Research Findings

What to expect when you and your job get outsourced


February 1, 2019

When I ask people what they think of when they hear the word “outsourcing,” most commonly I get the “ideal type” answer. It is an image long associated with outsourcing: information technology (IT) jobs that get shipped overseas to countries like India.  

Yet offshoring – the more appropriate term for this example – did not define the type of outsourcing affecting my friends and family or people I have come to know through my research.  Their examples were best characterized as “in-house outsourcing,” a form of outsourcing where outsourced employees remain onsite in their current environment, but work instead for a different company, as an onsite “vendor.”

In my new book, I sought to learn more about how in-house outsourcing was affecting professionals in IT and other fields. While IT has been most often targeted, in 2005, “cost centers” like human resources (HR), accounting, and other job fields were also increasingly outsourced.

Since 2005, I have interviewed IT and HR professionals with first-hand experience of the in-house outsourcing of their jobs and work. I have also spoken with industry insiders who facilitated in-house outsourcing deals or managed them for their employers. My interviews yield information on 20 outsourcing cases starting between 1996 and 2012.  During that time, I monitored news and scholarly sources for reporting on the topic, and I attended several outsourcing roadshows where in-house outsourcing was heavily marketed.

Usually, the business community at these roadshows stressed that outsourcing was an opportunity for professionals. They used economic logic to substantiate their claims.  Professionals whose work was originally a cost burden to the original company, with in-house outsourcing, would become the company’s core profit earners. As profit earners, professionals would have more opportunities in a breadth of jobs, substantially greater job ladders, and the possibilities to cross job silos and gain marketable experience in other areas of their work. 

But actual outcomes in the in-house outsourcing cases from my sample usually did not support these claims.  Rather, the underlying economic logic for most cases stressed reducing and fixing labor costs in outsourced work.  This was the common reason companies decided to outsource portions of their business operations – it would save them money. 

Difficult relationships with former colleagues

In contrast to the rosy rhetoric of its advocates, in-house outsourcing leads to mostly negative interactional, work, and job outcomes for professionals. Professionals who were forced into or chose to move to jobs with outsourcing companies usually began resisting their working conditions – mostly by quitting jobs. 

I quickly learned that in-house outsourcing – or market organization – changed social interactions and the established relationships between former colleagues. Those who used to work together now worked for two different companies, creating more tension and stress. Paul was especially articulate describing the different relationship.  He was 18 months into the first in-house outsourcing deal I had heard of, a case between Concerto Inc. (the customer) and Circuit (the outsourcing vendor). 

We won’t deliver the work in the same way we used to.  You can’t.  There’s now a whole new process to get things approved, for identifying new revenue.  … So I’m sitting down the hall from Bob who used to call me and say, “Hey Paul could you just?”  Because the tendency is to say, “Yeah sure!”  I used to do that for Bob, I’ll just go do it.  Well the reality is, I have to say, “Well Bob no, that’s not in the contract.  That’s not work Circuit delivers.  We’d love to do it and here’s the process to make that request so then we can bid for that work.”  You’re taking an already political process and politicizing it more.

New dimensions of political labor arise because of the more adversarial social structure in markets. Relationships between colleagues, even those with offices right down the hall from each other, become complicated.

Work speed-up from lean and flexible Organization

As part of a deal, the vendor promises to reduce the costs of delivering the work being outsourced.  For example, in the second deal I learned of, Merchant Inc. was promised a reduction in costs of 40 million dollars annually for the IT work they outsourced in their contract with Master Technologies. Per Maria, outsourcing companies reduce the costs of producing the work primarily through lean organization and flexible job silos.

In one year, we lost three people.  With the first person that we lost I said, “Well obviously we’re going to replace that person” because we had tons of work.  And they were, “Well we’re not going to replace that person” and I was like, “What?!”  They’re focused on the work that needs to be done, but not caring about the resources that have to do it. 

Across cases, when people quit, were let-go through planned layoffs, or moved to another outsourcing account, the amount and speed of work increased for the remaining employees, but no extra hands were added to help.

Hyper-commodification and greater job insecurity

Often professionals I spoke with grew sullen discussing the heavy commodification of their work, the regular layoffs, and greater insecurity with jobs in outsourcing.  The market logic – “everything revolved around numbers” – drives all workplace conversations and decision-making at outsourcing companies.  So much so that  even established employees, like Tanya with 10 years tenure and an excellent record at Tech Leader, still did not feel secure from the ever present possibility of another large layoff.

I think that RA (layoffs) thing hanging over your head is tough. It’s very disconcerting.  A lot of the decisions at Tech Leader are geared so that the executive management team can make the most money off of it, because they’ve got all these stock options. It bothers me the most, the layoffs, the disregard.

In conclusion, the outcomes for working conditions, the security in jobs, and the well-being of professional workers are drastically different than marketed by outsourcing companies and their advocates. 

The few subjects succeeding in outsourcing in my research did so predominantly in jobs as account and project managers, roles that function to standardize, automate, and cheapen the cost of delivering the work for outsourcing companies.  As former executive Jay affirmed, outsourcing is fundamentally about “the trading in of human beings on behalf of cost reduction.” The prognosis for jobs and careers in professional fields that become heavily outsourced will not likely be a good one.

Read more

Jacqueline M. Zalewski, Working Lives and In-House Outsourcing: Chewed Up By Two Masters Routledge, 2018.

Image: Lauren Coolman via Flickr (CC BY 2.0)

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