A new email survey and in-depth telephone interviews of more than 350 CEOs, CFOs, CIOs, COOs and other senior executives of North American companies found a striking change in the extent of collaboration with third parties in Brazil, China, India, Russia, Taiwan, Vietnam and elsewhere. While the percentage of operations outsourced by companies with less than 1,000 employees is relatively low right now, it is slated to roughly triple by 2011 (see below; blue bar is today; yellow bar is 2011).
Source: BusinessWeek Research Services
The January 2008 survey, sponsored by business software vendor SAP, found a variety of reasons for the increased reliance on overseas collaboration. The motivation goes beyond the labor cost arbitrage. Access to additional skill sets and ideas is a prime motivator, and access to new markets is increasingly seen as a key reason to seek out overseas partners.
Interestingly, many C level officials say overseas suppliers enable them to provide higher quality products and services to their customers, though they rated quality as the highest risk of collaboration.
Another key aspect of the rise of collaboration is the broad-based nature of the efforts in the future. Organizations are not just looking for low cost manufacturing help. As the table below shows, small and medium-sized companies are going to increasingly rely on offshore collaboration for R&D, marketing, sales, customer service and Human Resources support as well (see table below).
Outsourcing more than just IT
Organizations with less than 2,500 employees are already collaborating with external partners for most corporate functions to a modest extent, but more will be relying on others for a substantial extent in the future.
While the C-level execs are intent on increasing the number and extent of their collaborations with other companies, theyre not exactly sanguine about the level of support theyre getting from IT. Indeed, the survey indicates that only half of the respondents are satisfied that their IT infrastructure can support the extent of collaboration incorporated into their strategic goals for the next three years.