Despite Risk of Falling Behind Global Competitors Executives Avoid Outsourcing. Executives’ Fear of Changes in Management Style and Potential Loss of Control are Holding Canada Back from Realizing Outsourcing Benefits
TORONTO, Jan. 31, 2002 – Cost-cutting has become the number one priority of Canadian executives and while they acknowledge that outsourcing can help them achieve this goal, executives fear the change it may bring to their corporate culture, loss of control and the changes in management style it demands. These were among the key findings in an Accenture survey of over 300 Canadian executives in both the public and private sectors.
The company’s study titled, “Business Transformation Outsourcing, Canadian Perceptions”, found that 80 per cent of executives believe that outsourcing demands a different management system, while 75 percent feel that it radically changes the nature of an entire organization. Accenture defines Business Transformation Outsourcing as a program to change the way a business works by using outsourcing to improve in performance across the entire enterprise.
“Outsourcing does necessitate change within their organization, but business leaders can take comfort in the fact that a strategic outsourcing arrangement offers them shared risk, additional expertise, and ultimately it satisfies their cost-cutting objective,” said Blake Hanna, Accenture – partner, Communications and High Tech practice.
“While Canadian business leaders are rightly focused on the short-term imperative of reducing overhead, those who ignore the longer-term strategic advantages of outsourcing face a bigger potential risk -- the risk of falling behind their global counterparts,” said Hanna.
The study found that Canadian executives remain largely unaware of the emergence of the most strategic form of outsourcing relationship – Business Transformation Outsourcing (BTO), and its potential to create rapid, sweeping improvements in performance.
“Outsourcing, and in particular, Business Transformation Outsourcing, often provides a cost-effective and strategic way for organizations to focus on what they do best and position themselves for future change and growth,” said Hanna. “Business Transformation Outsourcing is about forming relationships to achieve quick, dramatic improvements in performance. Canadian business leaders need to understand this new trend, explore its possibilities, and add it to their management tool kits,” said Hanna.
Other notable findings
When asked about their most critical business priorities for the next two years, Canadian senior managers cited initiatives that will increase operational effectiveness and efficiency. Their top five organizational priorities are:
cutting costs (79%); improving customer satisfaction (79%); enhancing productivity (71%); recruiting and retaining top talent (66%); and attracting and retaining the right customers/clients (62%).
- 64% of Canadian senior managers cite organizational cost savings as one of the key advantages of outsourcing.
85% of interviewees said they have a “favorable” or a “very favorable” impression of outsourcing relationships. The favorable impression of outsourcing rises to 91% among executives who have “a lot of experience” with outsourcing. More than 90% of survey respondents said that they have previous experience with outsourcing relationships, and almost half currently rely on some form of IT outsourcing. That said, most respondents still characterize their experience with outsourcing as “limited”. 68% said that outsourcing certain business functions, processes, or entire organizational entities is a priority in 2002 and 2003. A significant number of business organizations say they would consider turning to a strategic Business Transformation Outsourcing (BTO) solutions partner to help them transform the way their business works in order to achieve dramatic enterprise-level improvements.
“Clearly, the slowing global economy is having an impact on the organizational priorities of Canadian businesses,” says Hanna. “And while no one is claiming that it is the single answer to all the hurdles before them, most Canadian business leaders consider outsourcing a potential solution to at least some of the operational challenges they face.”
The survey was conducted by Northstar Research Partners during November 2001. The objective of the research was to identify the perceptions and attitudes of Canadian executives toward outsourcing in Canada. A total of 304 decision-makers within Canadian government organizations and companies in four key industries -- financial services; communications/high-tech; resources/utilities; and manufacturing/retail -- were surveyed.
Accenture is the world’s leading management 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 $11.44 billion for the fiscal year ended August 31, 2001. Its home page is www.accenture.com.