Outsourcing fails for a third of firms

Nov 12 2004 by Brian Amble Print This Article

More than a third of British companies that have opted top try outsourcing have found that it either failed to deliver the expected benefits or failed altogether, according to new research.

A survey by Proudfoot Consulting of almost 1,000 senior executives in nine countries – 150 of them in Britain – found that 38 per cent of UK firms were unhappy with their outsourcing experience.

It also revealed that the UK is one of the countries with the lowest incidence of outsourcing. More than four out of ten (44 per cent) of British firms have chosen to keep all business functions in-house compared to only a third of US companies.

Only Australia and Germany are less keen on outsourcing than the UK. In contrast, South African firms are most likely to outsource, with only one in five businesses there choosing to keep all functions in-house.

Over all nine countries surveyed, just over of companies outsource some part of their business.

But back office processing is significantly more likely to be outsourced by UK firms. One in ten UK firms that outsource have done so with their back-office processing compared to just six per cent globally.

The most frequently outsourced business functions, both globally and in the UK, are IT support, logistics and transport, with sales and HR being the functions least likely to be outsourced.

Proudfoot's findings contradict statistics released last week by the CBI claiming that nine out of ten organisations that had outsourced elements of their operations were happy with the experience.

The CBI survey of 150 company chairman and chief executives found that one in three have already taken some activities overseas and almost one in four are considering doing so in future.

CBI Director General, Digby Jones, described outsourcing as "a survival issue" for UK business.

“Anyone who believes that firms have a great deal of choice are naïve. They know if they don't do it, somebody else will. If competitors act and they don't respond, they may put their business at risk," Jones told the CBI annual Conference.

But Proudfoot Consulting's European president Jean Thevelin was more cautious:

"Our survey is further evidence that some firms have rushed into outsourcing, seeing it as some kind of panacea for under-performing business functions," he said.

"A major trap management falls into is failing to sort out problem departments before outsourcing, leaving the outsourcing provider reaping the real benefits of efficiency and the company effectively giving money away."