IT Outsourcing India

BERLIN — In Europe, 70% of European companies already outsource at least one function of their business, with 20% set to increase their level of outsourcing in the next two years, as they increasingly view it as a means to gaining a competitive edge, according to Ernst & Young’s "European Outsourcing Survey 2008."

The survey consisted of interviews with more than 100 business leaders from companies with an annual turnover exceeding 100M euros in France, the UK, Germany, Italy, Spain and Belgium.

In addition, the survey found the biggest reasons for outsourcing were cost savings (49%) and better quality through the hiring of specialists (33%). The functions most commonly outsourced were maintenance (76%), logistics (73%) and computing/telecommunications (68%).

Belgium recorded the highest rate of outsourcing with 81% of the companies using it, while France had the lowest take-up rate at 63%. However, France demonstrated one of the broadest ranges of outsourced functions, with an average of five functions outsourced per company. Although a common business practice in the UK (71%), outsourcing remains restricted to an average of only three functions.

"Competing in the global economy and having to deal with a strong euro, European firms need to be more scalable and profitable, and this is creating a general trend towards the fragmentation of the traditional vertically integrated business," said Thierry Muller, partner at Ernst & Young France and outsourcing advisory leader, in a statement. "The overall outsourcing experience appears to be a positive one."

In the US, however, outsourcing is more complex, particularly in the manufacturing sector as soaring fuel and transport costs raise concerns.

The cost of shipping a standard container from Shanghai, China, to the US eastern seaboard, including inland costs, has tripled since 2000 and will triple again if oil prices reach $200 per barrel as some experts predict, according to according to a June report by CIBC World Markets.

The high cost of transporting raw materials, component parts and finished goods may well prompt some US companies to return their overseas manufacturing operations to the US, according to CIBC.

Sentiment in the US already appears to reflect the findings. According to a June survey by the National Association of Manufacturers, nearly half of North American manufacturers consider the US the most desirable country for business expansion in the next three years, and more than half expect to become more globally competitive in the next five years.

Although high fuel prices may impact, slow or even reverse outsourcing in some business sectors, it will not cause a dramatic shift in the globalization of the supply chain, the CIBC report concluded.

Source : http://www.my-esm.com/

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