Big companies are increasingly outsourcing a wide variety of operations.
Why do it yourself when you can pay someone else to? In addition to being the unofficial mantra of today’s consumer-services-oriented economy, this is fast becoming a popular refrain in corporate executive suites. According to the results of this month’s CFO Forum, companies are increasingly outsourcing tasks and services.
Nearly 29 percent of respondents say that their company is outsourcing more this year than last. Almost two thirds (63.3 percent) are farming out more work now than they were five years ago, and a whopping 79.6 percent report a higher level of outsourcing than a decade ago.
At the same time, companies are doling out tasks and services to a wider array of vendors. Although a majority (52.1 percent) deal with fewer than five providers, 27.1 percent do business with more than ten. One quarter of respondents say the number of vendors they use has increased from a year ago; and according to 60.4 percent and 75 percent of CFOs, the number of vendors they use now is higher than it was five and ten years ago, respectively.
The tasks and services that companies most commonly outsource are those requiring some specialized knowledge outside the firm’s core competencies, such as technology and legal services. However, 20.4 percent outsource manufacturing - perhaps an indication of the trend toward branding and selling products while avoiding the risks and low margins associated with actually making them.
Whether merely a way to cut costs or indicative of a fundamental realignment of the way goods and services are produced, it appears that outsourcing is here to stay: Approximately 60 percent of companies plan to outsource more next year than they do now.
What is the approximate value of tasks and services that have been outsourced by your company to third-party providers during the past 12 months?
Less than $10 million 63.3%
$11 million to $50 million 22.4
$51 million to $100 million 2.0
$101 million to $150 million 0.0
$151 million to $200 million 0.0
$201 million to $250 million 0.0
More than $250 million 12.2
What kinds of tasks and services do you currently outsource to third-party providers? (Check all that apply.)
Information technology 61.2%
Manufacturing 20.4
Legal services 46.9
Human resources 24.5
Payroll 26.5
Marketing 6.1
Other 53.1
Approximately how much does your company save annually by outsourcing?
Less than $25 million 93.6%
$26 million to $50 million 2.1
$51 million to $75 million 0.0
$76 million to $100 million 0.0
More than $100 million 4.3
How does your company’s level of outsourcing today compare with that of ten years ago?
It’s higher 79.6%
It’s lower 0.0
It’s about the same 20.4
What about five years ago?
It’s higher 63.3%
It’s lower 0.0
It’s about the same 36.7
What about one year ago?
It’s higher 28.6%
It’s lower 4.1
It’s about the same 67.3
How many different outsourcing partners does your company currently do business with?
Fewer than five 52.1%
Five to ten 20.8
11 to 15 12.5
16 to 20 4.2
More than 20 10.4
How does this number differ from that of one year ago?
It’s higher 25.0%
It’s lower 2.1
It’s about the same 72.9
What about five years ago?
It’s higher 60.4%
It’s lower 0.0
It’s about the same 39.6
What about ten years ago?
It’s higher 75.0%
It’s lower 0.0
It’s about the same 25.0
Does your company have a dedicated group to manage outsourcing relationships?
Yes 12.2%
No 87.8
If your company does not have a dedicated group to manage outsourcing relationships, does it plan to create one during the next 12 months?
Yes 4.7%
No 95.3
Where do you expect your company’s level of outsourcing to be one year from now?
Higher 60.4%
Lower 2.1
About the same 37.5
Does your company serve as an outsourcing contractor for any other companies?
Yes 32.7%
No 67.3
If yes, how many other companies do you provide outsourcing services for?
Five or fewer 29.4%
Six to ten 17.6
11 to 15 11.8
16 to 20 0.0
More than 20 41.2
If yes, approximately how much of your company’s annual revenue comes from outsourcing contracts?
Less than $50 million 75.0%
$51 million to $100 million 12.5
$101 million to $150 million 0.0
$151 million to $200 million 0.0
$201 million to $250 million 0.0
More than $250 million 12.5
The results of CFO Forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.
