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Stepping Out

Entrepreneurs grab a piece of the $100 billion outsourcing pie.

Entrepreneurs grab a piece of the $100 billion outsourcing pie.

Jesse Ramos Jr. could have been just another victim of downsizing. When the large oil and gas company where he had worked as a controller for 25 years was sold, he was one of the first to get the ax. But Ramos, 54, didn't let it get him down, and he didn't look for another job. Instead, he started his own business--and turned his former employer into his first client.

Ramos, with three of his downsized co-workers--David Orta, Ikie Wilkins and Garrell Edwards--joined the growing ranks of outsource contractors, providing many of the same skills they had performed in the corporate world but now doing them on an independent basis.

Today, Ramos and his partners, who own and operate ROWE Energy Services Inc. in Houston, provide specialized financial services for companies in the oil and gas industry. By 1998, the partners expect to be pulling in more than $1 million in revenues--with very little overhead, Ramos adds.

Rowe is part of a growing trend. All around the nation, companies large and small are parceling out work to outsource contractors. The 1996 outsource contracting market was estimated at some $100 billion, according to The Outsourcing Institute. And the institute predicts that figure will soar to more than $300 billion by 2001.

Why is outsourcing growing at such an accelerated rate? The primary reason, according to The Outsourcing Institute, is that large companies are doing whatever they can to reduce operating costs. Eliminating full-time employees and finding outsource contractors to replace them is a large part of that strategy. IBM, Chrysler, AT&T and Microsoft are all hiring outsource contractors to perform work that was once done in-house.

At Coors Brewing Co. in Golden, Colorado, some 18 business functions--including custodial services, facility maintenance, payroll, benefits administration and information technology--are outsourced. And more outsourcing is on the way at the company, according to Steven Brown, director of corporate development. "We're looking for outsource contractors who are better at their businesses and have more capabilities than we would internally," says Brown.

Like Coors, companies are outsourcing jobs and projects in every imaginable field: finance, sales and marketing, administration, customer service, manufacturing and more.

And it's not just popular with big businesses. Small and medium-sized companies are jumping on the outsourcing bandwagon, too, hiring contractors to take care of accounting, marketing and other business tasks. Some companies seek outsource contractors to fuel growth without incurring the burden of hiring full-time employees.

"It makes sense," says Robert Jennings, author of Make it Big in the $100 Billion Outsource Contracting Industry (Westfield Press) and a management consultant in Westminster, Colorado. "If you're a one-person company, would you rather spend time doing what you do best or accounting?"

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This article was originally published in the August 1997 print edition of Entrepreneur with the headline: Stepping Out.

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