Friday, June 01, 2007

Outsourcing critical to corporate strategies


A majority of senior operating executives will continue to outsource IT, HR and R&D functions, survey finds

A recent survey by PricewaterhouseCoopers says a majority of senior operating executives will continue to outsource IT, HR and R&D functions, demonstrating that outsourcing remains a top strategy among companies looking to lower costs and optimize services.

Some 87 percent of the nearly 300 senior operating executives polled worldwide reported that outsourcing delivered on the desired business results. More then 90 percent of those executives said they would outsource again, even if they weren't fully satisfied with previous endeavors, PricewaterhouseCoopers reports. The main drivers for outsourcing include lowering costs, gaining access to talent and increasing business-model flexibility.

More than 40 percent of respondents said they would outsource to improve customer relationships. Another 37 percent said the strategy could help them develop new products or services, and about one-third said outsourcing would be important in the case of geographic expansion.

Although IT remained the most outsourced activity, with about 60 percent sending those duties outside their companies, 70 percent of respondents outsource one or more of what could be considered strategic functions. More than half outsource production or delivery of core products and services, about one-third outsource sales and marketing, and another 32 percent outsource R&D activities.

"It is clear that companies are moving from outer ring of non-core non essential activities toward the second ring of nonessential business activities," the survey concludes.

"Outsourcing is still very much the game, but the rules have changed," said Pat McArdle, global outsourcing partner at the firm, in a press release. "The lightning pace of growth in outsourcing is matched only by the transformation of the market as traditional models are gradually being replaced by multisourcing, joint ventures, and 'best-of-breed' arrangements."