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SMEs looking to offshoring as recession bites

Interest is driving acceptance of overseas outsourcing

By Steve Evans

UK SMEs are looking towards offshoring as a way of reducing costs during the recession, according to a new report.

The survey, by SLASSCOM, the development body for Sri Lankan outsourcing, found that nearly one-quarter (22%) of UK SMBs are considering offshoring, while one in ten say they are likely to shift some part of their business overseas during 2010.

The main driver for this appears to be cost – 28% said that the current cost of UK labour was forcing them to look offshore, while 20% said that the recession had a direct influence on their interest in it. Just over 10% said that a lack of skill available here in the UK was driving interest.

IT development and maintenance (24%) was the business unit most likely to be moved offshore, followed by data processing (20%), customer service (18%), other back office processes (16%) and finance and accounting (15%).

“Interest in offshoring in the SME sector is both a symptom of the need to cut costs and a recognition that one country doesn’t always have all the skills needed for success,”  Madu Ratnayake, general secretary of SLASSCOM, said. “SMEs are coming around to the globalised way of thinking, that is now necessary for success. Those SMEs that think globally about skills and staffing are set to be increasingly successful in 2010 and beyond.”

The survey also looked at the reason cited for not previously embracing offshoring and found that 33% said loss of control was a real concern. Data security issues (22%) and potential reputation damage from moving parts of the business overseas (21%) was also listed.

However, these figures suggest that offshoring is gaining acceptance in the SME space after being primarily a large enterprise activity, according to Martyn Hart, chairman of the National Outsourcing Association.

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“It’s great to see so many UK SMEs interested in offshoring work. It indicates an acceptance of offshoring and globalisation that’s been a long time coming. Many larger businesses have already reaped the benefits of offshoring business models and now it’s the turn of the SME. Going forward, we expect a significant increase in cost-based and strategic sourcing across the SME sector,” he said.



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