Firms slow to adopt outsourcing

Firms slow to adopt outsourcing

A recent survey conducted by research firm Input Asia-Pacific has found that for IT outsourcing in Hong Kong, perception has lagged behind reality.

Despite a consensus among local companies that outsourcing can allow them to focus on their core businesses and increase their overall competitiveness, few local businesses have chosen to outsource their operations, the survey found.

Of the 75 Hong Kong-based CEOs interviewed for the survey, 85 per cent agreed that IT outsourcing is a good approach and can allow their organisations to focus on their core businesses and improve their competitiveness.

Although survey respondents commented favourably on the theoretical benefits of outsourcing, which include allowing them to focus attention and resources on core activities, expand quickly into new frontiers, address manpower and skills constraints and reduce costs, they have been slow in putting them into practice.

The survey found that only 29 per cent of the CEOs surveyed said that their companies have adopted outsourcing within their operations, although 16 per cent indicated plans to do so at some point in the future.

The reason most frequently given by CEOs for not outsourcing is that they believe their internal IT capabilities are sufficient to meet their basic needs, according to the survey.

"In some cases, this reflects a high level of complacency, and in other cases, it reflects the mistaken belief that outsourcing involves replacing rather than supplementing existing resources," said Reid Rasmussen, managing director of Input Asia-Pacific.

Another frequently mentioned reason for not outsourcing is that CEOs may believe that the outsourcing services available are too generic and cannot suit companies that operate in niche or specialised markets. However, Reid said this is a misconception given the number and variety of outsourcing service providers in Hong Kong today. Most, if not all, organisations with over 100 staff can benefit in some way from outsourcing, he added.

Reid said that because taking advantage of the latest technology is critical to business success today, local companies do not appear to be moving quick enough to address the immediate challenges confronting them.

On the role of outsourcing vendors, Input also interviewed 75 IT directors in the territory. Input found that outsourcing vendors are more likely to be seen as business and technology advisors, suppliers of support services, and a key business partner who shares both risks and rewards. Companies are less likely to view outsourcing service providers as an agent of change, Input officials said.

On a practical level, outsourcing vendors are primarily used for tactical purposes, such as addressing support and manpower shortage issues, rather than getting involved in strategic planning and business reengineering, they added.

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