Less than half of US and European corporates say outsourcing is cost effective, says survey
Three-quarters of US and European multinationals use outsourcing or shared services to support their financial functions although less than half of them consider outsourcing to be cost effective, according to a recent PricewaterhouseCoopers' Management Barometer Survey. US corporates lie marginally ahead of their European counterparts in their willingness to outsource, with 77% compared to 72% outsourcing some portion of the finance function in the past two years. Outsourcing providers will also be cheered by news that 29% of US and European corporates expect to increase the level of outsourcing in their finance functions, with a concomitant rise in spending expected to be 16% above today's levels.
But according to the survey, nearly one-third of corporates see little benefit in outsourcing, only 9% feel they are able to break even with outsourcing and 4% believe they are losing money. So how can corporates change this?
"Many multinational companies that outsource financial functions do not find it to be cost effective," says Dan DiFilippo of PricewaterhouseCoopers' performance improvement team. "Companies that turn to outsourcing for cost savings should conduct comprehensive feasibility studies to better understand their potential return on investment. Many companies enter outsourcing arrangements without conducting a proper cost-benefit analysis."