November 12th, 2004
Experts from the CBI are drawing attention to the fact that the UK's competitiveness is lagging behind global rivals. Outsourcing is now a 'survival issue' for UK businesses. The alert was raised by the Director General of the employers' organisation, Digby Jones, who said enterprise is naïve - if it thinks outsourcing abroad can be ignored.
"Make no mistake, this is a survival issue," he explained in a statement. "Anyone who believes that firms have a great deal of choice are naïve. They know if they don't do it, somebody else will. If competitors act and they don't respond, they may put their business at risk. Offshoring is now part-and-parcel of doing business in the global economy."
His remarks found support from the Chairman of IT services group Xansa, Bill Alexander, who said the success of his company was down to "finding the best service at the best price, wherever it could find it." "Not all offshoring is well planned or well managed, but it is certainly not new," he told the outsourcing panel. "For hundreds of years nations have been exploiting their comparative advantages and those advantages may be skills, costs processes, materials or even climate, but the principle is the same."
He added that in some business areas, offshoring has made a real difference in cutting costs as well as keeping prices down for customers.
"For a lot of customers at Xansa, the balance of advantage falls very much the other way," he said. "They gain real competitive advantage from well planned, well managed offshoring and they have 3000 employees in India - building new science parks to take advantage of the economy."
Research from the CBI claims that over half of UK firms approached half have felt more pressured to adopt outsourcing solutions in the last two years. A third of UK firms responding to the same poll said they had already set up services overseas, with a strong majority saying they felt satisfied with the experience.
Yet evidence from Proudfoot Consulting shows more than a third of British companies opting to outsource found it failed to deliver or failed outright.
As those involved with outsourcing know, one of the main difficulties lies in ensuring that communication and especially cross cultural communication is effective. Poor cross cultural understanding of how the 'other' communicates, works, manages, and delivers results eventually leads to failure.
Regardless of bad experiences, it seems that the trend towards outsourcing and offshoring is set to continue. Companies need to be aware of the probable cross cultural challenges that will ensue and be prepared to overcome them in order to maximise the potential of their overseas ventures.
