Friday, July 25, 2008

Offshore outsourcing: current state of affairs and future trends in Europe

The 2008 survey questioned more than 600 decision-makers of the largest European companies with a turnover of at least 100 million euros. The survey came up with the following findings:

1. 70% of respondents reported outsourcing at least one business process to lower-cost countries;
2. 49% of respondents agreed that offshore outsourcing served as an efficient cost saving tool;
3. 33% pointed to better quality through hiring the specialists among the major reasons for outsourcing;
4. Computing / telecommunications (68%) along with maintenance (76%) and logistics (73%) are the largest outsourcing segments;
5. Belgium was found to have the highest outsourcing rate (81% of companies), while France was found to have the lowest take-up rate at 63%;
6. At the industry level, the finance industry is reported to be the most mature in adopting outsourcing; banking is considered to be the most focused on IT and telecommunications outsourcing with a 75% take-up rate;
7. Medium-sized companies and multinationals are the major users of offshore outsourcing;
8. The majority of respondents generally report positive experience they have had with offshore outsourcing.
9. 20% of European companies admitted intending to increase their outsourcing level within the next two years.

According to Ernst & Young, the main reason why offshore outsourcing is expected to grow in the next two years is competing in the global economy and dealing with a strong Euro. The traditionally vertically integrated business processes are expected to be fragmented to allow European business and industry players to increase their profits and scalability. Outsourcing, serving as an efficient fragmentation tool, has proved to be very successful in delivering absolute competence to each element of the existing value chain.

TEAM’s own analytical experience fully confirms the findings of the 2008 Ernst & Young survey. In today’s business world many Western European countries choose to offload their processes to Eastern Europe for the purpose of saving costs and increasing the level of competitiveness.

Another important finding of Ernst & Young is that many respondents point to poor communication between a vendor and a client as a main obstacle in the way of effective outsourcing partnerships. Realizing that improved communication with clients is one of the key paths to success, TEAM International recognizes and established close relationships with each client regardless of its size and project scope.