Last month, Network Rail, which owns the UK's rail infrastructure, took three railway maintenance contracts in-house. Jarvis, the contractor previously responsible for the contracts, announced that it no longer wanted them. A fatal rail accident and two derailments had brought unwelcome publicity to both parties.
It was a significant event. While the trend for companies to outsource some of their activities is growing, and probably unstoppable, Network Rail's experience shows that contracting out can have a price - and it can be steep. Reputations can suffer, and costs can rise instead of fall.
A recent publication from the PA Consulting group, entitled Sourcing for Value, pointed out what many already know: companies are deeply dissatisfied with their outsourcing arrangements. Research by PA showed that 66 per cent of businesses felt the benefits they expected from their outsourcing contracts had either been only partially realised or not realised at all.
There is nothing new about outsourcing. All companies buy at least some of their goods and services from someone else. In recent years, however, there has been rapid growth, as outsourcing contractors have offered to take over company operations, from payroll services to computer help desks. Some commentators worry about the risks.
The PA publication says: "Traditionally, organisations have been advised that all routine operational activities, such as transaction processing, IT services or call centre operations, are prime targets for external sourcing.
The report adds: "The potential benefits of immediate cost savings and the removal of labour conflicts make sourcing of these mundane and repetitive activities almost irresistible.
"Technological advances have also opened up options to use quality service providers in any part of the world. However, to assume that externally outsourcing all routine, high-volume activities is some sort of panacea is seriously flawed."
Adding to the anxiety over outsourcing are companies announcing that they are moving thousands of jobs away from the US and the UK to low-cost countries such as India. It is not just routine, repetitive jobs that are being outsourced.
Initially, call centre jobs moved to India, but, increasingly, higher level professional services, including computer software development, architectural drawing, accountancy and financial analysis have moved to India and other countries such as the Philippines and Vietnam.
Politicians and trade union officials have expressed anxiety about where it will all lead. Worries are particularly high among workers in the US and the UK, who, because of the large number of English-speakers in India, are particularly vulnerable to the drive to move jobs there.
Bruce Mehlman, the US assistant secretary for technology, told a congressional hearing earlier this year: "Many observers are pessimistic about the impact of offshore IT service work at a time when American IT workers are having more difficulty finding employment, creating personal hardships and increasing demands on our safety nets."
Donald Manzullo, a Republican congressman from Illinois, said: "Increased global trade was supposed to lead to better jobs and higher standards of living. The assumption was that while lower-skilled jobs would be done elsewhere, it would allow Americans to focus on higher-skilled, higher-paying opportunities.
"But what do you tell the PhD, or professional engineer, or architect, or accountant, or computer scientist to do next? Where do you tell them to go?"
Amid the worries, we need some clear thinking. There are two trends at work. One is companies setting up new facilities of their own in countries such as India, recruiting local workers for their own organisations.
Managing workers at a distance is demanding, but many companies achieve it. While the anxieties about the future of work for people in developed countries are understandable, the incentives for employing Indian workers are huge. Not only are their salaries far lower than those paid in Europe and North America, but the Indian workers are often more highly skilled and better educated.
Far more challenging is when companies pass activities to third parties, whether at home or abroad. Ensuring that one's own employees are working effectively is hard enough; ensuring that someone else's employees are is far more difficult.
This is particularly the case as companies move from outsourcing routine back-office activities to contracting out direct contact with customers.
Once a company is no longer dealing directly with its own customers, how does it know how satisfied they are with the quality of service?
Providers of outsourcing services say that companies can demand not only that contractors provide details of how well they have dealt with customers; the executives of the company that outsources customer contact to a third party can also listen to the tapes of that contact, not only assuring themselves that quality has been maintained but also keeping in touch with what the customers want.
The PA consultants observe that while there are dangers in outsourcing customer contact, companies doing it themselves is no guarantee of decent service either.
"Many organisations do a lousy job of delivering customer care in-house, although many organisations may not choose to recognise or admit this," says the report.
This is certainly true. The worry is that it is just those companies that cannot manage customer service themselves that will be most tempted to rid themselves of the problem by assigning it to someone else.
