Outsourcing

A sub-contract occurs when two organizations sign a contract for which the sub-contracting organization pays for services provided by the sub-contracted organization. The services provided help the sub-contracting organization to meet its own objectives. As such it is best described as a fee for service relationship. In this relationship, it is then assumed that the sub-contracted organization already possesses some of the necessary qualities and skills to carry out the task for which it has been sub-contracted.

Outsourcing is a special type of subcontract that occurs when a company, hospital or government agency turns over an entire activity to an independent firm specializing in that kind of work.

On the eve of World War I, less than a fifth of the US labour force worked for an organization, primarily as blue-collar workers in small family-owned enterprises. The vast majority of people worked for a 'master' or 'mistress' By the 1950s, employees of large organizations dominated every developed economy: as blue-collar workers and managers in industry; as civil servants in giant government agencies; as nurses in rapidly growing hospitals; as teachers in even faster growing universities. Few people doubted then that by the 1990s almost everyone in the work force would be employed by an organization, and probably a big one. They were wrong. A much larger proportion of adults now participate in the US labour force than they did 30 or 40 years ago. Most – especially the great majority of educated people – do indeed work for an organization. But increasingly they are not employees of that organization. They are contractors, part-timers, temps – doing what is collectively known as outsourced work.

In the USA, hospitals have been turning over maintenance and housekeeping for many years; increasingly they are also outsourcing their data processing and business management. Similarly, outsourcing information systems has become routine for businesses, government agencies, and universities. It is estimated that by 2010, organizations may be outsourcing all work that is 'support' rather than revenue-producing, and all activities that do not offer career opportunities into senior management. In many organizations, a majority of the people who work for it might be employees of an out-sourcing contractor. Existing outsourcing descriptions include: an information specialist who works as a 'permanent temp' for a number of regional government agencies; an engineer on the payroll of a 'temporary-help' firm who works as plant manager for large companies – usually on a three-year contract – whenever such a company builds and runs in a new plant; the physician who works as a 'temp' in setting up emergency departments in hospitals; a former college dean who works as a 'full-time temp' for a year at a time setting up and running college fund-raising programmes; and an executive of an 'outsourcing' firm who described herself as an itinerant member of top management in the 20 large hospitals for which her company keeps the books and does housekeeping and maintenance.