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franciscrusad (IS/IT--Management) (OP)
1 May 08 4:41
Good morning to everyone.

Wanted to pick up some ideas here and see what suggestions may come from this intricate situation. I am currently running a team of IT support, we are about 7 members support a company with 5 branch offices and 200 users nationwide. My finance directo has suggest that we create a new company ( IT support ABC.com) and outsource our support service to the existing group and maybe to a few others in the futre. I have been working here for 6 years setting up ( IT wise) all the branch offices , what would be the negative implications should I agree to move from the existing working contract and position to the new service company? My boss wants to go ahead in the next 8 weeks so any advise would be really appreciated as I am totaly confused on what to say.
Thank you all.
 
edfair (TechnicalUser)
1 May 08 6:29
Terminating an outsourced contract is easier for a company than laying off people that work for you. That would be my first concern, that you are being set up for failure, intentionally or otherwise.

Your boss may see this as an opportunity to gain more influence, salary, or prestiege but any of that will be offset by the risk to the workers.

You'll be part of a smaller organization with less assets to invest in changes and subject to competitive pressure from other 3rd party suppliers clawing for business.

 

Ed Fair
Give the wrong symptoms, get the wrong solutions.

DonQuichote (Programmer)
1 May 08 6:31
There is no simple answer, bit I would not like this news at all.

Effectively, you are starting a new job with a different firm. This new firm may be better or worse than your current one. One thing I entirely miss from your story is the reason why a different company has to be set up.

There are be lots of reasons possible:
  • The IT support department costs too much, so it will have to make some money by being on its own
  • The IT department "has a product" that could be sold to others
  • Other departments act as if IT support is free and the costs must be made visible
  • It is a nice way to get rid of current employees and impose new conditions on the ones they want to keep
So, without knowing the reason, it is a bit hard to tell.

But if the reason is that support has to make its own money, I would be very wary. I once worked in a company that wanted to lower wages and "compensate" it with bonuses. That is really one of the worst things to do in a company:
  • Salesmen get their bonus by selling the impossible
  • Support people get their bonus by ensuring support is needed, so by screwing up.
Apart from that, being a separate company is not the same as being a department. If you would run a support company, would you still want your current company as the only client? Off course not. Being dependent on one client is bad for continuity. You would probably look for other clients, and your current company could look for cheaper suppliers (or at least threaten to do so). You get a different relationship with your current company. Again, this may be good: you get paid more for excessive clients and can formulate your own conditions. But it also may be bad.

+++ Despite being wrong in every important aspect, that is a very good analogy +++
   Hex (in Darwin's Watch)

franciscrusad (IS/IT--Management) (OP)
1 May 08 6:51
Hi , thanks so far for your answers. the new company is being created to support various smaller firms and as correctly highlithed IT support is free to all branches but this will change as every branch will need to contribute with an effective cost for support. As we have done such a great job ( VOIP, remote home workers, site mobility, access data from anywhere, blablabla) they think this model of technology can be exported to other clients of this firm that are eager and always impressed how we do business using current modern technologies. I am justs worried that I don't see too far ahead, don't catch the catch behind it. In all honesty there are no complaints so far and we work hard to make sure business continuitivity but you never know what is around the corner these days, also I dont know how to tell my team members that they will have to sign a new contract where certain conditions are different?

Also I will only have one boss to deal with instead of 5 ( one for each branch currently) so it could be a bit easier in the long term?

maybe if I renegotiate the salary for each team member and general working conditions that will help my team to make up their mind and stay with the new company.

This is something that I did not heard of before so it is all new, usually we concentrate on TCP/IP or DNS problems but not this type of migration.

Cheers everyone.

F
SQLSister (Programmer)
1 May 08 9:45
To provide benefits to employees you wll need to be paid a minimum of twice the salary of every employee. A smaller company may not be able to even get decent health insurance, so empoyees costs may go up at the same time that the quality of the health insurance is drastically reduced.

Now if they are making this new company as a wholly owned subsidiary of the orginal corporation, it may not be so bad.  In this case, you will probably reatin benefits.  

This could be done so that they can offer services outside the normal scope of their business including possibly to current competitors and is basically a legal fiction. In this case, they may be interested in seriously growing your shop to handle more business, but you as a group will have to learn to concentrate on becoming a profit center rather than a support center. This will include never doing any work without a contract in hand for the work. The managers will need to learn to do good time and cost estimates or you will lose money on the outside customers. The work you do for the current company and the rates charged will have to be defined. Will they be smaller than the rates charged to outside customers? If so, what happens when you get backlogged? You will need to develop a solid relationship with an IT consulting company or Temp agency to provide short term contract workers to handle those sort of situations. Once people are paying for a service they don't expect to wait for it.

"NOTHING is more important in a database than integrity." ESquared
 

Bandenjamin (Programmer)
1 May 08 10:33
I think its something worth listening too. If they are basically just wanting to increase what you and your team do by outsourcing your department, but you remain employees with benefits and all that, then it sounds pretty good. Just make sure to re-negotiate your salary as you will be taking on new work.

I agree with what SQL Sister said as well. No work without a contract! You would be surprised how much stuff people will try to sneak in on ya

--Dan
Whenever you find yourself on the side of the majority, it is time to pause and reflect.
Mark Twain

JCreamerII (MIS)
1 May 08 11:29
One thing you will find is that once to other units have to account for the cost of your services they will be more judicious in their requests for you services.   If it comes off their bottom lines they wouldn't be able to pick up the phone and get a resource without paying for it.  It brings a whole new slant to the relationship.   The quantity of service requests might go down.

Jim C.
spamly (MIS)
1 May 08 11:53
SQLSister has some good points.

Outsourcing is a model that is becoming more and more popular as companies look to focus on their "core" business. For instance, a health care company may entertain the outsourcing model as a way to focus on the health care industry instead of IT infrastructure. It also allows them to quantify services a little more strictly as all outsourcing services would need to be defined, negotiated, and purchased.

That said, as outsourcing company must provide a service and make a profit. Internal IT services try to minimize cost and maximize services. Outsourcing would try to minimize cost, provide negotiated services, and make a profit.

Can outsourcing be beneficial for both parties?  Sometimes. Many smaller companies cannot justify complex enterprise class infrastructures. They may not have the economy of scale to be able to justify the initial purchase or maintenance of an enterprise class storage array, backup/redundancy solution, and/or complex datacomm infrastructure. Larger outsourcing companies often already have this economy of scale and can "sell" a smaller company a piece of a already built infrastructure.

I'm really interested in how this works out for you. I've had experience on both sides of the fence with this one.
AndrewTait (MIS)
12 May 08 5:10
Be very careful.  I have been in a similar situation.

I used to work for a large Company, with many offices all over the UK and the world.  Each division of the company employed it's own IT staff, and whilst on an informal basis, we each helped other group companies out when we could, there was no interaction between the different divisions.

This lead to the situation whereby one office with 2 divisions in it had 2 IT departments, one for each division, whilst other offices had no onsite IT staff.

It was then decided that all the IT staff should work for one division, and a new IT Services division was set up.

We all got transferred to this division, and for me at least, lead to me travelling the length and breadth of the country, as I was considered a specialist in my particular field.

Any of the divisions could call on our services, which I agree was a better use of resources.  However, the divisions who had their own IT staff, usually the larger and more vocal divisions, then started complaining that they didn't have the level of cover they used to.

These complaint then lead to the IT Support division being sold off to a large well known outsourcing company, and the staff then got so demoralised that they left, and in return the Original company lost a lot of expertise, and continuity of support.  

=======================================
I got to the edge of sanity....then i fell off
======================================

Hap007 (MIS)
13 May 08 13:12
Dear franciscrusad,

Sounds like your boss is already on board, so I would guess it to be in your best interest to also go along.

1) Make sure that benefits are covered.
2) Make sure that the 'Parent' company is going to fund your operation, at least for the first year.
3) Ask that each of the employees, including yourself, be given something, like say a small pct of ownership.
4)Find out who is going to pay for your support, such as office space, utilities, accounting support. Make sure that this is included in your funding.
5) What about computers, software, office furniture. Will you have these? Will your parent company give/supply? Will they charge you for these items?

Personaly, I think it is a great opportunity for you as long as you can profit from the 'Profits'

Good Luck,
Hap...
 

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shoalcreek (MIS)
23 May 08 18:09

Get out of there fast.
 

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