Pressure On British Businesses To Off-Shore Is Great And Becoming Greater
Three in ten (30%) of the CBI member organisations surveyed have off-shored activities; even more feel that the pressures to do so are great (45%), and becoming greater (51%). With the "push" factors becoming more prominent, there are also a number of "pull" factors encouraging organisations to off-shore: almost all of those considering or currently off-shoring feel the potential for off-shoring has increased with improvements in technology (91%).
In contrast, off-shoring is felt by a substantial number to be inappropriate for their business (80% of those who are not considering off-shoring). Other reasons why organisations forego off-shoring is the difficulty of managerial control (27%), the loss of customer loyalty (16%) and the risk of disruption to supply (14%).
The overarching reason for considering off-shoring shared by almost all organisations is to reduce costs (95%).
In line with this, the main criteria for choice of location are lower costs (cited by 93%), within the framework of appropriate skills, and, to a lesser degree, the host government's support. Low levels of regulation or legislation is now a big attraction for those considering off-shoring. The primary change brought about by improvements in communications and other technologies has been to make more countries accessible (cited by 68%).
Almost nine in ten (87%) of those who have off-shored have done so in Asia - the bulk of these activities are in China (49%) and India (51%). Within Europe, Poland and the Czech Republic are the preferred locations. Although more organisations have off-shored beyond Europe than within it, anecdotal evidence suggests barriers to off-shoring closer to home are being broken down.
Nine in ten (87%) of those who have off-shored are satisfied with the experience. In addition, most (67%) feel their satisfaction has increased over the past couple of years.
Topline Results
- Senior level directors drawn from a broad range of organisations in the UK completed a paper self-completion questionnaire
- Respondents surveyed were drawn from CBI member organisations and were requested to take part in a letter from Director General, Digby Jones
- Approximately 1,100 organisations were originally approached, and 150 completed surveys were returned
- Fieldwork took place between 7-29 October, 2004
- Where figures do not add up to 100%, this is due to computer rounding or multiple answers
- The survey was carried out by MORI on behalf of the CBI in association with Alba, the electronic goods and power tools specialists
Q1 How great are the pressures for you to relocate some of your activities abroad?
| 160 | % |
|---|---|
| Very great | 21 |
| Fairly great | 23 |
| Not very great | 13 |
| Not at all great | 16 |
| None | 25 |
Q2 How have these pressures changed over the past 2 years?
| 160 | % |
|---|---|
| Increased a lot | 29 |
| Increased a little | 22 |
| Stayed the same | 39 |
| Decreased a little | 1 |
| Decreased a lot | 1 |
| Don't know | 5 |
Q3 Have you off-shored any activities in recent years and/or are you considering off-shoring any activities?
| 160 | % |
|---|---|
| Yes - have off-shored activities (either currently or previously) | 30 |
| Yes - considering | 23 |
| No, not currently and not considering | 47 |
Q4 Which of your operations have you relocated overseas in the last couple of years?
Q5 Which of your operations are you considering relocating overseas in the next year or so?
Q6 Which activities, if any, would you not consider off-shoring?
| 160 | Q4 | Q5 | Q6 | |
|---|---|---|---|---|
| 160 | Have off-shored | Considering off-shoring | Would not offshore | |
| Base: | 45 | 35 | 45 (Have) | 35 (Considering) |
| 160 | % | % | % | % |
| Production/manufacture of industrial goods | 44 | 49 | - | 3 |
| Production/manufacture of consumer goods | 29 | 26 | 2 | 3 |
| Call centre | 13 | 11 | 18 | 20 |
| R&D/Design | 29 | 23 | 11 | 31 |
| Accounts | 9 | 20 | 22 | 23 |
| Other financial back office | 16 | 26 | 20 | 23 |
| IT support & development | 29 | 26 | 11 | 26 |
| Equity Research | 2 | 3 | 13 | 17 |
| Insurance | 4 | 6 | 18 | 20 |
| Risk management | 2 | 3 | 18 | 29 |
| Other financial services | 9 | 6 | 11 | 23 |
| Human Resources | 2 | 6 | 31 | 37 |
| Administrative/secretarial | 4 | 11 | 24 | 29 |
| Other | 13 | 17 | 4 | 3 |
| No answer | - | - | 60 | 54 |
Q7 What reasons led your company to consider off-shoring?
| Base: | 45 (Have) | 35 (Considering) |
|---|---|---|
| 160 | % | % |
| Improve processes (speed, quality, accuracy etc) | 33 | 37 |
| Gain access to innovation in processes and technology | 7 | 9 |
| Reduce costs | 98 | 91 |
| Increase revenue | 11 | 26 |
| Increase stock price | 7 | 6 |
| Improve customer satisfaction | 18 | 20 |
| Proximity to new customers | 22 | 23 |
| Focus on core business | 18 | 17 |
| Joint ventures with overseas businesses | 16 | 14 |
| Gain skills applicable elsewhere in the organisation | 4 | 3 |
| Business process transformation, including culture change | 16 | 17 |
| Restrictive regulation/legislation in the UK | 13 | 26 |
| Other | 11 | 9 |
Q8 Which countries (i) have you off-shored to, or (ii) are you considering off-shoring to?
| Base: | (45) | (35) |
|---|---|---|
| Summary variables: | % | % |
| Any Europe | 62 | 51 |
| Any ex-Europe | 89 | 91 |
| Any Asia | 87 | 91 |
| Any S/Central America | 20 | 9 |
| Any Africa | 11 | 3 |
| Any Australasia | 7 | 3 |
Q9 What were your main reasons for considering that country/those countries?
| Base: | (45) | (35) |
|---|---|---|
| 160 | % | % |
| Host government's support for the industry | 31 | 23 |
| English speaking capabilities of staff | 42 | 40 |
| Technically capable graduate workforce / availability of skilled workforce | 67 | 69 |
| Lower employment costs/total costs | 93 | 91 |
| Better resource utilisation e.g. 24 hour working days | 24 | 17 |
| Willingness to take on more mundane jobs | 22 | 6 |
| Host country's attitude to copyright and intellectual property | 2 | - |
| Proximity to customers | 24 | 23 |
| Economies of scale bringing together activities in one location | 16 | 17 |
| Low levels of regulation/legislation | 18 | 29 |
| Others | 7 | 11 |
Q10 Overall, what do you consider to be the main drawbacks of off-shoring?
| Base: | (45) | (35) |
|---|---|---|
| 160 | % | % |
| Rapid turnover of staff | 11 | 9 |
| Risk of disruption of supply | 42 | 54 |
| Political risks | 36 | 34 |
| Negative impact on staff morale | 29 | 43 |
| Negative impact on customer loyalty | 13 | 14 |
| Negative publicity | 16 | 14 |
| Costs rising faster than expected | 13 | 31 |
| Appropriate skills not available: | ||
| 160160160i) Management skills | 24 | 14 |
| 160160160ii) Operative skills | 13 | 9 |
| Managerial control more difficult | 47 | 66 |
| Job losses/redundancies in UK | 24 | 26 |
| Language and time zone problems | 36 | 37 |
| Too much foreign travel | 20 | 9 |
| Security/corruption | 9 | 23 |
| No drawbacks | 4 | - |
| Other | 13 | 11 |
Q11 How have improvements in communications and other technology changed the character of 'off-shorable' activities?
| Base: | (45) | (35) |
|---|---|---|
| 160 | % | % |
| More service-type activities | 31 | 43 |
| More countries accessible | 64 | 71 |
| Change in the structure of supply chains | 47 | 37 |
| Use of less-skilled staff | 11 | 6 |
| No change | 9 | 14 |
| Other | 4 | 3 |
Q12 To what extent have improvements in communications and other technology changed the character of 'off-shorable' activities?
| Base: | (45) | (35) |
|---|---|---|
| 160 | % | % |
| A great deal | 47 | 46 |
| A fair amount | 44 | 43 |
| Just a little | 4 | 9 |
| Not at all | 4 | 3 |
Q13 To what extent have improvements in communications and other technology changed the character of 'off-shorable' activities
| Base: | (45) | (35) |
|---|---|---|
| 160 | % | % |
| A great deal | 47 | 46 |
| A fair amount | 44 | 43 |
| Just a little | 4 | 9 |
| Not at all | 4 | 3 |
Q14 i) How many jobs and what percentage of your UK workforce have you off-shored? Base: 45
| Number of jobs | % | Workforce | % |
|---|---|---|---|
| Up to 100 | 33 | Up to 5% | 33 |
| 101 - 250 | 18 | 6 to 10% | 16 |
| 251 - 500 | 11 | 11 - 20% | 16 |
| 501 - 1000 | 7 | 21 - 30% | 13 |
| 1001 - 3000 | 13 | 31 - 40% | 4 |
| Over 3000 | 2 | Over 40% | 7 |
| Mean | 590 jobs | Mean | 15% |
| Median | 175 jobs | Median | 9% |
Q14 ii) How many jobs and what percentage of your UK workforce have been lost as a result? Base: 45
| Number of jobs | % | Workforce | % |
|---|---|---|---|
| None | 22 | None | 22 |
| Up to 100 | 33 | Up to 5% | 31 |
| 101 - 250 | 9 | 6 to 10% | 9 |
| 251 - 500 | 11 | 11 - 20% | 11 |
| 501 - 1000 | 9 | 21 - 30% | 7 |
| 1001 - 3000 | 9 | 31 - 40% | 7 |
| Over 3000 | - | Over 40% | 2 |
| Mean | 340 jobs | Mean | 10% |
| Median | 75 jobs | Median | 4% |
Q14 iii) Since you began off-shoring, how many new jobs have you created in the UK, and what % of your UK workforce does this represent? Base: 45
| Number of jobs | % | Workforce | % |
|---|---|---|---|
| None | 49 | None | 47 |
| Up to 100 | 20 | Up to 5% | 20 |
| 101 - 250 | 11 | 6 to 10% | 13 |
| 251 - 500 | - | 11 - 20% | 2 |
| 501 - 1000 | 7 | 21 - 30% | - |
| 1001 - 3000 | 2 | 31 - 40% | - |
| Over 3000 | 2 | Over 40% | 2 |
| Mean | 230 jobs | Mean | 4% |
| (Median | 0 Jobs) | (Median | 0%) |
Q15 What type of jobs: Have you created off-shore? Were lost in the UK as a result? Have you created in the UK since off-shoring?
| 160 | i) Created off-shore | ii) Lost in UK | iii) Created in UK |
|---|---|---|---|
| 160 | % | % | % |
| Graduate | 42 | 20 | 31 |
| Skilled jobs | 60 | 44 | 31 |
| Semi-skilled | 62 | 44 | 9 |
| Unskilled | 33 | 24 | 7 |
| No answer | 9 | 36 | 60 |
Q16 From which UK region(s) have these jobs been lost?
| 160 | % |
|---|---|
| Northern Ireland | 2 |
| Scotland | 9 |
| Wales | 7 |
| North West | 16 |
| Yorkshire and Humberside | 11 |
| North East | 11 |
| East Midlands | 7 |
| West Midlands | 29 |
| East Anglia | 7 |
| London | 9 |
| South East (excluding London) | 24 |
| South West | 7 |
Q17 Since you began off-shoring, has the relative attractiveness of the location where you have off-shored to changed?
| 160 | % |
|---|---|
| More attractive | 33 |
| No change | 53 |
| Less attractive | 7 |
| No answer | 7 |
Q18 If you were to undertake your off-shoring activity again, would you choose the same country(ies)?
| 160 | % |
|---|---|
| Yes | 89 |
| No | 2 |
| No answer | 9 |
Q19 Overall, to what extent is your company satisfied with its off-shoring experience?
| 160 | % |
|---|---|
| Very satisfied | 29 |
| Fairly satisfied | 58 |
| Neither satisfied nor dissatisfied | 4 |
| Fairly dissatisfied | 4 |
| Very dissatisfied | - |
| Don't know | - |
Q20 How, if at all, has your company's satisfaction with off-shoring changed over the last 2 years? Would you say you are now...
| 160 | % |
|---|---|
| Much more satisfied | 29 |
| Somewhat more satisfied | 40 |
| No change in satisfaction | 18 |
| Somewhat less satisfied | 2 |
| Much less satisfied | 2 |
| Did not off-shore 2 years ago | 7 |
Q21 Have you brought activities back that had been off-shored?
| 160 | % |
|---|---|
| Yes | 4 |
| No | 87 |
| No answer | 9 |
Q22 If you have not off-shored activities and you are not thinking about off-shoring any activities, please indicate why? Base: 70
| 160 | % |
|---|---|
| Inappropriate for nature of business | 80 |
| Have outsourced in the UK | 7 |
| Risk of disruption of supply | 14 |
| Political risks | 4 |
| Negative impact on staff morale | 13 |
| Negative impact on customer loyalty | 16 |
| Negative publicity | 9 |
| Appropriate skills not available: | |
| 160160160i) Management skills | 1 |
| 160160160ii) Operative skills | 4 |
| Managerial control more difficult | 27 |
| Job losses/redundancies in UK | 9 |
| Language and time zone problems | 11 |
| Too much foreign travel | 6 |
| Security/corruption | 13 |
| Other | 9 |
| No answer | 4 |
