Staff outsourcing has become increasingly popular in recent years, says TechCentral.ie's CHARLIE TAYLOR. But just how easy is it for companies to hand over control to outsiders?

Outsourcing is hardly a new phenomenon. Companies have long been used to handing over control of non-core functions such as catering, cleaning and security to outsiders. Yet, in a business world that's slowly come to realise that human capital is by far a company's biggest asset, organisations have been wary of allowing others to take care of staffing and human resources.

Even when staff outsourcing began to come common a few years ago, it was mainly used as a tool for downsizing and reducing costs. Few companies felt comfortable with the idea of outsourcing personnel and to some extent this still remains the case. Many organisations still refuse to outsource essential elements of their business. However, as the economic downturn takes hold, staff outsourcing has become increasing common as companies re-focus on their core business.

The days of diversification are over and organisations are increasingly adopting a return to basics strategy where they concentrate on the elements at which they reign supreme. While large-scale enterprises may have their fingers in many pies, many are content to let others manage functions for which they don't feel qualified. As Conor McWade, sales director with IT resourcing company, System Dynamics, says: 'Companies lease buildings because they're not property management companies and don't want to tie up their capital in buildings. Likewise, why tie up your management time into your IT function if it's not a core part of your business?'

Adopting new tactics

The influx of multinational companies into Ireland has bought with it an adoption of their business practices, of which outsourcing is an important component. In addition to this, the realisation that outsourcing can encourage growth and be cost-effective has begun to have an impact here.

The boom in IT had also led to a rethink about staffing. At the start of the boom many companies rushed out and hired all the technical expertise they could. But, increasingly, companies came to realise that keeping IT expertise in-house was not such a good idea. Not only does keeping IT services in-house involve the expense of continually having to pay for equipment upgrades and staff training, IT departments are also prone to high staff-turnover and escalating salary costs due to skills shortages.

Phillip Maguire, chief executive officer of IT Alliance, one of Ireland's leading contracting services company, says that a large number of organisations are reconsidering their business plans. 'Most companies nowadays are thinking that they should stick with what they're good at and outsource the rest,' he claims. 'This is especially true when it comes to IT. Organisations are deciding whether IT is a core of what they're planning to do going forward. If it's strategic to an organisation then they want to keep it in-house, but if its not then it makes more sense to outsource it.'

Maguire also suggests that not only is IT an ideal area for outsourcing but that it will become increasingly popular once local loop unbundling takes place here. 'When the last mile is made freely available, you'll have service provisioning where companies can have large data centres that will manage all systems remotely over the Internet,' he said. 'Outsourcing will be ideal for this.

Good business sense

While outsourcing has traditionally been used to lower headcounts, many companies have woken up to the fact that it can also be used to encourage growth. By outsourcing non-essential areas, key personnel can concentrate on other, more pressing, matters. NTL signed an outsourcing deal with IBM Global Services in May of this year. Under the new agreement, IBM will manage all of NTL's internal networks in Ireland and the UK between now and 2012. This includes managing e-mail, printers, billing systems and internal telephony systems. Hugh O'Brien, HR Director for NTL Ireland, claimed that the IBM deal makes good business sense. 'The agreement is more good news for NTL stakeholders as it frees us from the day-to-day IT demands so that we can focus on delivering great service and innovative communications solutions for our customers while remaining confident that our non-core IT requirements are in the hands of experts'.

O'Brien continued: 'The alliance will enable NTL to deliver state of the art technology, a menu of support services and will also see significant savings in excess of US$2bn over the terms of the alliance.'

Upwards and onwards

Staff outsourcing also comes into play when companies are already experiencing rapid growth, says Paul Carroll, business development director with the staffing services organisation, CPL. 'It's a common misconception that outsourcing is only for downsizing and cutting costs, but CPL first got into outsourcing in 1998 when we were given the opportunity to work with Citibank, a company that was experiencing rapid growth and expansion plans,' he said.

'We were asked to cover their complete staffing function because it was much more efficient to get us to look after the process. Citibank's hiring managers were already busy with their day-to-day work so they needed a partner who wouldn't abuse their time with unnecessary problems.' CPL also managed the start-up of MetroMedia Fiber Networks in Ireland. Gerry Murray, Internet data centre manager with MetroMedia, has only good things to say about the outsourcing process. 'We outsourced the whole recruitment side for the start-up and some of the facilities management side has also been outsourced', comments Murray. 'We found the whole process to be highly efficient because it saved us having to have a HR person on the ground. It also made sense because CPL had the relevant expertise necessary to ensure it was a success.'

Murray stressed however that it's important to take a hands-on approach when outsourcing. 'Service level agreements [SLAs] are important, but it shouldn't be conceived as a way of catching your outsourcer out. The terms and conditions in SLAs are a way to set expectations. You have to stay involved in the process yourself because it's a partnership. We were involved in setting up the criteria for recruiting by writing up job descriptions, interviewing candidates ourselves and making the selection process.'

Small pieces

One of the factors that have held back the growth of staff outsourcing is that many view it only in an 'all or nothing' scenario. But as Tom Clancy, Irish regional manager with ElanIT Resource, says that is not really the situation. 'Outsourcing has a connotation that if you outsource too much of your business then you'll have nothing left,' says Clancy. 'But that's not true. Companies can ship out individual departments on trial to see how it works in practice.' According to Clancy, control of the outsourcing process can be closely controlled in two different ways.

The most user-friendly version way of doing this is 'insource', where you outsource the work but the personnel stay internally in your organisation', says Clancy. 'The second way to retain control is by having very tight service level agreements whereby the outsourcing agency are subject to heavy penalties if they don't hit their targets. Both methods ensure that individual companies maintain control of the outsourcing process.'

Another bonus connected with staff outsourcing is the whole issue of accountability. By getting outsiders to manage the process and having comprehensive SLAs in place, companies can tighten up their working practices.

Another bonus connected with staff outsourcing is the whole issue of accountability. By getting outsiders to manage the process and having comprehensive SLAs in place, companies can tighten up their working practices.

Outsourcing versus contracting

Many of those working in outsourcing services are quick to make a clear separation between contracting and outsourcing. While there are areas of overlap, many consider contracting to be much more disruptive, not only to management, but also to a company's permanent employees. As Phillip Maguire stresses: 'A contractor is a point solution for the client, they're applying particular skills to a particular problem, at a particular time. There are no long-terms solutions or partnerships involved and you still have management headaches because the company is bringing in added resources. Outsourcing on the other hand, is a long-term business solution that should generate extra revenue and better management in core areas.'

Areas of conflict

However, while staff outsourcing can be good for business, it also has its problems. If it's not handled properly, it can lead to conflict, particularly in situations where outsourcing staff are working side by side with permanent employees. 'This is an area which HR has to manage correctly', says Conor McWade. 'The good news though is that because this type of working situation is becoming increasingly common in all areas of work, HR personnel are learning how to deal with any potential problems, quickly and effectively.'