Is the multi-layered subcontracting structure in the IT industry a problem? ①
I am Tomimoto, an ESMC operations staff member.
In this industry, "multi-layered subcontracting" is critically discussed at every opportunity, but this time, I have summarized my own opinions on what exactly the problem is.
First, I would like to identify the problems with the current structure, and then I would like to consider the causes.
■ Problems
Let's assume there are 200 engineers in Japan, with 50 belonging to each of two major companies, and 10 belonging to each of the other 10 companies, and consider a [subcontracting structure] model.
[Subcontracting Structure]
[Major Company A] - 50 people
┗[Subcontractor A] - 10 people
┗[Second-tier Subcontractor A] - 10 people
・
・
[Major Company B] - 50 people
┗[Subcontractor B] - 10 people
┗[Second-tier Subcontractor B] - 10 people
・
・
① Occupational health and safety issues
Usually, a project team is formed by gathering engineers from different companies. In that state, a chain of command that crosses company lines is often created. In other words, there are cases where a PM from [Major Company A] gives direct instructions to an engineer from [Subcontractor A], but this is a violation of the law. (Labor Standards Act)
The responsibility for protecting the health of engineers lies with their affiliated company, so instructions that are inseparable from working hours should be given by the supervisor at the affiliated company.
However, at the project site, this is practically impossible.
In other words, the function intended to protect the health of workers can become incomplete.
② Amplification of indirect operations
If the number of companies simply increases, indirect elements (offices, tax/accounting, systems, personnel costs other than engineers...) also increase. I think it can be said that the fewer the number of companies, the greater the integration benefits and the better the efficiency.
③ Unfair? profits
Normally, I think compensation (sales) should be commensurate with value, but for example, there are cases where [Subcontractor A] receives work from [Major Company A] and an engineer from [Second-tier Subcontractor A] does the work.
In this case, [Subcontractor A] becomes the problem. However, it is an exaggeration to say that [Subcontractor A] does not create value, as it could be said that they were able to win work that [Second-tier Subcontractor A] could not because they spent more sales effort than [Second-tier Subcontractor A]. Also, [Subcontractor A] bears contractual risks. However, it is no exaggeration to say that their direct work is just issuing invoices. I feel that it often happens that companies in this position take too much of a margin.
④ Inadequate human resource management
For example, let's say an engineer from [Second-tier Subcontractor B] is in trouble at the site. If it is something that can be discussed at the site, there is no problem, but there are many cases where they are troubled by things they cannot say directly, such as power harassment from the project manager of [Major Company B] or unclear instructions. Usually, the sales representative of the affiliated company discovers the seeds of the problem early and resolves them before they escalate. However, when the subcontracting structure becomes multi-layered and complex, communication can fail, taking time or failing to convey the gist of the matter, which can worsen the problem. Sometimes members suddenly say, "I can't take it anymore!" and leave.
⑤ Gap between expectations and price
Please imagine a multi-layered structure like [User Company] → [Major Company B] → [Subcontractor B] → [Second-tier Subcontractor B] → [Third-tier Subcontractor B]. If each company takes a 20% gross profit, only 500,000 yen will reach [Third-tier Subcontractor B]. Of course, [Third-tier Subcontractor B] also takes a gross profit, so the full amount is not passed on to the engineer. The [User Company] expects 1 million yen worth of value. However, in reality, [Second-tier Subcontractor B] can only provide about 500,000 yen worth of value. A structure like this is created, which often leads to customer dissatisfaction.
These are the problems I feel.
Next, I would like to consider "Why is it structured like this?" (^^)/