New York (June 2, 2004) -- More news on outsourcing: Everybody isn't doing it, and it isn't just low-paying jobs that are heading overseas, according to a survey by CFO Magazine.
According to CFO's survey of 275 finance executives, only 18 percent currently use offshore outsourcing. Those companies have moved an average of 6 percent of their workforce overseas during the past three years, although some companies sent as much as 27 percent, CFO reported. Among those already outsourcing, 64 percent plan to use more overseas workers in the next two years.
Seventy percent of respondents have no plans to outsource offshore, 10 percent don't currently outsource offshore, but plan to, and 2 percent who don't outsource said they used to, according to the survey results.
Among those who use offshore outsourcing, 43 percent said their U.S.-based workforce decreased by more than 5 percent over the past three years, one-fifth said their domestic workforce increased by more than 5 percent during that time and 14 percent saw no change. Eight percent said it decreased by 5 percent or less, while 16 percent said it increased by 5 percent or less, CFO reported.
It isn't just call-center jobs that are going overseas. The majority of respondents who are already outsourcing offshore said they are sending information technology job functions overseas (59 percent). Manufacturing jobs ranked second, cited by 36 percent, followed by customer relations/call centers (31 percent) and finance/accounting (21 percent). Forty-seven percent of respondents said at least half of the jobs that moved overseas paid $50,000 or more before being outsourced. Among that group, 19 percent said all of the jobs going overseas paid at least $50,000 before they were outsourced.
According to the report, lower labor costs overseas don't always mean big savings. While a total 42 percent of those using offshore outsourcing report average savings of more than 20 percent, almost as many (38 percent) see savings of less than 15 percent. Eighteen percent realize savings of 16 to 20 percent, while 10 percent of respondents report no savings at all.
When deciding whether or not to outsource offshore, finance executives ranked the need to remain competitive, the desire to improve profit margins and the impact on workers who will be displaced as the top factors they would consider, followed by the desire to reallocate resources to new opportunities, and the impact on morale of remaining employees. Finance execs were least concerned about the risk of negative publicity, which ranked last on the list.
When asked the potential risks of outsourcing, many execs surveyed (47 percent) were very concerned about possible weaknesses in internal controls at their outsourced location; 45 percent were very concerned about the loss of intellectual property. Thirty-eight percent worried about lack of direct control over vital processes, while 37 percent were worried about political instability in offshore. Only 34 percent said they were very concerned about the loss of sensitive corporate information, and the risk of negative publicity ranked last on the list of potential outsourcing risks, with just 13 percent responding that they were very concerned about the potential risk.
The majority of finance execs don't think the backlash over outsourcing will last. Almost half (49 percent) of respondents think it will last until the economy improves. Seventeen percent say it will last until the end of the election cycle, while 16 percent say it will last until the Baby Boomers’ retirement causes a worker shortage in the U.S., and 15 percent think it's a long-term change in public attitude. And among those already outsourcing, only 5 percent say public disapproval will cause them to cut back, while 72 percent say it will have no effect on their plans. Nine percent said they are less likely to consider future offshoring as a result, and 4 percent will increase services/benefits for displaced workers.
When asked what effect offshoring will have on the total level of employment in the U.S., 61 percent said it will lead to a net reduction in U.S. jobs over the next few years, 28 percent said it would have no effect, and 11 percent think it will lead to a net increase in U.S. jobs, CFO said.
-- WebCPA staff
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