Almost three-quarters of big companies to increase outsourcing

Almost three quarters of global businesses will increase their investment in outsourced services, according to research by KPMG.

The research also indicates that more firms are taking advantage of global delivery models including functions such as finance, procurement and HR delivered centrally, often offshore.

KPMG's survey found that 72% of big businesses plan to increase outsourcing spending, while 61% said they will increasingly use global shared services for IT and business processes over the next two years, with offshore services accounting for a larger portion of both.

In its report, The State of Services & Outsourcing in 2014: Things Will Never be the Same, carried out with HfS Research, KPMG said that, on average, enterprises plan to increase their offshoring activities by 20% to 30% over the next year. 

The report said integrated global services models that incorporate internal shared services and outsourcing are the core focus for most enterprises, with 56% are already increasing investments in centralised functions to manage a mix of service delivery models.

Dave Brown, KPMG's head of global lead, shared services and outsourcing advisory, said outsourcing is at a “crucial juncture between providing genuine value and low-cost staff augmentation.”

He said suppliers today must go beyond providing people to carry out standard business functions. 

“Providers need to prove they can do more than basic operations, otherwise outsourcing runs the risk of becoming a staff augmentation model for flexing operations as opposed to a strategic partnership between provider and buyer that can add more skill, technology, and analytical capability for clients.”

Buyers also have to consider where to have services delivered from. The global business service delivery map is changing with a wide choice of locations today. 

For example, when pharmaceuticals giant AstraZeneca decided to reduce the amount of IT it outsources, the company decided to retain the advantages of the offshore delivery model through a captive centre in India. The company is also planning to open delivery centres in Eastern Europe and California.

The recent 2014 Global Services Location Index, from AT Kearney, revealed the best places to outsource services and set up global delivery operations.

Asian countries dominate the management consultancy’s index of the top 50 global locations, with India (1), China (2) and Malaysia (3) making up the top three. Eastern and Central Europe also feature in the index: Bulgaria (9), Poland (11), Romania (18), Hungary (31), Czech Republic (33) and Slovakia (35).

Latin America has two of the top 10 outsourcing locations with Mexico (4), Brazil (8), Chile (13), Costa Rica (24) and Columbia (43) also in the index. The Middle East and North Africa region featured Egypt (10), Tunisia (28), Morocco (34) and Mauritius (36) in the index.

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