Offshoring could save companies ''billions''

13 November 2006

13 November 2006 | Paul Snell

Top organisations in Europe and the US could save billions by basing backoffice functions, including procurement, overseas.

A study by the Hackett group, published this month, calculated that companies in the FT Europe 500 could save a combined total of ?48 billion per year (£32.3 billion) through offshoring. US companies listed in the Fortune 500 could save $58 billion (£30.4 billion).

The average saving for each business in Europe would be ?95.9 million (£64.6 million) annually. For US businesses, savings could reach $116.1 million (£60.9 million) each.

The report saidEuropean companies could save up to ?8.8 million (£5.9 million) each year if they offshored procurement. . US companies would benefit to the tune of $9.9 million (£5.2 million) by doing the same.

The study added that making these savings would mean job losses. On average, they would affect 246 procurement staff at European companies, and slightly more - 275 - at US firms.

Michael Janssen, managing director at the Hackett group, said: "Companies can turn to established offshore resources that deliver labour cost reductions while maintaining, or even improving the skill level of staff."

But he added that firms must be aware of the risks when trying to take advantage of globalisation.

SMnov2006

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