Why does Big comapnies outsource the work to big agencies?
Normally what i have noticed is that big companies always give contracts to big companies only. Whether its a consultancy job, civil construction or sub-construction.
The bigger companies does not show much faith in smaller or medium companies.
What could be the possible reason for this?
As per me the big companies outsource their work to big companies due to the following reasons:
- Scale of Operations: Big comapnies have quite higher operation levels, smallers companies might not be able to provide the services at their level.
- One stop Solution: Normally big consultants have Lawyers, Chartered Accountants and every other professional under one roof. They can understand and do the work by analyzing from all prospective. For smaller consultancy firms its not possible to hire these professionals.
- Legal Requirements: Big companies dont want to get stuck in legal requirements, they outsource Sub-contracts to big companies so that the compliances are offloaded to the contractee.
For example, construction companies have to pay ESI for labours, even if they are on contract. Instead of keeping record of different small contractors, they outsource the work to big contractor. The sub-contractor have to take care of ESI and other legal compliances.
- Image of the Company: Some companies outsource to big ones due to their image in market.
- Big Companies have proved track record, its risky to outsource the work to new and unexperianced company.
- Big companies normally are more professional compared to smaller one.
- Normally all big companies have same administrative procedures, giving contracts to them insure that procedures are synched well.