Executives Cite Loss of Operational Control as Most Significant
Barrier to Expanding Outsourcing
LONDON; July 2, 2002 — “An overwhelming majority of businesses
are using outsourcing as a cost-cutting tactic, but few companies
have embraced it as a strategic business imperative, according to
new research from Accenture (NYSE: ACN).
The research was based on a survey of 150 senior executives at
Fortune 1000 companies in the automotive, consumer goods, retail,
industrial equipment and transportation industries. Participants
were asked about current and future outsourcing initiatives,
barriers to more effective use of outsourcing, and how quickly they
expect a return on these investments.
Nearly nine out of 10 respondents (87
percent) said their companies outsource at least one aspect
of their business. For instance, 27 percent
outsource information technology, 27 percent outsource
logistics/distribution, and 25 percent
outsource customer service/technical support. Two-thirds of
respondents, however, reported no plans to
expand their outsourcing to other business areas
within the next 18 months.
“There is a distinct gap between how
companies use outsourcing now and the strategic
possibilities it offers, but apparently
there are hurdles that must be overcome before many
companies will embrace outsourcing more
strategically”, said Greg Caster, a partner in Accenture’s Products
Operating Group. “While executives have long realized that
outsourcing basic business
activities can enhance operational
efficiency, only a select few are ready to use outsourcing as a
tool to drive business growth.”
Almost one half (48 percent) of the
executives surveyed said that the fear of a loss of operational
control was the most significant barrier to
expanding their use of outsourcing. Other impediments
cited included cultural barriers in the
organization (19 percent), costs (14 percent) and long-term
dependency on an external organization (11
percent). Just 6 percent cited diminished vendor
relationships and collaboration capabilities
as an impediment to more aggressive use of
outsourcing.
“There is a significant competitive
opportunity for companies who succeed in closely aligning
strategic outsourcing initiatives to their
growth plans and using outsourcing to transform cost
structures and service levels,” Caster said.
But the outlook for uptake still remains
sluggish. Of the executives who plan to increase
outsourcing within the next 18 months, 13
percent said they would consider outsourcing human
resources and 13 percent said they would
consider outsourcing their IT operations.
“These findings tell us that even those
companies with plans to increase their outsourcing are still
approaching it as a means of cost-cutting,”�
added Caster.
An additional factor in this equation may be
return on investment (ROI) and timeframe. One-fourth
of respondents expected to see ROI within
the first six months, and almost one half (42 percent)
expected it within seven to 12 months.
“The demand for rapid ROI leads companies to
undertake bite-sized projects instead of the
business transformation initiatives that may
be necessary to compete long-term,” commented
Caster. “Those that invest in the long-term
vision will be better positioned to reap both the short-
and longer-term benefits.”
About Accenture
Accenture is the world’s leading management
consulting and technology services organization.
Through its network of businesses approach
— in which the company enhances its consulting and
outsourcing expertise through alliances,
affiliated companies and other capabilities — Accenture
delivers innovations that help clients
across all industries quickly realize their visions. With more
than 75,000 people in 47 countries, the
company generated net revenues of US $11.44 billion for
the fiscal year ended August 31, 2001. Its
home page is www.accenture.com.
