money

Cost-cutting drives outsourcing

The principal reason for outsourcing service operations is cost-cutting. At least 10% of costs go on internal and related services not linked to the core operation. This has been shown by a Nordic survey of large companies and the public sector.

Of the Nordic countries, Finnish companies and public organisations spend the most money on internal and related services not linked to the core operation. The average proportion of costs in Finland is around 14 percent, while in Sweden, Norway and Denmark the figure is more like 10 percent.

The primary motivator in the Nordic region for sourcing services outside the organisation is to cut costs. Other key reasons are to increase the quality and service level, or to improve opportunities to focus on the core operation. Cost-cutting weighs more heavily for Norwegians than for other Nordic countries. In Finland outsourcing is seen partly as a way of increasing the focus on the core operation, and partly as a way of giving employees in the field a chance to develop.

The greatest problem in conducting service activities in-house is a shortage of time for developing new ideas and solutions. There is a general consensus here – both between the Nordic countries and between the public and private sector.

External service deliveries increasing

Sourcing service operations from external suppliers is extremely popular in the Nordic countries. Virtually all large Finnish companies and the entire Finnish public sector outsource their services. In Norway outsourcing of services is nowhere near as prominent, with more than half of Norway's local, regional and national authorities running service operations in-house.

Looking ahead, the majority of respondents in Denmark, Finland and Sweden believe that companies and authorities will increase outsourcing of services over the next five years. However, the opinion in Norway is that current practices will remain in place in the future. All that said, everyone agrees that outsourcing of service operations is here to stay.

About the survey:

The target group was large companies (with 500 employees and at least 250 people in one workplace), government agencies, county councils and local authorities. The primary interview subjects were MDs, Deputy MDs, County Council Directors and Local Authority Directors. Secondary subjects were buyers, property managers, administration managers and heads of finance. A tertiary group of subjects was HR managers. The survey entailed a total of 466 telephone interviews in Sweden, Norway, Finland and Denmark between 21 May and 5 June 2007. Research company Demoskop conducted the survey on behalf of Coor.