By Derek Busby

It can now be regarded as a given that firms which outsource their non-core operations tend to be more profitable than those which do not.

There are a number of reasons for this, but chief among them is the simple truth that such businesses are more likely to take an analytical approach to their processes and seek to make each component of the business as efficient as possible.

The icing on the cake is that by outsourcing activities such as IT, they gain access to a deeper pool of expertise, make users more productive by facilitating greater service levels and allow the business to focus on its fundamentals. And, of course, they cut costs.

In recessionary times like these, stringent cost management is often viewed as the over-riding imperative for any business initiative, and there is no doubt that outsourcing functions such as IT can comfortably generate savings of up to 25% in a single year.

These savings will necessarily result from what HR euphemistically calls “the option to reduce FTE (full-time employee) headcount” – in other words letting people go. This is part of business life and is indeed a business decision which managers in bigger companies have long steeled themselves to its necessity.

However, in many smaller companies, a round of redundancies is a traumatic event not only for the staff involved but also for the directors, who often are the company owners, and may have built the company over a long period and developed natural feelings of loyalty to employees.

More progressive outsourcing suppliers are conscious of such sensitivities and have sought ways of allowing companies to reduce costs in an efficient manner while still looking after the interests of their employees.

One way of doing this is by employing the TUPE – that is, Transfer of Undertakings (Protection of Employment) – regulations. These are a complex series of regulations introduced in the eighties which were originally designed to protect workers in businesses which changed hands.

Their effect is to make not only the transfer of the employees but any liabilities associated with them – such as their terms and conditions of employment – enforceable by law.

As an example, if potential savings in the IT department of a small to medium sized company – comprising roles from desktop engineers to IT director – were identified, outsourcing could be proposed to dramatically reduce costs.

For appropriate staff affected by consequent redundancy, the company to whom the work is being outsourced could offer, under TUPE protection, the opportunity to be part of a larger IT organisation and the chance of a greater degree of IT career development and progression.

This would have enormous benefits for the staff. They could, for instance, continue working in the premises of their former employer, or they could relocate to work on a wider spectrum of client sites and range of technologies.

However they proceed, they will have the opportunity to develop and move towards technical specialisms within a relevant technology area while having access to a larger group of technical resources.

Such a development is also advantageous to clients because they retain a degree of particular skills and a degree of business familiarity.

This is not altruism on the part of the outsourcing company. By taking on particular people in such circumstances, it is adding to its industry knowledge. Not only can the company acquire people who are familiar with the client but, more importantly, it can develop the employee to provide these skills and services to other clients.

This sort of transfer is particularly valuable to IT specialists who are working for non-IT businesses, perhaps in the professional services sector, such as lawyers, accountants or surveyors. The managers in these businesses may not be fully IT aware, so they can often be unsure of how best to develop their staff.

Individuals in this situation, no matter how competent, trusted or well liked they may be, actually do relatively little IT development or training and are in serious danger of becoming stagnant in what is, after all, a very fast-moving industry.

For all small to medium sized companies outsourcing is a big decision, and often requires a change in mind set. However, this action to outsource is best for all concerned as costs are reduced, continuity of service is maintained and the business can be confident that the decision to outsource is in the best interests of their ICT staff.

Derek Busby is divisional manager of PracticeCare, part of NVT Group.