Research Points to Changing Outsourcing Trends

Outsourced call center services have long been used by organizations operating in the automotive, high-tech, and manufacturing industries. There is now a concentrated effort to outsource back-office support, such as operations, IT, finance & accounting, human resourced and procurement.

According to a report from Houston-based analyst firm EquaTerra (News - Alert), these changes are the result of efforts to reduce costs and heighten performance. This report points to extreme levels of product innovation and operational efficiencies as primary strategies employed by North American companies to maintain a competitive edge against lower-cost emerging market rivals.

AMR Research has noted the same trend. The firm points out that automotive manufacturers have heavily outsourced data-center operations and Web hosting offshore. Company representatives feel that it is a logical extension to more aggressively outsource back-office IT as well.

EquaTerra highlights that the results organizations in these industries are seeking from outsourcing are similar to those cited in banking, financial services, and insurance. The firm’s survey reveals that reducing cost is the most sought-after benefit, as 57 percent of respondents. The next three goals include fund transformation, shift in focus to more strategic activities, and improved efficiency reach, as cited by more than 35 percent of respondents.

In fact, the company is forecasting a continued increase in outsourcing as the strategy for cost-containment. As a result, automotive companies, for example, will be able to use the money saved to better focus on competitive issues such as improving time-to-market and pricing, while also addressing demand.

In regard to future outsourcing investment plans, EquaTerra found that 32 percent of manufacturing and related organizations that previously outsourced one or more process areas intend to expand outsourcing into new process areas; 38 percent plan to expand outsourcing into new geographies or business unites; and 29 percent plan to expand existing outsourced process areas.

Back-office business process outsourcing is expected to become more prevalent, with the emphasis shifting to extending outsourcing to more remote, global resources. Outsourcing to lower-cost markets such as India or China can even help some companies enter those markets to sell their own goods and services. Smaller markets are likely to continue to remain primarily a source of services.

EquaTerra also noted that companies will see opportunities to outsource less common processes, such as warranty services, service after sale, document service, and forms of knowledge process outsourcing such as R&D analytics.

While there will continue to be changes in the outsourcing and offshoring trends, the reality will remain that for some companies, it makes financial and strategic sense to employ such methods to support processes and even extend their reach. As long as this continues, offshore outsourcing will remain an attractive option.

Susan J. Campbell is a contributing editor for TMC (News - Alert) and has also written for eastbiz.com. To see more of her articles, please visit Susan J. Campbell’s columnist page.