Why Majority of China Mainland Businesses Are Still Reluctant to Outsource

According to the latest Grant Thornton International Business Report 2014 (IBR), 37% of China mainland businesses currently use outsourcing providers or plan to, while 63% have no plans to outsource any business processes in the near future. Although outsourcing can provide cost savings and process efficiencies, many business leaders are worried about losing control of their business processes.

 

The research reveals that China mainland businesses cite losing control of business processes as the major obstacle to outsourcing, taking percentage of 38% among all barrier factors; 29% of businesses lack plans to outsource, suggesting the issue is not on their strategic agenda; meanwhile, high cost of outsourcing and redundant labour resources are also concerned by businesses, taking up 16% and 13% respectively.

 

The survey also looks into the drivers that encourage businesses to outsource. Among the surveyed mainland businesses, 33% think the requirement to achieve more cost savings will become a major driver, and 27% believe improved confidence in service providers can drive the outsourcing business. Workload increase and information technology improvements are also taken as driving force, accounting for 16% and 14% respectively.

 

“There is a misconception that outsourcing a process means a business loses control, whereas in fact, outsourcing can help business leaders manage their workload and focus on core valued business that boosts productivity," says Xu Hua, CEO of Grant Thornton China. "Our research also suggests there is a large market for the outsourcing service providers who need to win clients with better services and stronger marketing.”

 

The IBR suggests only 40% of businesses around the world use outsourcing services. Outsourcing is least prevalent in southeast Asia (26%), eastern Europe (31%) and the Nordics (33%). By contrast, more than half of businesses in southern Europe (64%) and Latin America (51%) are currently using outsourcing providers or plan to.

 

Among those businesses which currently outsource, 57% cited improving efficiencies and reducing cost (55%) as the key drivers.

 

In the meantime, business leaders in the developing economies are more likely to use outsourcing to ensure professionalism; 46% of BRIC businesses cite better access to expertise as an outsourcing driver, compared with 39% in the G7, and 45% hope to mitigate risks through outsourcing services, 10 percentage higher than G7 businesses.

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