Two pieces of research give two different pictures of outsourcing. The first is a recent study commissioned by the Business Services Association (BSA). The research, conducted by Oxford Economics, indicated that Britain’s outsourcing industry accounts for £200 billion a year and 8 per cent of the UK’s economic output – slightly less than the financial services sector, which accounts for 8.1 per cent.
The second report was published by the National Outsourcing Association (NOA) in May. According to the NOA’s research, which polled more than 2,000 people, only 20 per cent of British adults believe that outsourcing benefits the UK job market or economy, while a mere 19 per cent said outsourcing can help get the UK out of recession.
Putting the two surveys together, it’s clear that there is a significant gap between the reality of outsourcing and the perceptions surrounding it. Despite making up a sizeable percentage of this country’s GDP, outsourcing continues to be associated with negative connotations – 22 per cent of people cite outsourcing as a profession they dislike, according to the NOA’s survey.
Indeed, this reputation was precisely the trigger for conducting the research, says Glenn Hickling, the NOA’s communications manager. “I monitor the news on a daily basis and there’s a lot of negativity about outsourcing,” he says. “We suspected as much and wanted to prove it.”
Despite making up a sizeable percentage of this country’s GDP, outsourcing continues to be associated with negative connotations
So what is the source of this negativity? In today’s economic climate, it’s no surprise that it boils down to fears around job losses and the prospect of moving work overseas. In particular, the terms “outsourcing” and “offshoring” are often used interchangeably.
However, they do not mean the same thing: outsourcing means contracting work out to a third party – not necessarily overseas – whereas offshoring means carrying work out in a different country.
This distinction is not widely understood, as the survey’s results illustrate. Only 14 per cent of respondents correctly identified hiring an accountant to help with a tax return as an example of outsourcing, whereas 58 per cent identified a major bank opening a call centre in India, which is actually an example of captive offshoring.
This confusion is significant because often the negative perceptions surrounding outsourcing are more applicable to offshoring. When asked “What words do you associate with outsourcing?”, 65 per cent of the survey’s participants selected “cost cutting”, while the next most popular choices were “job losses”, ”call centre” and “India”.
In reality, outsourced activities often remain in the UK, although they may take place in a different part of the country. And while the prospect of job losses looms large for many of those with concerns about outsourcing, it is not uncommon for staff working for an organisation to make a career move to one of the company’s outsourcing partners.
“Yes, there are jobs that are being lost, but the nature of efficiency and specialisation means that jobs are constantly going to be lost and reinvented in an economy,” says Matthew Bennett, partner at law firm Olswang. “Outsourcing is just part of that – it’s not the cause.”
Inevitably some people understand outsourcing better than others. Male respondents to the NOA’s survey were more likely than their female counterparts to agree that outsourcing benefits the UK. Age also has an impact: 27 per cent of 18-24 year olds acknowledged the benefits for the economy, compared to 12 per cent of 55-64 year olds. When asked whether outsourcing can help get the UK out of recession, only 11 per cent of 55-64 year olds agreed, compared to the overall figure of 19 per cent.
Meanwhile, familiarity with the topic is likely to be affected by occupation and any personal experience people might have had in this area. “Outsourcing has been around a long time and there’s a pretty good knowledge base,” says Chris Moyles, chief technologist at HP Enterprise Services. “But for people who don’t spend as much time with outsourcing, it gets tagged with certain labels that don’t reflect the full nature of the service.”
While these negative perceptions are pervasive, positive stories about outsourcing tend not to be celebrated. Mr Bennett says that successful outsourcing projects tend not to get the accolade they deserve. “The general perception is that there are failings, but no one really talks about the positive transactions,” he says.
The danger is that the negative perceptions make outsourcing less attractive, despite the associated benefits, and companies concerned about the PR implications of outsourcing some of their activities may ultimately decide against such a move.
In order to change these negative perceptions, solid proof is needed of the benefits outsourcing provides. When asked “Which of the following do you think would make outsourcing more acceptable to you?”, 70 per cent of the NOA survey’s respondents chose “Evidence of how many UK jobs are created by outsourcing”, closely followed by “Proof of how much outsourcing positively contributes to UK economy”.
The NOA is taking up the gauntlet with its Outsourcing Works campaign, which will focus on providing further research into the subject as well as a PR campaign to improve the profile of outsourcing. Another goal is to position the UK as an offshoring destination in its own right, focusing in particular on areas such as knowledge management and software development, in order to encourage more investment and more jobs in the UK.
There is much that outsourcers themselves can do to tackle negative perceptions. Celebrating the successes of outsourcing more proactively may be helpful here, as Mr Bennett points out: “Sometimes it’s difficult to see the benefits because successful outsourcing should be invisible by its nature.” He says that the role played by outsourcing has almost gone unseen in high-profile public sector projects, including Transport for London’s Oyster card.
Meanwhile, for companies which do outsource some of their activities, engaging with customers more closely can help them to challenge misconceptions and celebrate success stories. Social customer relationship management (social CRM) presents some interesting opportunities here.
As the NOA’s Mr Hickling concludes: “Outsourcing is definitely contributing massively to the economy, but it’s the unsung hero. If the public perception was changed, maybe it could contribute more.”
