1

OFFSHORING AND OUTSOURCING - RISK,

CAPABILITIES ETC..

DR. MURALI KRISHNAMURTHY

 Outsourcing
» Defined as the complete transfer of a business process
that has been traditionally operated and managed
internally to an independently-owned external service
provider.

˃ A complete transfer of all associated internal business process

activities
˃ Once outsourced, the people, facilities, equipment,
technology and other assets are no longer maintained
internally

9-2
 Outsourcing
» Not the same as subcontracting, joint venturing or
contract manufacturing

9-3
Outsourced activities

Source: Handley, S.M., The Evaluation Analysis and Management of 4

the Business Outsourcing process, Unpublished Dissertation, The
Ohio State University, 2008 9-4
 The concept of Outsourcing
» A process rather than simply an event

Source: Handley, S.M., The Evaluation Analysis and Management of the Business 5
Outsourcing process, Unpublished Dissertation, The Ohio State University, 2008
9-5
 Reasons for
Outsourcing Business Processes

The generic strategic benefits of outsourcing are:

1. Cost Minimization
2. Refocus Organization to Core
3. Improvement in Operating
4. Increased Market Share and Revenue

9-6
Outsourcing Business Processes

» The usual primary driver for outsourcing :

+ A reduction in direct operating costs which must be significantly
lower than the current direct operating costs

9-7
 Specific Purposes & Benefits of
Outsourcing
1. To reduce and control operating costs
2. To improve quality
3. To change company focus
4. To acquire external capabilities
5. To refocus scarce resources for alternative uses
6. To reduce cycle time
7. To obtain cash infusion
8. To reduce risks
9. To gain flexibility
10. To turn fixed costs into variable costs

9-8
 The Following are Important for Realizing
Expected Outsourcing Benefits

» An extensive strategic assessment

» A true commitment to a cooperative relationship

with the service provider

9-9
The Hidden Cost of Outsourcing
1. Quality Costs

˃ Preventative
˃ Appraisal
˃ Internal failure
˃ External failure

10

9-10
Detecting Quality Failures
The buying firm will need a proper mechanisms that are
capable of detecting quality failures by an external source.

This may be more difficult than with internal sourcing

11

9-11
 The Hidden Cost of Outsourcing
2. Supplier or Vendor Relationship Management
The most effective external sourcing relationships involve
considerable management time and coordination

External Sourcing which involve:

˃ Commodity products or services may not require extensive

relationship building and coordination.
˃ Strategic products and services require extensive relationship
building and coordination activities.

12

9-12
The Hidden Cost of Outsourcing

» Relationship Management Costs

˃ Labor expense of purchasing personnel
˃ Travel
˃ IT infrastructure and management
˃ Supplier development programs (e.g. training and
performance evaluation systems)

13

9-13
 The Hidden Cost of Outsourcing
3. Internal Coordination
» Contrasted against the internal coordination and overhead
costs associated with internally sourcing (Vertically
integrate or Make)

» The costs of bureaucracy

˃ Payroll, benefits management
˃ Utility expenses, IT expenses, etc.

14

9-14
 Understanding Overhead Costs

Firms need to have a thorough understanding of these

marginal overhead expenses and how they would be
incrementally impacted by outsourcing

15

9-15
 The Hidden Cost of Outsourcing
4. Implementation of External Sourcing Model

» Costs associated with the transition resulting from

switching sources
– supplier search, evaluation and contracting
– the transfer of physical assets
– domestic and international travel during start-up
– training of the new source

16

9-16
Additional Hidden Costs Associated with the
Internal Workforce

• relationship manager training for internal

employees
• retention bonuses, severance packages,
employee turnover
• management time required to thwart labor
disputes

17

9-17
 The Hidden Cost of Outsourcing

5. Coordination of Product / Service Design and

Development
˃ There appears to be a significant interplay between the
architecture of the product or service and the cost of
coordination.

˃ Cost of coordination: the number of engineering

hours required to bring a new product to market
˃ Tightly coupled or integrated product designs
require higher levels of coordination

18

9-18
A Need to Coordinate Sourcing Alternatives

» Firms need to develop a deep understanding of

the coordination cost implications of various
sourcing alternatives

19

9-19
 The Hidden Cost of Outsourcing

6. Governmental and Political Related Expenses

» Costs involved with ensuring compliance with

governmental laws, regulations, and even local
business customs
˃ legal expenses incurred to learn about a foreign location’s
laws and regulations, travel
˃ taxation, local content obligations, lobbying efforts
˃ tariffs, quota systems, etc.

20

9-20
 The Hidden Cost of Outsourcing

7. Supply Chain Risk Management

» Risk can be defined as a measure of the probability and
severity of adverse effects.

» Four iterative phases

1. Risk assessment
2. Risk mitigation
3. Risk monitoring
4. Contingency planning.

21

9-21
 Supply Chain Risk Management

» A comprehensive risk management approach will

introduce costs that are different for various
sourcing alternatives.

» Different options will carry with them different types

and sizes of risks.

» Some specific costs includes

˃ insurance, dedicated risk management
personnel, financial hedging, and operations
hedging.

22

9-22
 The Hidden Cost of Outsourcing

8. Miscellaneous Financial Considerations

Sources of financial benefit from outsourcing
 Vendor’s better economies of scale
 External suppliers’ capability to aggregate the demands of their
multiple customers

23

9-23
 Miscellaneous Financial Considerations

» The size of the buying firm’s portion of cost

improvement is determined by competitive
conditions in the supply market, power structures,
and the overall threat of opportunistic behavior by
the external supplier.

» If a firm’ internal efforts can generate nearly equal

financial improvement as outsourcing, the
outsourcing decision is called into question.
24

9-24
 Core Competencies

» Core Competencies are:

+ The collective learning in an organization
+ Unique combinations of thought, focus
and implementation methodologies
+ Achieved over the long term

» Outsourcing can provide short-term competitive

benefits, but does not significantly improve
Core Competencies 25

9-25
Keys to Outsourcing Success in Today's
Economy

1. Understanding and avoiding the pitfalls of cost-focused

outsourcing and apply a total business-outcome-focus

2. Continuously re-evaluate contracts to improve efficiency

and costs. The drivers of efficiency and costs are:
+ Provider selection and retention,
+ Services delivery policies, contract pricing and etc.

3. Ensure a certain level of flexibility in contract terms in

order to be response to corporate changes
26

9-26
 Elements of Strategic Outsourcing

• The steps are highly

interrelated.
• Modification to the
steps are required to
fit each specific
organization and
outsourcing objectives.
• Concurrent
relationships between
steps reduce the
implementation cycle
time. 27

9-27
 Elements of Strategic Outsourcing

1. STRATEGIC EVALUATION
• Outsourcing is the act of reversing a previous decision
to “make” or perform a particular function internally.

• The first step is to understand the strategic

importance (value) of the activity or system.

+ Standardized processes, commoditized products, etc.:

extremely low strategic value.

• Buying firms must make decisions as part of a

comprehensive sourcing strategy. 28

9-28
Elements of Strategic Outsourcing

2. FINANCIAL EVALUATION

• Outsourcing decisions are required to make short

and long-term financial sense.

• However outsourcing benefits are not mutually

exclusive and independent constructs, but rather
significantly interrelated.

29

9-29
Elements of Strategic Outsourcing

3. SUPPLIER SELECTION AND CONTRACT DEVELOPMENT

» Supplier Selection
˃ Supplier profiles
+ Key management contacts, a company overview
+ SWOT analysis, Porter’s five key financial figures
+ Information on current contracts, “owners” of the relationship
within the firm, and an organizational chart.
+ Functional evaluation of the content

˃ Establish expectations, scope of work, pricing

30

9-30
 Supplier Selection and
Contract Development
» Contract Development
˃ a minimum for an enforceable contract include:

1. A clearly defined scope of work and elements of the

processes to be supplied
2. An agreed upon approximate price for each aspect of what
is being supplied.
3. An understanding of an acceptable level of operating
flexibility as circumstances and requirements change.
4. Consider a short term contract with provisions for
extensions and renegotiations
5. Ground rules that encourage relationship and alliance
maintenance
6. Determination of a means for measuring performance for
each aspect of the agreement. 31

9-31
 Element of Outsourcing
4. TRANSITION TO EXTERNAL SOURCING MODEL

Begins with the contract execution to the transfer of the

agreed upon activities and resources
• The buying and selling organizations must both follow
the specific roles outlined in the contract
• The buying organization must also appoint a relationship
manager
• The relationship manager and the supplier must merge
their independent plans into one consensus plan

32

9-32
 Elements of Outsourcing

TRANSITION TO EXTERNAL SOURCING MODEL

(continued)

» Consensus transition plan must include at a

minimum
˃ Communication Criteria
˃ Personnel Criteria
˃ Transition Criteria

33

9-33
 Elements of Outsourcing
TRANSITION TO EXTERNAL SOURCING MODEL (continued)
» Communication Criteria
˃ About the process of communicating external initiatives to
the affected and unaffected employees

˃ The following actions should included in the process

+ Announce that the contract has been signed and awarded to the supplying
firm
+ Discuss how severance packages will be offered to affected employees
+ Conduct extensive question and answer session

34

9-34
 Elements of Outsourcing

TRANSITION TO EXTERNAL SOURCING MODEL (continued)

» Personnel Criteria
˃ About the overall message itself that will be
communicated to the affected and non-affected
employees
˃ Create the perception of procedural and interpersonal
justice
1. Communicate early and clearly why the decision was made
2. All stakeholders need to feel as though their interests were
represented
3. Retained employees need to be trained to enhance their “lateral”
skills such as relationship management, negotiation and consensus
building.
35

9-35
 Elements of Outsourcing
TRANSITION TO EXTERNAL SOURCING MODEL (continued)
Transition Criteria
1. The schedule involving the transfer of activities and
resources to the supplying organization
2. The list of activities to implement outlined in the
project management schedule should include:
– An organization meeting for employees being transferred to the
supplier’s organization.
– A meeting with the buying firm’s manager whose activities are
being outsourced conducted on-site at the new location.
+ A creation of a plan to address the issues involved in transferring
significant physical assets
– a specific third-party agreement in the contract
36

9-36
 Relationship Management
» In order to effectively cultivate the relationship, the
buying firm must actively monitor and evaluate
performance. The buying firm must also solve
outsourcing related problems.

» The original contract establishes

+ the performance measures
+ deliverables, due dates
+ the expected supplier requirements
37

9-37
 Relationship Management
1. Performance measurement is the cornerstone of the
buyer-supplier relationship.
• It establishes control which provides the ability to
manage the relationship

2. The buyer and supplier relationship managers should

develop and execute the reporting system established
in the contract.
+ A performance report is also needed. See the following slide.

38

9-38
 Performance report
Performance Performance 2009 2009 2008 2008 2007 2007
Measures Standard Actual Variance Actual Variance Actual Variance

Number of
outputs

Number of
errors

Number of
on-time
deliveries

Number of
day-cycle
time

Number of
outputs per
employee

 The performance report should be designed to compare

the actual performance to the contractual standards. 39

9-39
 Risk
» Outsourcing risks include:
˃ Breaches in intellectual property
˃ Provider shirking
˃ Opportunistic renegotiation

» The combination of contractual

incompleteness, asset specificity, and
uncertainty gives rise to these risks when firms
pursue external sourcing

40

9-40
 Performance Report
» Risk is the difference between risk and
uncertainty
» Risk as defined By Knight:
˃ Risk is measurable, but uncertainty cannot be measured
˃ Buyers outsourcing risks (BOR) = PA x NC
˃ PA = the probability that an adverse event will occur
˃ NC = negative consequences if the adverse event occurs, assuming
that each of the adverse events is independent

41

9-41
 Forms of Governance

» Traditional theory
˃ Hierarchy (i.e. internal sourcing) v. Market (i.e.
external sources)
˃ Market: arm’s-length relationship between the
customer and supplier organization

42

9-42
 Forms of Governance
» Hybrid governance theory
˃ From the observation of Japanese- style supply chain
relationships
˃ Neither purely hierarchical nor a purely arms- length
market mechanism.
˃ Seeks to realize the control, goal alignment, and
improved coordination associated with retaining an
activity internally, while also benefiting from the
potentially superior skills and cost position of specialized,
external organizations.
˃ The relationship is more of a long-term, collaborative
partnership 43

9-43
 Long Term Relationships
» Benefits
˃ A reduction in transaction costs
˃ Improve learning and control opportunism
˃ Greater social capital
+ Improved dissemination of information and reduced motivation for
opportunistic behavior

+ Social capital: the sum of the actual and potential resources embedded
within, available through, and derived from the network of relationships
possessed by an individual or social unit.

44

9-44
Long-term relationships with service providers can
mitigate many of the traditional concerns with
external sourcing

45

9-45
 Requirements for
Long Term Relationships

» Strong commitment from both parties

1. The sharing of timely, rich, and often proprietary information
including:
– demand forecasts, detailed cost
information
– new product plans, strategic change
2. For building trust between the organizations
3. For more effective planning and execution

46

9-46
 Requirements for
Long Term Relationships
• Joint effort by the organizations.

• Equitable distribution of pain and gain (tying their destinies

together)
• A contract that defines performance incentives by means of
penalty and reward structures
• A constructive and flexible change management and dispute
resolution process
• A formalized procedure for communicating the buyer’s
expectations and evaluating the supplier’s performance
47

9-47
 Background on the Booz Allen Hamilton
Outsourcing Security Survey
» As the use of outsourcing continues to grow, so too do risks to
customer and company data that companies must rely on their
outsourcing vendors to protect
» In order to better understand how companies are managing the
information security and data privacy risks of outsourcing, Booz
Allen Hamilton surveyed senior executives involved in defining and
managing their companies’ outsourcing strategies
» The survey, which reflects the responses of 158 executives from
companies across a range of industries, June-December 2005, was
designed to provide insight into:
˃ Senior Executive perspectives on the magnitude of information security risk involved in outsourcing
relationships
˃ How companies approach the evaluation and monitoring of outsourcing vendors’ information
security capabilities
˃ The information security and data privacy challenges that the outsourcing industry must address in
order to maintain the trust and confidence of customers and clients
» The following presentation provides an initial summary of the 48
survey results
 Key Takeaway: Companies using
outsourcing are increasingly concerned
about information security
Executive Summary

» Security is an increasingly important issue among outsourcing buyers

» While security is a complex issue, respondents almost unanimously agreed on
the need for standards and auditing mechanisms
» These mechanisms are particularly needed in some key countries where
respondents do not trust the current legal and regulatory infrastructure (e.g.
India, China)
» Support is growing for government involvement in setting and enforcing
security standards
» Like financial markets, outsourcing security can benefit from public - private
partnerships to provide regulations, standards and audit capabilities
» Outsourcing buyers seem willing to pay a premium for improved security
capabilities
49
Services, pricing and security capabilities
are the top three evaluation factors when
selecting an outsourcing partner

Capabilities and quality of 117

services

Pricing of service and cost

77
savings to the company

Provider's security policies, 74

capabilities and track record

Financial strength and 63

business stability

Reputation, brand and 51

references

Provider's regulatory and 33

compliance history

17
Geographic factors

0 50 100 150

When selecting an outsourcing partner, what are

the most important evaluation factors? 50
 Companies are more concerned about cyber
threats than physical breaches and natural
disasters
When evaluating or managing outsourcing
relationships, how concerned are you about the
following type(s) of security threats?
Theft, misuse or damage of company systems and 101
data from outside the Outsource Provider
(system hacking, viruses, spyware infiltration, etc.) Cyber
Theft, misuse or damage of company systems 98 Threat
or data from inside the Outsource Provider s

Theft or damage of data or assets via compromises 56

of physical security (break-ins, vandalism, etc.)
Non-cyber
Threats
Compromise of operating continuity due to external 56

factors (natural disasters, political instability, etc.)

0 50 100 150

51
Note: Includes only # of respondents who answered “Very Important” in each category
Note: Respondents were asked to select all that apply
 Increased awareness of security risks has led
many companies to review their outsourcing
strategies in the last year

As a result of this knowledge, has

In the last two years, have you your company reviewed its
heard of specific examples of overall outsourcing strategy in
outsourcing security failures the last year?
and/or breaches of privacy?

No
No Yes Yes
42 37
58
% % 63
%
%

52
 The security risk is perceived as significantly
higher for providers with offshore operations
Do you perceive a greater or lesser risk of
security threats for outsourcing providers
located offshore?
Much Lower No basis
1 for comparison
4
Moderately Lower 2 %
%
%
Same
28%
17 Much Higher
%

48 76%
76% of
of respondents
respondents consider
consider the
the
% security risks when using offshore
security risks when using offshore
Moderately Higher providers
providers higher
higher than
than the
the risks
risks
associated
associated with
with domestic
domestic providers
providers

53
 Providers with operations in India, Asia and
South America are particularly challenged by a
legal and regulatory perception gap

Which geographies have a robust regulatory and legal Major Findings

infrastructure? » North America is seen as having
North America 83%
the most robust legal and
Ireland 52% regulatory environment, followed
by Ireland and the emerging EU
Emerging EU 42% countries of eastern Europe
» India is seen as fair, with room to
India 27%
improve, as only 27% of
respondents indicated that the
Southeast Asia 11%
area has a robust legal
Other 9% infrastructure
Challenging
Challenging Regulatory
Regulatory
and Legal Environments
» China, South America, and
and Legal Environments
South America 6% Southeast Asia were seen has
having the biggest legal and
China 5% regulatory gap, with 11 percent
or fewer respondents indicating
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
they had a robust infrastructure
% of Respondents selecting geography
54

Note: Respondents were asked to check all that apply

 Providers’ security capabilities matter more
than providers’ security budgets ….
How important are the following security factors when evaluating and managing
an outsourcing relationship?

82
Provider’s network & system
security 78
Provider’s compliance with
standards and laws
68
Provider’s personnel security Verifiable security
management capabilities
policy and procedures matter more than absolute
63 spending
Physical security at provider’s
facilities
60
Provider’s security team (depth
of expertise)
Provider’s security budget 33

(provider’s budget on security

0 20 40 60 80 100
relative to industry best
practices)
55
Note: Includes only # of respondents who answered “Very Important” in each category
Note: Respondents were asked to select all that apply
…however defining, monitoring, and integrating security
management in outsourcing contracts is a growing challenge
Which factors present the biggest management
challenges in evaluating and managing security
in outsourcing relationships?

Establish effective security management 65

requirements in the contracts

Monitoring, auditing and evaluating vendor 58

compliance with established security policy

Evaluating and implement security technology and 54

process integration

Acquiring and maintaining the right skill sets and 31

capabilities to manage security

Determining how much to invest in security in an 26

outsourcing relationship

Delivering effective training in policies and

22
procedures of Outsourcing Providers

0 20 40 60 80
% of respondents putting factor in top 3
56
 Companies want more 3rd party audits and independent
security evaluations of outsourcing providers
What tools do you feel are most important to
use in evaluating the security capabilities of
outsourcing vendors?
Site visits and in-person audits of vendor 105
security processes and capabilities

References from other clients 95 Pull metrics

3rd party security certifications
89
(e.g., NASSCOM)

Security industry benchmarks 80

& analyst reports

Vendor’s security track record

39
as reported in media, industry press Push metrics
Vendor’s self-reported metrics 37
(e.g., RFP responses) Information
Information on
on vendors
vendors sought
sought
by
by companies
companies (pull
(pull metrics)
metrics) isis
0 50 100 150
more
more reliable
reliable than
than vendor-
vendor-
reported
reported metrics in
metrics in RFPs
RFPs or
or
media
media (push
(push metrics)
metrics)

57

Note: Respondents were asked to select all that apply

The US government could play an increasing
role in creating security and privacy regulations
for outsourcing providers
Should the U.S. create specific regulations for
outsourcing providers to ensure they meet
commonly accepted security and privacy standards?

Yes, across all providers, functions

No and service categories
33%
32%

Two
Two thirds
thirds of
of respondents
respondents are
are
34%
open
open to
to some
some form
form of
of US
US
regulation
regulation of
of security
security standards
standards

Yes, but only for specific functions

or service categories
58
Outsourcers should work with associations and
governments to define and establish security
regulations and standards…
Who should be responsible for
defining and establishing the
standards?
Customer trade groups or industry
50
associations

Industry
Industryassociations
associationstop
top
Outsourcing service provider coalitions 46 preference
preference for
forestablishing
establishing
or industry associations
security
securitystandards
standards

Independent experts and outside 49

consultants

Government-led from within major

industrialized nations (e.g. U.S., Europe) 49

Government-led from countries with growing

outsourcing industries (e.g. India, China) 31

Industry
Industry ready
ready for
for public-private
public-private
0 20 40 60
partnerships
partnerships for
for setting
setting
# of Respondents expressing preference standards
standards and
and regulations
regulations

59
 …while leveraging external auditors for
monitoring
Who should be responsible for
certifying, monitoring and
enforcing standards?

External enforcement via regular certifications and audits 73

by external consultants and auditors

Self-enforcement and reporting

at the outsourcing company level 38 Nearly
Nearly 2:1 2:1 preference
preference
for
for 33 party
rd
rd
party audits
audits over
over
self-enforcement
self-enforcement

External enforcement via active regulation

and management by government entities 41

0 20 40 60 80

# of Respondents expressing preference

60
 Investments should be prioritized for security training
and awareness, new technologies and improved
policies/procedures
How do you believe outsourcing providers should
prioritize their security investments?

Invest in internal security training, 107

education and awareness initiatives
Invest in new security technologies 85

Improve published security policies and 75

procedures
Invest in outside, independent assessments to highlight 70
internal security and compliance track record

Invest in new physical security and other 51

business continuity initiatives
0 20 40 60 80 100 120

# of Respondents expressing preference

61

Note: Respondents were asked to check all that apply

 Buyers may be willing to pay a premium for improved
security capabilities — challenging the industry to
demonstrate ROI
Would you be willing to pay 10% to 15% more for
outsourcing services if you thought it would ensure
superior security?

No - additional security is either not worth

the premium or it is too difficult to validate
Definitely - proven security
15% is worth the additional cost
30%

55% 85%
85% ofof respondents
respondents may
may be
be
Maybe - would depend on comparison willing
willing to
to pay
pay some
some premium
premium
of security against other factors for
for improved
improved security
security

62
 Respondents viewed service disruption, loss of customer trust and
brand impact, and loss of intellectual property as equally
important outsourcing security risks

What do you believe are the greatest security risks and vulnerabilities to your
business from outsourcing?
Disruptions in product delivery or service caused by breakdowns
94
in mission critical business processes or functions

Loss of customer trust or relationships due to improper or

fraudulent use of confidential customer data 91

Loss of intellectual property or other sensitive information via

either accidental exposure, theft or misuse of corporate data 94

Brand or reputation damage that results in loss of goodwill 92

arising from actual or perceived risk of security failures

Risk that your company is liable for improper actions of your 65

outsourcing provider

Other 5

0 20 40 60 80 100
# of Respondents expressing preference

63

Note: Respondents were asked to select all that apply

 Companies are more concerned about theft or misuse
of outsourced data than they are about the threat of
terrorism
From your perspective, how serious How concerned are you about theft,
is the threat of terrorism for the misuse or damage of company systems
operations of domestic outsourcing and data from outside/inside an
vendors? outsource provider?
Serious
No Basis Threat Not Concerned
for Evaluation
9% 9%
15%

Moderate Somew 28%

39% Threat hat 63%
Concer
47% ned
Low
Threat Very
Less
Lessthan
than 50%
50%view
viewterrorism
terrorismasasaa
moderate – serious threat, while
moderate – serious threat, while
Concerned
91%
91%were
weresomewhat
somewhat––veryvery 64
concerned
concerned about
about data
data theft
theftor
or
misuse
misuse
There is credibility gap in the security capabilities of providers,
with clients in some verticals more skeptical than others
For your industry, do you find the
security capability claims of
outsourcing providers credible? 15%  Less than half of
25%
25% financial services

Financial Services
respondents trusted
30% even the largest
30% providers’ security
Yes capabilities
Maybe, but
no way to
14%
verify or 18%  Government
30%
validate 36%
25% respondents were
9% even more skeptical
claims

Government
with less than 30%
36% trusting all or the
37% largest providers
20%
No Yes, but only
the largest 14% 24%  67% of
Half
25% manufacturing
Half of
of
Verification 19%
Verification of
of respondents found
Manufacturing

respondents
respondents
compliance
compliance 22ndnd
discredit
discredit
most
some degree of 65
most important
important
outsourcers’ 43%
outsourcers’factor
evaluation
evaluation factor provider security
security
security claims
claims
claims to be credible
 Over the next two years, respondents expect continued growth
in the outsourcing market, but are generally divided on whether
growth will occur in existing functions, or expand upstream
For your industry, what do you expect 5%

in the outsourcing market in the next  95% of financial services

two years? respondents expect

Financial Services
outsourcing market
50% 45% growth to continue, but
Reduction in the
size of the market are divided on expansion
into upstream functions
Slowing growth or market
stagnation

6
7% %  Government respondents
27%
are less certain, with
36% almost 40% expecting
market stagnation or

Government
49% 9%
reduction
27%
38%
Continued growth and 5%
successful expansion of
outsourced functions
Continued growth, but with (e.g., moving upstream into R&D)
 86% of manufacturing
10%
little expansion respondents expect
beyond current functions outsourcing market
growth to continue, but 66
Manufacturing

43% 43% are divided on expansion

into upstream functions
83% of respondents are currently outsourcing
or actively considering doing so
Is your company either currently
outsourcing any functions or actively
considering outsourcing?

17%
NO

83%
YES

67
Survey respondents represented companies of all sizes

Distribution by Revenue Distribution by # Employees

19% 8%
5%

39% <$100 M
<1,000
$100M - $1B 42%
18% 1,000 - 10,000

18% $1B-$10B 10,000 - 50,000

>$10B+ 50,001 - 75,000

75,000+

24%
27%

68