Why do large and progressive businesses outsource? Cost cutting would be the expected answer. Yet, recent studies have shown that such a trend is changing. No.1 reason why companies outsource these days is not just to save but to “Reach Untapped Markets”
Consulting firm PricewaterhouseCoopers stated in their 2005 Global CEO Survey Bold, Ambitious, Careful Choices, that corporations want a shot at getting a niche out of emerging markets especially in China and India. Globalization is now not only viewed as unstoppable, but an asset in the realization of business goals. Samuel DiPiazza, chief executive of PricewaterhouseCoopers International even stated that majority of CEO’s see it as a potential means to get new customers.
Both local and international companies have expressed positive feelings over this shift and only 12% view such a change as negative. Executives in developing countries have welcomed multinational endeavors since they see it as a way to exchange ideas and technologies, even open up business deals with new partners.
Although all eyes are focused on China, other developing countries are being considered by these bosses in their offshore plans. Countries with highly skilled professional individuals adept at the sciences, upbeat and dynamic technologies are at the top of their list. These CEO’s believe they would not only limit their overhead costs by outsourcing, but be able to get consumers who are willing to buy their products and use their services.
There are still concerns raised by these executives regarding offshoring- like too much regulations, trade barriers, small incidents of corruption, but they strongly believe that big benefits far outweigh these challenges. Parts of globalization are risks, but when stakes are good, a larger return on investment is expected. This survey showed that businesses are opting to be flexible and open to long-term changes set to occur and are greatly anticipating such diversification. CEOs are optimistic about the future. 90 percent expressed confidence in their companies’ prospects for revenue growth over the next 12 months. Nearly 40 percent are also engaged in offshoring or planning to do so.
PricewaterhouseCoopers’ 8th Annual Global CEO survey includes 1,300 CEOs in over 40 countries during the last 3 months of 2005. Chief executives survey breakdown indicates 25% worked for corporations with a turnover of $1bn a year and more, while half were leading firms that had a turnover of less than $500m.