal folks get to see the bid requirements, and can respond with the deficiencies.

The sales folks from the outsourcers have a single task, make you a customer. They often glance over the costs of many everyday tasks that managers may not be aware of.

For instance, in one contract that I was involved in, the IT folks moved the computers as part of their job. The outsourcing job had computer moves as a chargeable item in their contract. Once the number of moves, and cost was calculated, the outsourcing cost was close to the internal cost.

Response is also a major issue. If an employee works for you and is under your roof, it is fairly easy to redirect their action toward an emergency. An off site person who responds within a contracted window is a lot tougher to redirect.

The bottom line of course is the bottom line, and most outsourcing ventures don't take in the true bottom line cost. If it costs your company more to provide a daily constant internal service, there is something wrong, and outsourcing is not likely to fix it in the long run.

Learn more about this author, Arthur J. Byrnes.
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