Whether you’re just developing your business processes, and you’re still in the hurly-burly startup phase — or you’re trying to systematize your business to obtain more consistent, effective results — you’re strongly considering outsourcing some of your systems. But how common is this practice? What sectors outsource the most? What are the most common reasons for outsourcing?
Data on Outsourcing
According to Sourcing Line Computer Economics, in 2013, United States companies outsourced 2.6 million jobs. 36% of Chief Financial Officers admitted to using outsourcing in some capacity. Of those who did, 26% outsourced to India, while 18% did so to China.
The industry break down is also pretty telling. 12% of call/help centers outsourced, while 26% of distribution companies outsourced. Research and development (R&D) groups outsourced 38% of the time. IT services outsourced 43% of the time. Manufacturing outsourced 53% of the time!
The manufacturing sector’s heavy investment in outsourcing has sparked a legion of critics. Analysts argue the sector’s decision to, effectively, outsource en masse has “robbed” U.S. workers of good jobs at fair wages. Critics point to decimated cities in the industrial Midwest and Northwest, like Cleveland, Detroit and Pittsburgh, as canaries in the coal mine. They say these cities’ problems showcase the perils of scaled outsourcing. Decades ago, these industrial centers thrived – Pittsburgh’s steel industry fueled construction, while Detroit’s automotive industry “got America moving.” But globalization, the web, and other changes disrupted those industries in a big way and made outsourcing much more economical for businesses.
The point is that outsourcing can be a double-edged sword, both for businesses and for society.
So why DO companies outsource? What do the statistics tell us?
According to the Sourcing Line Computer Economic survey, 44% of companies outsource to “reduce costs,” while 34% of companies do so to access IT resources that they do not have in house. 31% of companies outsource to liberate internal resources. 28% of companies use outsourcing to improve customer focus. 20% of companies aim to transform and/or reorganize. 15% of companies outsource to accelerate projects and tap into outside management expertise. And 9% of companies outsource to speed up time to enter a market.
Based on workforce, resources and skills, cost index, and other metrics, the survey measured the top 10 best countries for outsourcing. Here’s the list: