Outsourcing by U.S. companies declining: BDO

Outsourcing by U.S. technology companies is on the decline, according to a survey by BDO USA, the accounting and consulting organization.

About 35 percent of the one-hundred chief financial officers (CFOs) of the companies surveyed indicated that their firms are currently outsourcing services or manufacturing outside the U.S. -- down from a high of 62 percent in 2009, and a slight decline from the 37 percent decline in 2010.

The study also found that of the companies who are not currently outsourcing (65 percent), the majority would not consider outsourcing too far from home (58 percent), either choosing the U.S. (25 percent), Canada (13 percent), or indicating no plans to outsource at all (20 percent).

The CFOs indicated that while they are concerned about some U.S. regulations that may change taxes, they don’t expect jobs to head overseas any time soon.

“Outsourcing can be looked at as a bellwether of the economy,” said Don Jones, Partner in the Technology and Life Sciences Practice at BDO USA.

“Tech companies turned to outsourcing in 2009 in order to reduce operating costs and ride out the recession. Since then, we’ve seen a marked decrease as companies recover and look to create jobs and growth close to home.”

Since 2008, most foreign countries saw a decrease in the number of U.S. firms establishing outsourcing operations (the average destination saw a 29 percent decrease, while Western Europe was the only destination that saw an increase, 9 percent).

India now favored country to outsource to

Among U.S. firms that are still outsourcing, BDO states, India has surpassed China as the favored region for the first time (24 percent of respondents selected India, versus 18 percent for China).

Also, of the companies that seek to outsource, the most likely ones are involved in manufacturing (53 percent), followed by

IT services and programming (43 percent), R&D (38 percent), distribution (26 percent) and call or help centers (12 percent).

“Manufacturing is most commonly outsourced because it can be both labor and capital intensive,” said Jones. “When done right, an outsourced manufacturing function can cut operating costs and help tech companies to realize significant savings.”