Why outsourcing (85-90% of CGI's business) is such a lucrative field in which to be, in good economic times and in bad.
Some additional thoughts specific to IT outsourcing:
1 - the barriers to entry for competitors is very high
2 - the cost of switching from one outsourcer to another is prohibitive; to repatriate internally is unthinkable
3 - the Canadian market is very fragmented and ripe for consolidation.
4 - the Y2K problem, explosion in networks and e-commerce, shortage of IT staff with rising costs etc. will continue to pressure companies to outsource this non-core aspect of their business.
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PRICEWATERHOUSECOOPERS' LANDMARK STUDY CONCLUDES: ''BUSINESS PROCESS OUTSOURCING PAVING THE WAY
FOR LEADING CANADIAN COMPANIES TO COMPETE GLOBALLY AND REDUCE COSTS.''
Cost Reduction Drives Canadian Companies To Business Process Outsourcing
(BPO), New PricewaterhouseCoopers Study Shows
TORONTO, Sept. 25 /CNW/ - Canadian companies are ahead of their global
counterparts when it comes to outsourcing business processes to third parties.
PricewaterhouseCoopers' pioneering study of top decision-making executives
worldwide found that 73 per cent of Canadian companies engage in Business
Process Outsourcing (BPO), compared to 63 per cent of companies worldwide.
This landmark study commissioned by PricewaterhouseCoopers and conducted
by Yankelovich Partners Inc. - one of the world's premier marketing research
and consulting organizations - focused exclusively on interviews with 304 top
business leaders at major multinational companies worldwide (26 within
Canada). The results reveal that executive attitudes toward BPO are beginning
to reflect the growing importance of this new corporate strategy.
Key findings among participating Canadian business executives include the
following:
- 100 per cent of executives surveyed agree that BPO allows their
companies to focus on core competencies.
- 89 per cent believe that BPO will help companies become more
profitable, leading to an improvement in shareholder value.
- 54 per cent view BPO as a cost reduction strategy.
- 46 per cent believe that the importance of BPO has increased over the
past three years.
- 85 per cent identify Payroll as the best candidate for BPO, followed
by 69 per cent for Real Estate Management and Claims Administration,
and 62 per cent for Benefits Management.
BPO is defined as the long-term contracting of a company's non-core
business processes to an outside service provider to help increase shareholder
value.
Overall, high levels of satisfaction with BPO initiatives and the desire
to reduce costs and concentrate on core competencies suggest continued
increases in shifts to BPO. Into the Year 2000, Canadian companies are more
likely than companies worldwide to outsource the majority of non-core
functions.
''We are seeing a rapidly growing interest in outsourcing by medium and
large-sized organizations that don't have the time or resources to build and
maintain world class support processes,'' says John Simke, Partner-In-Charge
of the Canadian BPO Practice at PricewaterhouseCoopers. ''As a result, they're
looking to external suppliers for high-quality, cost-effective solutions. A
number of organizations are also willing to share a common infrastructure for
processes that don't provide a competitive advantage, such as back office
functions,'' he continues.
According to C. Frederic John, the Yankelovich Partner who conducted the
study, ''Business process outsourcing is paving the way for leading companies
worldwide to compete globally and increase profitability into the new
millennium. Savvy executives are beginning to recognize BPO as a strategy for
helping companies focus on their core capabilities and providing bottom-line
results.''
Top executives (CEOs, Presidents, CFOs, COOs, CIOs, CSOs) in the United
States, Canada, the United Kingdom, France, Germany, Netherlands, Spain,
Switzerland, Sweden, Italy, Australia, Brazil, Argentina and Japan
participated in the study.
Most of the Canadian companies surveyed are large revenue-generating
organizations, with an average of 18,200 employees and $4.43 billion (Cdn) in
revenue.
One revealing set of data from the study centres on companies that have
outsourced a business process versus those that have not. Canadian companies
that have engaged in BPO are typically larger than those that have not - in
terms of both revenue and employees. Furthermore, business leaders that
outsource are more likely to recognize the value and strategic benefits of
BPO, such as improving shareholder value, maintaining a competitive edge and
becoming a more efficient organization. In fact, top Canadian business leaders
recognize these strategic benefits more often than business leaders worldwide.
BPO is the emerging growth segment of the global outsourcing market,
which is estimated to grow to more than $100 billion (U.S.) by the Year 2000.
PricewaterhouseCoopers is widely credited as being the leader among the Big
Five firms in this market. The firm's Global Business Process Outsourcing
Practice is organized as a separate service line with over 1,400 specialists
serving BPO clients from Centres of Excellence throughout Canada, the United
States, Europe, Latin America and Asia/Pacific. Services centre around core
competencies in the following areas: finance/accounting; internal audit; tax
compliance; applications process; procurement; human resources; and real
estate. In Canada, PricewaterhouseCoopers has relationships with some of the
largest private and public sector organizations.
BPO's mission is to help build clients shareholder value - while working
closely with management to improve performance and profitability, gain
competitive advantage and reduce operating costs. The practice strongly
believes that people and teamwork make all the difference to the success of
every engagement. Given its emphasis on people and innovation, the firm
received the ''Most Visionary Outsourcing Relationship'' Award in 1998 from
Infoserver, The Journal For Strategic Outsourcing Information.
PricewaterhouseCoopers (www.pwcglobal.com/ca) is the largest professional
services firm in Canada with more than 5,500 staff and offices in 24
locations. It is also the largest professional services firm in the world with
more than 140,000 people in 152 countries helping clients build value, manage
risk and improve their performance.
PricewaterhouseCoopers provides a full range of business advisory
services to leading global, national and local companies and to public
institutions. These services include audit, accounting and tax advice;
management, information technology and human resource consulting; financial
advisory services including mergers and acquisition, business recovery,
project finance and litigation support; business process outsourcing services;
and legal services through a global network of affiliated law firms.
A summary of the survey results is available on the
PricewaterhouseCoopers web site (www.pwcglobal.com/ca).
PricewaterhouseCoopers is a Canadian member firm of
PricewaterhouseCoopers International Limited, an English company limited by
guarantee.
For further information: Jim Gilligan, Director, National Marketing,
(416) 814-5744, james.k.gilligan@ca.pwcglobal.com; Shannon Bowness, Langdon
Starr Ketchum, (416) 544-4910, bowness@langdonstarr.com; John Simke,
Partner-In-Charge, Business Process Outsourcing, (416) 365-8869,
john.simke(st)ca.pwcglobal.com
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