Many Outsourcing Companies Just Send the Work Across the Street

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The Orange County Register Author(s): Jan Norman

SANTA ANA, Calif. -- After seven years in business, Message Broadcast in Newport Beach, Calif., grew to need more legal assistance than its outside law firm had time for. But the marketing firm still didn't have so much legal work that it needed to hire a full-time general counsel.

Instead, the company decided to outsource the work -- not to China, but to Orange County, Calif.

Enter The General Counsel LLC, an Orange County firm that goes to clients' sites to fill the gap between companies that need only occasional legal advice and those that must hire a staff attorney.

Message Broadcast gets experienced, cost-effective legal help, and The General Counsel LLC gets to include Message Broadcast in a broad base of customers that provide it with consistent work.

Outsourcing is often equated with sending work to other countries. But studies about outsourcing -- such as a report from consulting firm PriceWaterhouseCoopers that 73 percent of U.S. executives outsource at least some business processes -- typically don't distinguish between work sent halfway around the world and what's sent across the street.

While the motivation to send work to foreign countries usually is saving money, domestic outsourcing often enables small or growing companies to tap greater expertise than they could afford to hire as employees. It also gives them greater flexibility when their workload spikes temporarily.

Marketing and human resources are among the functions that businesses most frequently handle through domestic outsourcing.

The General Counsel LLC owners Stuart Blake and Michael Oswald had been general counsels for such companies as Kinko's and Lantronix. Rather than dispense legal advice at $400 an hour, they decided in May to tap the niche of being part-time counselors at clients' offices, handling everything from licensing to contracts.

"Our clients are busy enough to need an experienced lawyer on their management team, but not big enough to warrant paying a full- time legal department," Blake explained, estimating that a full- time employee would earn $150,000 to $200,000 a year to do this work, plus benefits. The General Counsel LLC charges $1,500 a day.

At Message Broadcast, president Bill Potter agrees. He thought he would bring Oswald in three days a week to catch up on contract, insurance and transaction work and then cut back to two days a week. He hasn't cut back yet, but likes the idea that he can.

"I get the greatest amount of expertise at the least amount of money and no (long-term) commitment," he said.

In contrast to companies that outsource abroad, flexibility rather than cheap labor is the greater motivation for companies' outsourcing to local third-party providers.

Filenet, a Costa Mesa, Calif., software company, has 100 marketing employees worldwide, but hires The PowerMark Group Inc., a San Juan Capistrano, Calif., technology marketing firm, for special projects such as planning its recent user conference in Las Vegas.

"I expect outsourcing to smooth out the peaks and valleys, so I don't hire people for the whole year to do three months' work," said chief marketing officer Martin Christian.

Domestic firms that handle outsourced tasks tend to have experienced people in specialized areas, said Denise Chavez, chief executive of Conduit International, a Long Beach, Calif., marketing company that outsources work to Erin Baldwin at Baldwin Business Consulting in Costa Mesa instead of hiring its own chief financial officer.

"Erin is very talented, with a breadth of experience," Chavez said. "I didn't have time to train an employee to do the work."

Often, the recipients of outsourced assignments started their businesses to capture that type of work.

Baldwin started her business in 2003 after she couldn't get a raise at the law firm where she was office manager. She concentrated on the type of work she liked best, including preparing business and marketing plans, handling office relocations and planning corporate events.

"I had peaked on salary, but I knew I hadn't used all my skills," she said. "Every year my business has doubled. Now I'm making double what I made as a law firm administrator."

Income wasn't as important as stability for Colleen Edwards of The PowerMark Group. She had been laid off twice, most recently as marketing vice president of Foundstone, a software company bought by McAfee.

"Both layoffs were highly lucrative for me," said Edwards, who even positioned herself for the second one. "I chose Foundstone because I was looking for a company that would be acquired at some point. (The severance pay) enabled me to start this business."

Like Edwards, attorney Blake at The General Counsel voluntarily switched careers. He did so after disagreeing with a former employer's way of doing business.

But being in business for oneself can lead in unexpected directions.

Edwards had envisioned that she would serve as an outsourced marketing department, but instead has found more work handling projects for companies like Filenet and McAfee. That's not her preference, she said.

Sometimes clients change an outsource provider in ways that surprise its owner.

Cindy Pickens created Cynergy in Huntington Beach, Calif., with the intention of providing online training seminars for small- business owners and individual corporate executives.

"I didn't anticipate that large companies would buy groups of seatings at these online seminars, like sexual harassment training, because they don't do training in-house," Pickens said. "It's going to impact the seminars we offer. We're redirecting some marketing to reach major companies with hundreds of people to train." That change in focus will make Cynergy an even bigger resource for corporations' outsourced training work, she said.

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When to outsource:

A company cannot outsource every task. Here are some guidelines a company can use for deciding which work can be contracted to an outside firm.

The work is not your company's core competency; you don't want to spend energy on a task that is not basic to your company's existence.

You have a deadline and cannot do the work in-house on time.

Your company doesn't have enough money or resources to do the work in-house.

The extra work is temporary.

You want to save money or free up in-house resources.

You cannot find the right employee to hire to do certain work.

You don't have time or resources to train employees to do the work.

You want to establish long-term, strategic relationships with world-class service providers to gain competitive advantage.

Outsourcing the work spreads your risk.

You want to tap special expertise in a specific area.

Outsourcing can reduce spending on technology that will quickly be out of date.

An outside provider can do the work better than you can, and for less money.

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