If you are still wondering why outsource? Or perhaps you still want more in regards to answering the big question - what is outsourcing? In this section, some important Outsourcing statistics are discussed.
"The global outsourcing market's total revenue in 2013 was 82.9 billion U.S. dollars."
Outsourcing has been significantly and steadily growing across the globe since 2000. The global outsourcing market's total revenue in 2013 was 82.9 billion U.S. dollars, an increase of 37.3 billion dollars since the early 2000s (statista.com 2014). Zooming in on the United States, U.S. multinational corporations cut their work forces in the U.S. by 2.9 million during the early 2000s and since then, outsourced an estimate of 2.4 million jobs. The 2009 recession sparked a resurgence in Outsourcing across the U.S. At that time and still today, business leaders were seeking more ways to outsource, as Outsourcing has many benefits such as it reduces and controls operating costs. This appealing benefit of Outsourcing is a primary reason why only 9% of companies terminated Outsourcing agreements since the recession. To highlight this financial benefit of Outsourcing a good example is the use of Outsourcing the Airline industry - for every 1,000 jobs American Airways sends to India, the airline saves almost 23 million U.S. dollars (economist.com 2014). This surprising truth about Outsourcing can be further seen by the following statistics since the recession:
- 57% of companies Increased the use of Outsourcing
- 34% significantly restructured one or more Outsourcing agreements
- 9% terminated one or more Outsourcing agreements
- 46% of companies have cited their top reason for Outsourcing was to reduce operating costs with 12% desiring to access world class capabilities
Today, the list of Outsourcing sectors continues to widen. With the ongoing boom in technology, IT outsourcing services, manufacturing Outsourcing services and research and development Outsourcing services have notably increased. These facts are illustrated below and the sectors most commonly outsourced from the U.S. are ranked in order:
U.S. corporations also have an expanding list of countries to choose from for Outsourcing services. The list of the top five outsourced countries and their overall rating and workforce for Outsourcing is located below:
(Source: Global Trends in Outsourcing and their Impact, Name: An Interactive Qualifying Project Report submitted to the Faculty of Worcester Polytechnic Institute, By:K. Tyler Marvin,)
Besides the fact that Outsourcing reduces and controls operating costs, the other top reasons why corporations outsource are ordered below:
China, India and Indonesia have been the leading outsourced countries since the mid 2000s. However, in recent years, Mexico has been battling to be the prime hub spot for logistics operations in the U.S. Outsourcing to Mexico, or nearshoring, has been trending among US corporations. This is because nearshoring has many advantages like lower freight costs, improved speed-to-market and time-zone advantages to name a few. As nearshoring is becoming more and more attractive, countries like China are becoming less so. To name a few more reasons:
- The full landed cost of Chinese production rose from 2005 to 2010 to 87% of U.S. costs, while Mexican costs fell to 75% of U.S. costs.
- Ocean freight from Altamira, Mexico to the port of Miami takes 6 days while shipment from Chinea can take up to a month to arrive.
- China's fuel costs grew at approximately 20 percent per year in the past few years
(Source: Moral Logistsics Inc, by:Kelli Saunders, Date:June 15, 2014, Name: 3 Stats Suggesting Mexico is a Prime Nearshoring Choice for North America
Today, like the early and mid 2000s, Outsourcing (whether its nearshore or not) continues to be highly valued. The average U.S. manufacturer today outsources 70% to 80% of its finished product. In a recent survey conducted by the Economist, it was found that 90% of firms consider Outsourcing as crucial to their growth strategies and even stated it is now "essential" to outsource in order to remain competitive on the world stage(economist, 2014).
"The average U.S. manufacturer today outsources 70% to 80% of its finished product."
Since global outsourcing has steadily increased throughout this past decade, many speculate on the future of Outsourcing - especially the future of IT services. Gartner Newsroom, for example, predicts software spending from smart operational technology and cognitive models will increase 25% and global IT spending will be up 2.1% in 2014 compared with 2013. However, others believe it won't be too long before IT is capable of managing itself. Either way, it is necessary to gather such statistics on Outsourcing, IT outsourcing and types of Outsourcing in order to continue answering questions like why outsource? Or What is outsourcing, in order to learn if Outsourcing is right for your company.
(Source and by, Gartner Newsroom, Date: Oct. 24 2012, Name: Gartner Reveals Top Predictions for IT)