South Florida Business Journal
BGT an Outsourcing Champion
Miami, Fla. July 12, 2002 - Even the New Economy, based on state-of-the-art technology and an Internet delivery, appears to abide by the old business theory that only the strongest survive.
The battle for technology workers in the 1990s that was fought with extravagant salaries, stock options and signing bonuses appears to be over, and the employers with the deepest pockets, strongest strategies and best timing appear to be the winners in the first showdown of the New Economy.
As the national unemployment rate hovers near 6 percent - a couple of percentage points higher than the typical rate in the late 1990s - a significant number of workers are still out of work or laboring for lower salaries.
This has created an employers market, the prize for those companies that persevered through the employees' market of the late 1990s.
Suddenly, companies have an opportunity to increase productivity while maintaining labor costs, a feat difficult to accomplish during the tech boom.
By hiring only what employees were needed to complete a job, he has also been given a glimpse of precisely what skill sets are in demand.
For those less conservative companies, outsourcing has been the best strategy for survival.
When Lucent Technologies spun off Avaya, the suddenly independent enterprise networking division found itself with a new strategy not aligned with the existing staff, said Ramon Arras, director of e-business in Latin America.
The company offered early retirement incentives, in addition to "rightsizing," to streamline the operation. But the company still had a job to do so Arras turned to Miami-based outsourcing firm Bum Development.
"The environment is more competitive and intense because the pie's smaller," Arras said. "Companies are forced to look at other options, forced to be effective,"
Arras pointed out that outsourcing is much easier for employers in that someone else manages sick days, vacations, training and other human resources issues. Additionally, employers reap the benefits of a staff with broader experience than can be gained working for just one company.
For all of those reasons, Burn Development and other outsourcing firms have prospered during the tech layoffs.
"It's extremely cost effective to out source project-based activities," said Mark Zilbert, director of business development for Burn. "Companies have to cut costs every way they possibly can."
By outsourcing, companies spend more up-front on the hourly fee but typically save on the "loaded" costs associated with training and benefits, he said.
Companies are working with fewer people but “the work hasn’t gone away,” Zilbert said. Department may be gone but the managers still have to fulfill goals, he said
As a result, Burn has seen a 40 percent grow in its business because companies are finding it cheaper to bring in an outside group on a project-by-project basis, Zilbert said.
But as the followers of the business theory understand, the strong of today aren't necessarily that strong tomorrow, and a round of layoffs doesn't necessarily sound the death knell of a company.
E-MAIL RESEARCH DIRECTOR Lory Reyes at lreyes@bizjournals.com
