Outsourcing expenditures to rise 27 percent by early '99

Worldwide outsourcing expenditures will rise 27 percent by early 1999, to more than $235 billion, according to the second annual Dun & Bradstreet Barometer of Global Outsourcing.

In 1997, global outsourcing expenditures increased by 23 percent, according to a press release from D&B.

The results of the D&B survey, announced by Michael R. Flock, president of D&B Asia-Pacific/Canada/Latin America and D&B Receivable Management Services, first appeared in the July 20, 1998, issue of Fortune magazine.

"Our survey shows that outsourcing continues its strong growth and is fast becoming an integral business practice for companies around the world," Flock said in the release. "The results also indicate that this move towards outsourcing has plenty of room to grow because only one company in three globally is currently involved in outsourcing."

Recording to the D&B survey, approximately 60 percent of outsourcing worldwide originates from the North American market, where outsourcing expenditures are anticipated to increase $25 billion, or 21 percent, to $141 billion. In 1997, North American outsourcing expenditures increased at a rate of 15 percent.

Results of the D&B survey indicate that outsourcing will continue to grow in Europe, as well, with expenditures expected to reach $92 billion in 1999, an increase of $25 billion, or 34 percent, from last year.

The survey results cover the 12-month period from April 1998 to April 1999. Dun & Bradstreet surveyed 1,036 businesses in Europe and North America for the D&B Barometer of Global Outsourcing. The survey defined outsourcing as "the use of outside people or companies to perform activities which traditionally would have been performed by your company."

The biggest driver of outsourcing growth, the D&B survey found, is information technology (IT). Survey respondents cited a growing need for outside IT expertise, led primarily by increases in network communication outsourcing. IT outsourcing, which currently represents about 28 percent of all outsourcing expenditures, is anticipated to increase by 26 percent.

While much of the outsourcing expenditures related to IT can be traced to remedial actions required for the year 2000 computer problem, growth is also occurring elsewhere in information technology. The D&B survey showed that new media activities, including intranet, extranet and web site development and maintenance, will continue their rapid growth.

These activities are anticipated to grow by 26 percent.

The D&B survey also shows expected outsourcing growth in the finance and human resources areas, although the average annual outsourcing expenditures for both these areas represent less than one-third the levels spent on IT out-sourcing.

Ronald Klausner, senior vice president and general manager of D&B's Receivable Management Services, has a first hand view of the sharp growth in business outsourcing.

D&B's own out-sourcing collections business is up more than 60 percent in the past year. "We're seeing a move towards a truly global marketplace, where companies are faced with an increasingly sophisticated and demanding consumer," Klausner said.

"The growth in outsourcing is clearly a response to the continued pressure on businesses around the world to deliver more for less."

D&B is also seeing strong growth in its credit outsourcing business, with sales more than doubling in the past year. "Businesses are responding to the demand for better performance, better turn-around time, and more consistent credit decisions," said Bob Clark, assistant vice president of D&B's Business Outsourcing Services.

"Outsourcing enables companies to satisfy their customers' needs, while keeping costs down. It's a win-win situation for both businesses and their customers."

Most companies that have tried outsourcing appear to be satisfied with the results. The survey found that 90 percent of companies already involved in outsourcing plan to continue outsourcing.

Of those, 33 percent plan to increase their outsourcing expenditures through the first quarter of 1999. Only 8 percent expect to reduce expenditures over that period.

Not all the news on outsourcing is positive. Respondents to the D&B survey did report some problems with their outsourcing relationships. In fact, 24 percent terminated an outsourcing agreement in the past two years.

Poor performance and a lack of coordination between the companies were the problems most often cited.

Dun & Bradstreet, a company of The Dun & Bradstreet Corporation, is the world's leading provider of business-to-business credit, marketing and purchasing information, and receivables management services.

The Dun & Bradstreet Corporation, which also includes Moody's Investor Service, has its headquarters in Murray Hill, N.J., and employs 13,000 people in 39 countries. For more information, or to contact D&B, the company can be reached online at www.dnb.com.

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