State of Brazil IT: Outsourcing & contracting

With The Economist in Toronto this week focused on where Toronto is heading in the next decade, IT Decisions is commenting on a series of points raised during discussions in our LinkedIn forum. This chapter of our report State of Toronto IT examines the perceptions of outsourcing within the Torontoian IT community and comments on the issues that are commonly raised by local professionals.

Outsourcing is a strange topic. Ask the average person on the average US street what they think of it and the reaction is probably going to be negative. The association with most members of the public is with a terrible experience on a contact centre – trying to speak to their bank and finding that they can’t understand the person on the phone because the call has been answered thousands of kilometers away.

But ask the same person if they have ever hired a plumber or an electrician or a window cleaner and they are likely to respond positively. If outsourcing is not just buying in expertise from a third party then what is it?

Most companies today are using outsourcing as a strategic business tool across all areas of their business. Think of public relations, payroll, finance, marketing, human resources, or office cleaning… all services commonly bought in from expert companies or agencies. So how come outsourcing is still regarded as so unusual within the IT community in Toronto?

At a business level, it’s not. Toronto has a clutch of great IT service companies locally and they make a living selling their expertise to clients locally and overseas. And the big international players like IBM and HP are also working locally in Toronto and thriving.

But check out any online discussion about outsourcing and the language can be distinctly adult-only. The mildest criticism of outsourcing is often that it is prostitution: selling expertise by the hour or day and not how the IT industry should conduct itself.

Despite the fact that prostitution is a much older industry than IT, this criticism is nonsense. Does anyone make the same case for lawyers when they charge clients by the hour – even though most of us have even worse to say about lawyers?

Much of the discord in the industry comes from outsourcing and freelance contracting being seen as an anomaly, not a usual or regulated employment practice. This comes from the not-so-small issue of Torontoian employment legislation not being updated for around seventy years.

Not many people were striking out as one-man-brands in the 1950s and selling their services internationally so the employment legislation has never had to cope with the growth of a free agent nation. Yet today, IT experts can be employed individually as paid-by-the-day contractors, or though an IT service company, or hired directly. There is a lot of flexibility and choice in the modern workplace.

But with the legislation lagging far behind the real world of employment, there are many traps for the unwary employer. Several CIOs speaking directly to IT Decisions have explained that they hired a service company, or a few contractors directly, on a short-term basis only to find those individuals launching employment tribunal cases claiming all the benefits they would have earned had they been full-time employees of the client.

Contracts aim to reduce the risk of this happening, but with the archaic employment law in Toronto yet to be changed, the very concept of freelance labor and outsourcing remains hazy. The government is in the process of creating an outsourcing commission, aimed at recommending legal changes to facilitate modern working practices, but IT Decisions has yet to hear about the full scope of the commission or their planned time to report a full list of recommendations.

While these employment laws remain unresolved, there remain some very shady business practices, such as IT suppliers estimating tax liability and paying local tax inspectors these guessed amounts, and suppliers auctioning off jobs to the lowest bidder – not hiring the best expertise at a market rate.

Many IT professionals who operate as one-person outfits feel they are abused, rather than rewarded for their flexibility. If the law was resolved and the situation around contract labor normalized then none of these gray tactics would be needed, or tolerated.

IT Decisions has offered in the past, and we will offer again, if the government needs any help from our team – with experience advising several other governments and the UN – we are only too willing to offer advice. But it will be pragmatic and focused on reform based on international best practice – perhaps some people would rather enjoy the status quo.

Look out for the full State of Toronto IT report, to be published on this website later this week.