In the framework of an increasingly competitive and challenging business environment derived from globalization, organizations seek survival by choosing to implement various mechanisms that allow them to accentuate their presence in the market, obtain lower costs and generate significant competitive advantages.
Since, as the company enters global competition, it becomes more intense and therefore, the more difficult success.
In this way, the cost and quality objectives appear linked to the flexibility of changes in designs and quantities produced, for example; as well as the general consideration of customer service, that is, speed in changes and deliveries, after-sales service, among others. Thus, in the face of this panorama, companies need to concentrate their resources on their main activity or core business, and under this approach, outsourcing is integrated as a proposal for the optimization of resources.
In this regard, outsourcing is the business process in which one organization transfers to another the resources and responsibilities related to the fulfillment of certain specialized tasks or services, however, the practice of outsourcing has been one of the most controversial issues in economic matters., labor and social security in Mexico, since its erroneous application has made it possible for this type of work to imply the breach of employer obligations and reduce labor rights. However, when the figure of outsourcing complies with the legislation, respecting the rights of workers, it can incorporate excellent benefits to the organizations that choose to apply it.
Meanwhile, in Mexico there are more and more organizations that are committed to assigning to a third party the basic operation of personnel and payroll administration, telecommunications services, development and execution of projects, general and specialized maintenance, surveillance, among other elementary services and processes. for the company. However, the information available regarding the development of outsourcing in Mexico is ambiguous, since it is implemented from a traditional approach oriented to the performance of basic tasks; considering it mostly as a form of "savings", rather than as an organizational development strategy.
Definitions to consider
The term outsourcing is not a concept that emerges from the field of law, rather it has its origin in other disciplines such as administration and economics. However, it should be considered that the term outsurcing is an Anglicism, which is not included in any Mexican legislation. In any case, its translation into Spanish refers to subcontracting, outsourcing or outsourcing. (Silva, 2010)
In origin, outsourcing is closely related to the outsourcing of services, since it involves the search for a source external to the company that can efficiently provide certain services, so that it can have more time and resources to focus on the key aspects of your business. (Meanings, nd)
Likewise, (Guzmán, 2008) states that outsourcing consists of the external contracting of attached resources, while the organization dedicates itself exclusively to the reason or basic activity of its business. Therefore, it is not only a contract of persons or assets, but a mechanism to obtain better results.
In this mode, the contracting company delegates to an external provider, who has experience and seriousness in the area; the management, operation and risks of one of several of its processes or services, in order to streamline said activity, optimize quality and / or reduce the costs of the outsourced process. In a sense, the external service provider becomes part of the company, but without formally joining it.
On the other hand, it is worth mentioning that the implementation of outsourcing derives from managerial decision-making, as it helps to set business expectations and indicates those areas where specialized knowledge is needed in any of the functions or processes of the organization. In this case, the external service provider takes responsibility in the administrative processes of planning, execution and evaluation of the activities contracted under the figure of outsourcing. (Guzmán, 2008)
Originally, outsourcing was established as an economic strategy derived from the premise that productive entities must specialize in those activities for which they have a greater advantage over the competition. Thus, such entities resort to the implementation of outsourcing in the production of those goods or services for which no benefit or comparative advantage is achieved, but which are nevertheless essential for the proper performance and functioning of the production process itself.
Therefore, organizations opt for the application of outsourcing as a strategy to improve their productivity, manifesting itself when the company to which they assign the realization of a good or service, can execute it using fewer resources without sacrificing its quality standards. At the same time, they promote their competitiveness from the savings generated by the implementation of outsourcing, since by reducing their costs, higher profit margins are obtained.
In view of the above, in some cases, the contractor of an outsourcing service undertakes to offer the provider key and strategic information about their business so that they can carry out their work, and in return, the provider provides resources, technology, time, staff and effort to fully integrate into the client's process, dealing with technological decisions, project management, implementation, administration and operation of the assigned infrastructure. Therefore, the contracting company benefits, since it acquires a greater functionality than it achieved internally, but with lower costs. (Guzmán, 2008)
Today outsourcing processes cover the areas of financial systems, marketing activities, sales, human resources, administrative systems, production, transportation and distribution systems, supply processes, secondary activities, technology and systems; being precisely the area of technology and systems, where processes are mostly outsourced to enable organizations access to the skills of technology specialists at lower costs. (Challenges in Supply Chain, 2014)
Obviously, the main reason for the growth of outsourcing is the savings in production and administrative costs, since, for example, by using qualified labor with much lower salaries than those that would be paid with direct hiring, it causes the outsourcing model to be It becomes a very attractive mechanism for company managers.
However, it should not be forgotten that the outsourcing scheme implies a relationship between client and supplier with shared responsibility that generates a strategic commitment; Therefore, more than a contractual relationship between a client and a supplier, it is a strategic alliance of two companies with a specific and common purpose. (German, 2014)
Background
Outsourcing is a practice that dates from the beginning of the modern era, since delegating responsibilities and commitments that are not inherent to the essence of the business, was a constant in organizations at the beginning of the post-industrial era, since with the emergence Due to the voracious competition in global markets, some companies opted for other companies to assume their responsibilities, although their capacity did not seem sufficient to accompany the growth strategies that were envisioned.
At the beginning of this period, companies used to monopolize all the processes for the production of goods or to offer services, however, the high costs involved in maintaining the material and human infrastructure began to cause high financial losses and little operational effectiveness, in addition to rigidity in the response to various markets. Therefore, it was not until the mid-1980s that the flexibility that outsourcing implied began to take hold. (Almanza & Archundia, 2015)
Thus, in the 90's after the opening of the economy and the integration of the domestic market to the international market, the traditional industrial sector was forced to compete with international companies without restrictive conditions and with marked technological, organizational and regulatory barriers, under a political and economic environment that, in the case of Mexico, attracted foreign investment to the country, but did not promote the growth of the domestic market and national industry.
As explained (Guzmán, 2008), in that period, Mexico was characterized by a welfare state, intervenor in the economy and promoter of large industrial relations systems, with rigid labor codes, where subcontracting already existed, but was limited by labor laws and strict collective bargaining agreements. Such is the case of Petróleos Mexicanos (PEMEX), which has since maintained a collective contract where it is established that certain areas or functions are exclusive for unionized workers, in which the subcontracting companies of course cannot have any intervention.
On the other hand, globalization demanded flexibility from companies in their economic and production strategies, giving the opportunity for outsourcing to be viewed as a way of gaining competitiveness by reducing costs, specifically labor costs, which is why, in practice, became a mechanism that provides the expected flexibility of work, without generating significant conflicts with collective contracts or unions, since, by transferring responsibility and obligation in terms of labor and social security to other subcontracted companies, apparently the companies reduced their administrative cost through the reduction of the tax burden, which made possible illegal practices of evasion in tax and social security matters, and at the same time the rights of workers were affected.
Outsourcing, understood as the business strategy that allows an external partner to be entrusted with the performance of continuous non-strategic functions in a company, began in Mexico by hiring surveillance and cleaning services, later, dining and maintenance services, until reaching to the areas of recruitment and selection of personnel, public relations, information systems, maintenance of systems and data processing, logistics, consulting and training, among others. (Almanza & Archundia, 2015)
On the contrary, in the United States, the subcontracting scheme appeared in the civil construction, mining and agriculture industries, as US businessmen identified outsourcing as a strategy for the emergence of new technologies that were emerging at that time. (Durán AE, 2011)
In general, outsourcing emerged in the world as a phenomenon of outsourcing a company's operations to external contractors who offered specialized services without investing in the acquisition of infrastructure. Therefore, although it is not considered a general rule, it is large companies that have frequently received subcontracting services, while medium and small companies are more akin to subcontracting. Being the need to make material to cover increases in demand, the need for more specialized personnel, the reduction of production costs, and the search for efficiency, quality and docile workforce in flexible hours, some of the main reasons for the implementation of outsourcing in companies. (Olivares, 2014) In consequence of the above,The appearance of the large-scale economy and the informal economy are the two important aspects to establish the antecedents of outsourcing.
Business outsourcing or subcontracting models
Subcontracting network between large companies and SMEs
It is a vertical integration, in which network management has benefits for both parties, as it is an alliance strategy where the large company makes its production process more flexible, lowers its production costs of labor, technology, and warehouses, making it competitive their prices, and looking for added value in the product, which responds to changes in demand or in product styles.
While SMEs, for their part, develop an alliance strategy that allows them to integrate into the production chain, being assisted by the large company with financing and advice in the purchase of materials and equipment, in the organization of work and in the guidelines of QA. (Cabello, Conde, & Reyes, 2002)
Outsourcing network between SMEs
It is a spontaneous and endogenous network organized horizontally, which implies a relationship between equals, since the participating companies have similar technological and economic resources. Thus, the relationship is based on private contracts in which there is an alliance strategy.
The aim is to achieve collective management in which companies collaborate within the same production process, each one specialized in a single task that contributes to increasing the group's efficiency; allowing them to increase their productive capacity, increase their ability to innovate and take advantage of limited resources. (Cabello, Conde, & Reyes, 2002)
In house: It is the subcontracting modality that refers to the fact that the service provided or contracted, is carried out within the company's own facilities, for example, when cleaning or security personnel belonging to an agency are in charge to pay all the benefits of such employees.
Off site: It is the subcontracting modality that refers to the fact that the service provided or contracted is carried out outside the company's facilities, for example, when the telephone attention services are contracted, such operations being carried out within the facilities of the outsourcer. (CreceNegocios, 2011)
Co - sourcing: Modality in which the outsourcing service provider offers some kind of added value to its client, such as risk sharing. Likewise, it occurs when a business process is carried out by internal personnel and external resources such as consultants or outsourcing providers with specialized knowledge in a business process, for example, accounting or internal audit services. (Durán C., nd)
Offshoring or relocation: It is the transfer of productive activities from industrialized countries to developing countries. In general terms, offshoring is understood as the relocation of the service or production activities of certain companies in countries with low wages, in which these organizations can find the necessary skills for their development through the use of specialized subcontractors from other countries, giving step to the existence of an offshore outsourcing, since, if the subcontracted companies are subsidiaries of the contracting company, it would be a form of direct foreign investment. (Troy, 2012)
Selection of outsourcing service providers
Some considerations must be addressed before selecting an outsourcing service:
- Select outsourcing providers cautiously: Companies should look for providers that focus on the industry to which it belongs, in addition the provider must have experience and the technical capacity to handle the products to be subcontracted. Analyze the cost-benefit relationship:The activity that is subcontracted must be carried out by the chosen supplier at a lower cost and with equal or higher quality than that achieved by the company. Since, when an outsourcing provider presents a generalized cost greater than that obtained in the company, two important assumptions can be considered: The company tries to subcontract an activity that is part of its core skills and / or the selection of the provider is deficient and it does not have the capabilities to offer the required service. Prepare a defined and written contract:As beneficial as the service offered by an outsourcing provider may be, it should not be forgotten that important activities for the company are being placed in the hands of third parties, which at some point could harm the interests of the company. In this lies the importance of having a written contract that is clear, to establish all the necessary points for the third party to comply with the delivery of the product and / or service, as well as with all the other requirements and characteristics requested by the company. Thus, the contract should establish the goals and costs of the outsourcing project. (Cortez, 2008)
Likewise, before granting an activity or process in subcontracting, the probability of obtaining a competitive advantage must be analyzed considering the outsourcing transaction costs, as well as the vulnerability to which the organization is subjected through the commitment acquired, maintaining an appropriate control, but with the necessary flexibility in the customer-supplier relationship.
Consequently, if the competitive edge and vulnerability are high, the organization needs a high level of control over the outsourcing it intends to undertake, and must develop internal strategic skills through contracts or long-term joint ownership commitments. Since a successful outsourcing process requires that the client maintain an adequate level of delegation to the outsourcing provider that he employs.
By virtue of this, an excessive delegation causes the contracting company not to allocate sufficient resources to the supervision and control of the provider, leaving the latter adrift in terms of operational guidelines. And on the contrary, by granting little delegation, the contracting company exercises excessive control that absorbs the expected savings, as it focuses on creating a new administrative control structure dedicated to managing the customer-supplier relationship, while on the other hand, limits the supplier, given the fulfillment of the large number of administrative requirements requested that prevent it from implementing the procedures on which its promise of operational efficiency and economy of scale was based. (Guzmán, 2008)
Fiscal and economic implications of outsourcing in Mexico
Obviously, in Mexico outsourcing practices began to emerge as a business strategy that offered schemes to avoid paying taxes or social security to employees in organizations, which caused billions of pesos to stop being received in the public treasury, at the IMSS, INFONAVIT and ISSSTE, among other state institutions.
Likewise, companies that have operated illegally with various schemes proposed by companies that sold the implementation of outsourcing systems to evade said tax and labor obligations, can be accused of money laundering, since they reinvest what they obtained illegally for not paying taxes in the Mexican financial system.
It should be noted that Mexico ranks fifth in the subcontracting or outsourcing industry in Latin America, with a market value of 1,457 million dollars annually, according to a study carried out by the firm Staffinng Industry Analysts. (Business 360, 2016)
The analysis entitled "The outsourcing of companies in Latin America", indicates that this figure is below that reported by other nations in the region, where the total value of the outsourcing market is 47 thousand 800 million dollars. Brazil being the country that contributes the most significant volume with 35,400 million dollars and Colombia in second place in the list, contributes 4,450 million dollars.
In the case of Mexico, even though it is a nation that has implemented regulatory mechanisms for such practices in recent years, it receives the impact of informality in this market, because of the 900 companies registered under this activity, only 100 have registration before the Instituto Mexicano del Seguro Social (IMSS) and of these only 40 percent pay taxes. (Business 360, 2016)
According to (Durán AE, 2011), under the figure of outsourcing for more than a decade, approximately 14 thousand companies stopped paying fees to IMSS, Infonavit and taxes such as VAT and ISR, allowing Mexico to commit one of the largest tax fraud in history, which could damage the treasury and workers by about 5 percent of GDP, failing to pay the social benefits of more than 4 million workers. These estimates established the amount of tax fraud through outsourcing at more than 535 billion pesos.
Likewise, those companies that engage in illicit outsourcing practices commit more than 8 criminal figures that range from omission to withhold VAT or ISR, falsification of contracts and documents, omission in the payment of social security contributions, money laundering, fraud to workers, and administrative crimes due to omission of taxes until determination of social security compensatory quotas, among other labor crimes. (Durán AE, 2011) As a result of the foregoing, the Mexican labor reform published on November 30, 2012 in the DOF, incorporating articles 15-A to 15-D into the Federal Labor Law, circumscribing the term of labor subcontracting and articles 1004-A to 1004-D that refer to the breach of the precepts of the subcontracting modality.
Meanwhile, subcontracting is considered as the figure of a boss, not an intermediary, which affects workers in any of the branches of the productive sector, while the figure of an intermediary addressed in articles 12 to 15 of the Federal Law Labor, refers to those who link the relationship between the contractor and the service provider, but who do not hire him directly. (Jaime, 2014)
In labor matters, this business practice generates more jobs, but does not create an identity with the company. In this way, for the worker it represents an opportunity to be employed, but at the same time, it makes them vulnerable, since the deterioration in the quality of jobs is manifested among other aspects by high staff turnover, low productivity, reduced wages and a decrease in the population's access to social security protections. Unfortunately, these outsourcing mechanisms are an increasingly common practice in Mexico, because it offers to eliminate labor obligations of the employer, maintaining the flexibility to reduce or increase the employed personnel,strengthening in the face of the growing and sustained prevailing unemployment rates that have made the labor force willing to accept subcontracting grow under these terms. (Vaivén portal de ideas, 2014)
In contrast, various organizations have enjoyed the financial and administrative benefits of outsourcing from different application levels related to the provision of temporary services to the reduction of areas within the same company, in which flexibility in contracting is one of the more favorable characteristics, since they are aimed at providing specialized services in specific technical skills and with training in the required area, which reduces large investments to the contracting companies, allowing them to obtain greater productive and competitive advantages.
Among its benefits at the tactical level we can highlight the control and reduction of operational expenses, better investment of capital funds, trained personnel adapted to the needs of the company; while at a strategic level, its advantages focus on access to world-class resources and greater competitiveness. However, the basic and most important rule of outsourcing is not to subcontract any of the functions or areas that are considered essential for the organization. (Echaiz, 2012)
Macroeconomic effects and offshoring
In another order of ideas, at the macroeconomic level for each country in the world, being competitive mainly means being able to develop and produce products in its own territory and thereby improve the standard of living of the people who make it up. This indicator is called Gross Domestic Product (GDP), and it is considered a reflection of the competitiveness of companies.
For example, if the production of Mexican companies does not grow at a higher rate, it means that they are not investing in the creation of new companies, and therefore, job creation is not developing at the desired rate. If GDP grows below inflation, it means that wage increases will tend to be less than inflation.
In that sense, a GDP growth represents higher revenues for the government through taxes. Thus, if the government wants higher income, it must strengthen the conditions for non-speculative investment, that is, direct investment in companies; and also to strengthen the conditions so that the organizations already working in the country continue to grow. It should be noted that GDP only considers the products and services that emanate from the formal economy. (Escalante, 2016)
Given these facts, the informal economy being one of the setbacks that derives from illegal outsourcing practices in Mexico, its effects not only damage the previously expressed microeconomic aspects, but also macroeconomic aspects that reduce financial and investment opportunities to the country, and theoretically diminish the quality of life within it.
On the other hand, in the case of offshoring, mainly in the 1980s, various American companies chose to solve their competitiveness problem through the implementation of outsourcing associated with production from emerging countries. However, after that, many of these companies chose to move their means of production entirely to countries with high-consumption economies as a financial strategy.
That is, outsourcing was used to transfer the development and production work to specialists abroad who had specialized knowledge, cutting basic research expenses and allowing them to focus their efforts on developing their main competencies, getting rid of those activities that They add little value and use their income on innovation, which is basically what provides competitive advantages. Such is the pure essence of outsourcing. (Lawrence, 2010)
However, there was a time when outsourcing was not used to eliminate aspects that did not provide value, but the competitive advantages themselves, the means of production, the sophisticated production and engineering processes also left their home country. Thus, the absolute dominance of the technology sector in the United States, which dominated the market by intervening more than anyone in research and development, lost leadership after several decades of work under the outsourcing scheme in emerging countries. (Speakman, 2012)
This is the case in the mobile phone industry, all consumer electronics, batteries for electric and hybrid cars, television screens and monitors, computers, mobile devices, even the fiber components of Boeing's own American aircraft. 787, are clear examples of markets in which North Americans have lost leadership, despite the fact that the concept of all these products, their original creation and innovation was developed in the US entirely and financed by 100% investment of American capital. (Lawrence, 2010)
conclusion
It is important to note that outosourcing as such does not represent outsourcing or subcontracting, as they are frequently confused terms. Outsourcing is a commercial contract, but not a labor one; where there is no subordination relationship with the contracting company, but rather a job separation where results are only required under a supervisory regime of these and not of the activities carried out by the outsourcer. This being the essence of the origin of said practice as a business strategy.
However, at least in Mexico, outsourcing practices are detained within a traditional approach strongly oriented to solving specific problems and covering the performance of temporary tasks to obtain access to certain resources or to reduce the tax burden. and labor.
On the other hand, there is a growing academic and business interest in promoting the change towards business outsourcing, using network and cluster management models as local productive development strategies. However, on the part of the government sector, no coordination has been found between the various chambers, associations and organizations, as there is still mistrust on the part of the employer regarding the risk involved in sharing information with potential competitors.
Therefore, outsourcing in Mexico is a market that is in the process of maturing, as it is still considered as a static process model that maintains a strategy that is totally independent from the general objective of the organization.
Finally, in the labor and economic environment of Mexico, there is evidence of a lack of a solid, efficient legal structure with particular characteristics that can regulate, observe, and allow the practice of this modality without questioning by the public sector, however, the authority has implemented in recent times various regulatory mechanisms for the protection of labor rights and the fight against money laundering and tax evasion.
References
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Thanks
Special thanks to the research professor Fernando Aguirre y Hernández, professor of the master's degree in administrative engineering attached to the Orizaba Technological Institute, for the technical contribution to the construction of this article and its direction in the process of learning systemic thinking. Likewise, to the National Council of Science and Technology (Conacyt) dedicated to promoting and stimulating the development of science and technology in Mexico, for financial support for postgraduate studies.
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