Link between Outsourcing and Business Success Demonstrated by Outsourcing Index; U.S. Companies Expected to Increase Outsourcing Expenditures by 26 Percent in 1997

Business Credit, October 1997 | Go to article overview

Link between Outsourcing and Business Success Demonstrated by Outsourcing Index; U.S. Companies Expected to Increase Outsourcing Expenditures by 26 Percent in 1997


U.S. Companies Expected to Increase Outsourcing Expenditures by 26 Percent in 1997

Demonstrating a clear link between a business' outsourcing activities and its financial success, a survey conducted by The Outsourcing Institute and Dun & Bradstreet found that only 2 percent of companies involved in outsourcing are considered poor risks for long-term stability. This supports the claim by many that companies that focus resources on their core capabilities and rely on others to perform non-core activities are more likely to be successful.

Among the survey's other key findings: U.S. companies plan to increase their expenditures for outsourced services by 26 percent during 1997 to approximately $85 billion; and through the first quarter of 1998, outsourcing activity is predicted to rise by 16 percent.

"As more companies turn to `outside experts' to help them with important, non-core business activities, outsourcing continues to prove itself as an effective tool for improving a company's competitive position," says Marq Ozanne, vice president, Market Research and Planning at Dun & Bradstreet, and an adjunct professor at the University of Connecticut.

The Outsourcing Index forecasts the level of outsourcing expenditures by U.S. companies. The Index is based on interviews with more than 600 companies, each with over $80 million in annual sales. The sample covered all regions and industries around the United States. The Index was designed in response to requests from both suppliers and users of outsourcing for an impartial method of tracking outsourcing activity.

Information technology, the survey found, is the function most likely to be outsourced, representing 30 percent of all outsourcing activity among respondents, followed by human resources (16 percent), marketing/sales (14 percent) and finance (11 percent).

In terms of use by industry, manufacturers account for nearly two-thirds of all outsourcing. Information service providers, including telecommunications and technology companies, are also substantial outsourcers, accounting for 13 percent of all activity, and planning to increase their use of outsourcing by over 50 percent in 1997.

The survey did uncover one downward trend in outsourcing: 10 percent of companies are planning to decrease their outsourcing expenditures during 1997. An earlier edition of the Outsourcing Index had revealed only 2 percent of respondents with such plans for the coming 12 months.

"This situation may result from poorly established expectations and success criteria for outsourcing activities," suggests Frank J. …

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