The explosion of outsourcing companies – Part 2

goldfish jumping out of the water

On the first part of this article, I introduced why is easy to create an outsourcing company. In this second part, I will approach how the crisis was a good thing to the creation of new outsourcing companies and an opportunity for others to grow.

The crisis brought some cleaning to the market. I remember a technique to make a company grow, where every year 10% of the employees are invited to quit and new ones are hired to occupy the places left empty. The idea, a little cold, is to remove people considered weak links, and bring new blood, fresh ideas and motivated people to the company. The idea is as good as any other, a bit cold for the human view but companies are not created for charity (well some of them are, but I hope with a different human management strategy).

This behavior happened to the companies, instead of employees. Small outsourcing companies, the bottom of the market, didn’t resist and they were bought by bigger ones or just closed the doors. Others were created, because it was easy (see the first part of this article), and occupied the place of the “fired” ones. The number of created companies was bigger than the number of the closed ones.

The main reason for the failure of some outsourcing companies was because the majority of its consultants were in a few big customers, that due to the crisis they had to dispense them to cut the costs. Now these outsourcing companies had dozens or hundreds of consultants returning to the main office without any customer to go. Some of them were invited to find another outsourcing company, others just saw an opportunity to open an outsourcing company, and a few stayed.

Other companies saw the crisis as an impulse to try new markets, outside their comfort zone, in other countries. They have created partnerships with international outsourcing companies or opened new international offices, and the crisis was just replaced with new needs for consultants. The consultants, they had to adapt, and even going against some of his family values, they started to accept international positions. They started to visit their family weekly, monthly, or they just moved to other countries with or without the family.

Some consultants and managers with no will to go to other countries saw here as interesting opportunity to open outsourcing companies. The big companies put their focus on outside markets and left the low-cost opportunities for other small companies. Sometimes, they just invite these companies to belong to their enterprise group, or they just buy these companies. This, I observe frequently.

Other mid-size companies, they didn’t try outside markets, consequently they only find small positions for the consultants, because the now international companies have a more strong brand in the outsourcing market.
Now the number of international outsourcing companies has grown, ironically because of the crisis, and the other ones, are fighting to survive in the local market, still in crisis. The weakest ones, they have a big challenge here, the low positions available on customers, make them loosing their best assets, to the big companies. They try to fight this, creating the concept of “cultural niches”, which I said before is not the solution, but it’s a way to go.

And a new explosion of small outsourcing companies is still happening, created by the free consultants, managers without a place after his consultants were fired, and others just taking the space left by the big companies that went international. Why? It is easy to create an outsourcing company.

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