July 12, 2002—New research has revealed that company bosses avoid increasing their use of outsourcing out of fear of losing control.
Although many companies use outsourcing to cut cost, new research from management consulting firm Accenture shows that few companies see it as a strategic business imperative.
Nearly nine out of 10 survey participants said their companies outsource at least one aspect of their business. 27% outsource information technology, 27% logistics/distribution and 25% customer service and technical support. However, two thirds said they had no plans to expand their outsourcing to other business areas within the next 18 months.
Greg Caster, a partner in Accenture’s Products Operating Group commented: “There is a distinct gap between how companies use outsourcing now and the strategic possibilities it offers, but apparently there are hurdles that must be overcome before many companies will embrace outsourcing more strategically.
“While executives have long realized that outsourcing basic business activities can enhance operational efficiency, only a select few are ready to use outsourcing as a tool to drive business growth.”
Almost half (48%) of the executives surveyed said the fear of loss of operational control was the most significant barrier to expanding their use of outsourcing. Other reasons included cultural barriers in the organization (19%), costs (14%) and long-term dependency on an external organization (11%).
Of the executives who said they do plan to increase outsourcing within the next 18 months, 13 % claimed they would consider contracting out human resources and/or IT.
150 senior executives at Fortune 1000 companies took part in the survey, from the automotive, consumer goods, retail, industrial equipment and transportation industries.
EDS has pulled out of one of the largest IT outsourcing deals with Procter and Gamble, worth more than $1bn per year.
In a statement, the company said: “The decision to terminate discussions was made after careful consideration of the overall transaction requirements and more specifically, the acquisition price sought by P&G for intangibles associated with the related business assets.”
—Jessica Jarlvi
Reprinted with permission; copyright 2002 i-FM
