Nearly half of leading US technology companies outsource some type of manufacturing or service, according to a new survey by accounting and consulting group BDO Seidman. Forty-nine percent of all respondents said they outsourced key services to offshore destinations; this increased to 64% among Silicon Valley companies.
The findings are from the 2008 Technology Outlook Survey, which examined the opinions of 100 chief financial officers (CFOs) at technology companies located throughout the US. Revenues of the surveyed companies ranged from $100 million to $15 billion.
Of those outsourcing, the most common functions being off shored are: manufacturing (74%), IT services and programming (51%), research and development (49%), distribution (45%) and call centers (35%).
The most common locations for outsourcing are India (60%), Southeast Asia (50%), China (46%), Western Europe (21%) and Latin America (19%). When asked what one location they might consider for outsourcing in the future, the CFOs cited India (30%), China (23%), and Southeast Asia (22%).
“Despite some of the CFOs’ concerns regarding international expansion, nearly 50% of technology companies in the US and 64% in Silicon Valley are feeling the need to source services or production overseas. This shows that the very nature of the technology industry has become international,” said Lee Duran, Partner in BDO Seidman’s Technology Practice.
“These companies are also continuing to outsource their manufacturing, IT and distribution services to India, Southeast Asia and China; despite near-sourcing alternatives in Latin America and Canada."
Other findings in the survey were that CFOs at technology businesses cite currency risk (26%) and uncertain political/business climates (25%) as their main concerns regarding continued international growth in 2008.
Training of international employees (17%), risk to intellectual property (14%) and international business tax regulations (12%) were less of a concern to the CFOs.
Approximately four-fifths (79%) of the CFOs indicated their business has operations outside of the United States.
The survey reinforces the view that 21st century business, especially in areas that focus on innovation and speed, is increasingly about managing an ecosystem of suppliers rather than being an integrated 'soup to nuts' organisation.
It also flies in the face of much US election talk which has identified offshoring as a threat to the US economy; indeed, it appears to be supporting the most dynamic elements of the US business world.
