Outsourcing -- Part One
Outsourcing -- Part Three
Outsourcing Information Technology Systems and Services
Are We Indispensable?
The Best Gift Arrived in a BIG PACKAGE
While it may not have invented outsourcing and it addresses only one aspect of this vast economic phenomena, Manpower Inc. may be the paradigm for this transformation in the American workplace. Founded in 1948 as a tiny back room venture by two lawyers in Milwaukee, Manpower today is a mammoth business employing more than a million people worldwide, with annual revenues approximating $5.0 billion and earnings well in excess of $100 million. Temporary help or "temps" is no longer providing emergency fill-in people, but has become part of a workplace strategy on an ongoing basis to gain flexibility in labor costs.
Manpower's marketing strategy has also been refocused. In 1990, the company derived only 5 to 10 percent of its revenues from Fortune 500 corporations. Today, Manpower is writing major contracts to meet the non-permanent staffing needs of these corporations. These contracts each generating annual revenues of at least $25 million and often much more now represent more than 25 percent of the company's total business. Among the companies being served are the IBM Corporation, Mellon Bank Corporation, Northern Telecom Ltd. and Hewlett Packard Company. And in addition to Kelly Services Inc. and other larger players, this industry is also being well served by many smaller businesses. Indeed, temps have become big business!
ServiceMaster L.P. is another ubiquitous illustration of outsourcing that was well-established before the buzzword was coined. Founded in 1947 as a tiny rug-cleaning business, ServiceMaster has grown dramatically by taking on the menial chores its customers have found to be inhouse nuisances. The core of its early business was to provide housekeeping and custodial services for hospitals on a contract basis -- tasks that most hospital administrators considered to be distracting and frequently a source of aggravation. ServiceMaster introduced professional management to these previously servile jobs, and relieved the hospital administrator of worries over (1) the satisfactory performance of this low level work and (2) quality assurance
. Its success with the delivery of contract custodial services to hospitals led to providing plant operations and management, foodservice management, and materials management for hospitals. All of these management services are now also offered to schools, colleges and universities as well as to industrial corporations. Today, ServiceMaster employs approximately 35,000 people and manages an additional 200,000 people employed by others. The company's annual revenues exceed $3.0 billion and its operating profits exceed $200 million. Indeed, housekeeping has become big business!
These are only two examples of the transparent simplicity of most outsourcing opportunities. And the entry strategy is singularly uncomplicated:
- Identify those tasks that are not a critical part of the host company's core business and the daily concerns for which the company may well be pleased to be relieved, and
- Determine which of these tasks we may be qualified to undertake profitably at a competitive price with the assurance of fulfilling total quality and performance standards.
In today's intensely competitive environment, many large as well as middle market corporations are eagerly seeking ways to outsource non-critical functions. And this strategic shift is opening opportunities for the owner/manager of the smaller business that are often startling. Mid-sized banks have outsourced their marketing departments. The corporate outsourcing of the accounting and audit functions is no longer exceptional. Of course, outsourcing of many manufacturing needs has been common since the beginning of the Industrial Revolution, but is increasingly prevalent today; the average manufacturer in the United States spends more than 50 cents out of every revenue dollar on outside suppliers.
Our imagination is the only constraint upon finding outsourcing opportunities. The IBM Corporation and Public Service Company of Colorado have a unique alliance offering energy-management services to other utilities and major energy consumers. Further, IBM now manages the utility's computer and communications systems under an outsourcing agreement; reciprocally, the utility is assisting IBM's management of energy utilization throughout its facilities.
If we open our eyes, we are surrounded by outsourcing opportunities. The imaginative owner/manager of the smaller business can discover attractive outsourcing opportunities in 1996 that simply did not exist five years ago!
Your comments and suggestions for these pages are most welcomed!
Revised: November 12, 2004 TAF
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