Offshoring by US companies surges: survey

AFP, Aug. 3, 2009

WASHINGTON — US companies are increasingly turning to offshoring their functions to achieve cost savings, and few plan to bring those jobs back to the United States, the Conference Board said Monday.

The number of US companies with a corporate offshoring strategy in place more than doubled in the past three years, according to the fifth annual report on offshoring trends, published by Duke University in collaboration with the Conference Board.

Of the companies surveyed, 53 percent had a corporate offshoring strategy in place, up from 22 percent in 2005, said the Conference Board, a nonprofit business research organization.

"Sixty percent of companies that had already offshored say they have aggressive plans to expand existing activities, and very few plan to relocate activities back to the United States," it said.

The report also said the globalization of innovation -- defined as engineering, research and development (R&D), R&D support functions, product design, and software development, is accelerating.

"Speed to market and the domestic shortage of science and engineering talent are two key drivers for offshoring projects," the board said.

In the 2007-2008 survey, the financial services industry has the highest proportion of companies adopting corporate-wide offshoring strategies.

In 2004, offshoring strategies were largely focused on information technology and help desk support and aimed at reducing costs.

Now, members of senior management are expressing a growing interest in existing offshoring initiatives and future opportunities in a variety of areas, including engineering, software development, marketing and sales and procurement.

Ton Heijmen, senior advisor for outsourcing and offshoring at The Conference Board, and one of the report's authors, said that companies that have implemented a corporate-wide offshoring strategy often report significantly better performance.

Such companies often have improvements in cost savings, meeting target service levels, improving relations with providers and overcoming internal resistance, he said.

"Outsourcing innovation in engineering, research and development, product and software development, and knowledge processes makes companies, whatever their country of origin, more competitive by increasing speed to market and compensating for domestic talent gaps," Heijmen said.