News

December 11, 2009

One in five small firms considering outsourcing abroad, claims survey

More than a fifth of small firms are considering relocating or outsourcing elements of their business overseas next year in an attempt to reduce their costs, research has revealed.

An online poll of 200 small firms carried out by SLASSCOM, the development body for Sri Lankan outsourcing, found that 22 per cent of UK small businesses were thinking about offshoring in 2010 - either by relocating overseas or outsourcing elements of their business abroad.

The recession was the biggest driver, the survey said, while the high cost of UK labour was a motive for 28 per cent of UK businesses. More than one in ten also said they would use offshoring due to a lack of available UK skills.

Among the functions most likely to be outsourced by small firms were IT (cited by 24 per cent), data processing (20 per cent) and customer service (18 per cent).

However, National Federation of Enterprise Agencies’ (NFEA) spokesman, Hayley Williams, said that the survey’s main claim that a fifth of small firms are considering offshoring next year seemed unrealistically high.

“It’s likely that most of this 22 per cent are just considering using an overseas supplier, or outsourcing another element of their business, rather than relocating everything overseas,” she said. “The Internet has made it much easier for small firms to outsource parts of their businesses.”

NFEA chief executive, George Derbyshire, added: “The large numbers apparently considering an overseas move or outsourcing is somewhat concerning — it’s not a decision that should be taken lightly.

“We would always advise small business owners to be cautious before making an overseas move or outsourcing any of their functions and carefully consider their options - so that they do not risk jeopardising their customer services and relationships, and ultimately the success of their business,” he said.

According to the National Outsourcing Association’s (NOA) chairman, Martyn Hart, there is a growing awareness that offshoring is not just for big firms and that it could bring real cost benefits. “Going forward, we expect a significant increase in cost-based and strategic sourcing across the small business sector,” he said.

However, an NOA spokesman said offshoring was not without risks for small businesses. “First, firms need to make sure that they have definable and portable business processes, otherwise the model won’t work for them,” he said.

“Secondly, they need to consider the compatibility of different locations, taking into account that country’s legal system, culture and language,” added the spokesman. “Small firms considering offshoring should seek professional advice either from the NOA or a qualified offshoring adviser.”

• For more information about offshoring, visit the NOA website