Most would agree today that lifetime employment belongs to history.

But it seems that the concept of employment itself is coming under fire, at least in the microcosm I know better: the small to mid size businesses (SMBs).

Non-core functions like HR, accounting or legal services have traditionally been outsourced. However, and until very recently, a vast majority of companies would make sure their core functions be handled by full-time employees.

A rollercoaster economy combined to the ever increasing cost of hiring and retaining these employees is yielding a growing number of companies to question the validity of keeping their core competences on their payroll.

I am participating in a few experiments between “friendly” companies interested in sharing some of their core competences, as workload fluctuates.

There are pros and cons to the model, but altogether I found it particularly hard to manage. In addition it looks like a band aid that does not address the real problem; global competition, shorter life cycle for products and services, and a fast changing economy are calling for radical changes in the way companies handle their HR and therefore on how employees think of their career.

Richard Barrett, a HR specialist rightfully said recently on his blog:

The new employment model is just-in-time, do-it-yourself. Companies now acquire workers just-in-time, shifting their employment burden to independent contractors and outsource service providers. Workers, even the direct employees, are responsible for their own healthcare and retirement planning. Indirect payroll costs for direct employees will climb significantly in the next ten years, so companies will continue to reduce their direct employee base and increase their use of contractors and outsource providers. (http://mappingcompanysuccess.com/2009/03/barretts-briefing-employment-past-and-future/)

Barrett implies that companies are going to outsource more and more in the future. He is certainly right, and that is the problem. In fact, as companies keep externalizing their business processes to a variety of vendors, the line between outsourcing and chaos becomes thinner and thinner.

Companies have to turn to larger outsourcing firms that can handle an entire business process. Large corporations do it all the time, but SMBs cannot afford the required overhead.

What they need indeed are local firms to provide them with a first level of interaction that is local, both in terms of distance and culture. In turn, these local firms can tap into resources that are located either inshore or offshore, it does not really matter.

I see this as a golden opportunity for employees to leave their job before being laid off, organize in groups of small outsourcing/consulting firms, and offer their services locally, and probably starting with their former employers, which are likely to become their first clients. (A word of caution though, think the whole process through carefully before tending your resignation!)

The key to success is definitely not to become a free lancer, but to team up with the right people, both local and offshore, to offer solutions that are tailored to the exact needs of the targeted niche. These “federations of providers” could exist for a given project, or might be formed to tackle a given market.

It is certainly easier to say than to implement. Our business model is based on this concept, and after the first 2 years of operation, I can see the many advantages to all parties involved: customers, employees and shareholders.

That said, it is only the beginning of a long process and a lot remains to be done to create a valid alternative to the current dominant business and employment systems.

If anyone located in the Bay Area or SoCal is having similar thoughts, let me know. I would welcome further discussions or experiments.

Remi Vespa
Venus Software International

Posted by Remi on Tuesday, July 14th, 2009 at 10:22 AM.