I think this has been discussed to death before, but it would appear that QF is now going to experience the reality. Speaking as someone who was part of the management of an outsourcing company, let me tell you what we did...
First of all we bid as low as we dared to win the contract - basically we bid at cost. Why did we do this? Because we knew as C100 driver has pointed out, that a contract can never spell out the complete requirements of a job - there are always unknowns - and these unknowns are the money spinners - we call them variations. Anything not in the contract, even the smallest teensiest detail, immediately becomes a variation and attracts a premium price.
The two immediate consequences are first that the simple repetitive boring stuff contained in the contract gets done as quickly and as cheaply as we can possibly do it. And secondly (thats right!) we put all our effort into finding variations and getting the customer to sign off on them. E.G.: "half the placards in the cabin are illegible, want us to fix that?".
There are three longer term consequences.
The cost savings are not as great as expected, but its hard to discover why. The heavy maintenance costs have disappeared but (guess what?) the line maintenance costs have increased for some reason.
The outsourcing company will try and "lobotomize" the engineering (or other part involved of the company) if it can to remove any and all expertise in the outsourced area. This has three purposes.
- It removes possible sources of technical criticism of the job the outsourcer is doing.
- It makes it difficult for the customer to remain an "informed" consumer of outsourced services.
- It removes possible criticism of the beancounters that made the decision in the first place.
In our case we connived with the head beancounter of this particular organisation and their technical staff were either hired by us or fired. It took them five years to work out what we had done to them and start the long term job of wresting control of their technical strategy and future from us, by which time we had releaved them of well over $100 million.
Of course if you really want to make money as an outsourcer, ensure that the company has three or four different outsourcing deals that overlap. You can then make heaps of cash claiming incompatibilities between each of your responsibilities and claim major variations because of it.
Sorry for the lecture, I just dislike watching people go down this road only to retrace their steps five years later.