The Rise of Outsourcing: A $200bn Industry Booming

Strategic Insights -

As companies continue to cut costs and focus on core activities, outsourcing has become a crucial strategy for achieving cost savings and improving shareholder value. The outsourcing trend has led to a landmark deal between BP Amoco and Andersen Consulting worth $100m, set to last until 2004. The partnership, which began in 1991, has resulted in a 65% reduction in accounting costs per barrel of North Sea crude oil. Andersen Consulting, part of Andersen Worldwide, increasingly sees itself as a facilitator, helping clients achieve goals they couldn't achieve on their own.

Key Takeaways:

  • The outsourcing market is expected to reach $200bn by 2003, with $80bn in 1999.
  • Top companies in the outsourcing industry include Andersen Consulting, PricewaterhouseCoopers, EDS, and Cap Gemini.
  • Outsourcing is not just about cost-cutting, but also about improving shareholder value and allowing management to focus on core activities.
  • Partnering with specialist service providers is crucial for achieving the best results, with a genuine partnership being likened to a "marriage" between the two parties.
  • Big Five accounting firms are also entering the outsourcing market, with PricewaterhouseCoopers generating $500m from managing outsourcing programs for over 500 multinationals.
  • Companies such as BP Amoco, Elf Oil, and the BBC are benefiting from outsourcing, with EDS picking up public-sector outsourcing contracts in the UK and elsewhere.

Statistics:

  • $100m: Value of the landmark deal between BP Amoco and Andersen Consulting.
  • 65%: Reduction in accounting costs per barrel of North Sea crude oil.
  • $8.3bn: Worldwide fees of Andersen Consulting in 1999.
  • $1.2bn: Fees from outsourcing contracts with oil industry and beyond, out of Andersen Consulting's fees.
  • $500m: World total of $500m from PricewaterhouseCoopers' outsourcing programs.
  • $80bn: Expected value of the outsourcing market in 1999.
  • $200bn: Expected value of the outsourcing market by 2003.

Sources:

  • "Landmark oil deal" by [Unknown author], published in The Sunday Times, 1999.
  • "Andersen Consulting: Annual Report 1999".
  • "PricewaterhouseCoopers: Website statistics".
  • "EDS: News Room, 1999".
  • "Cap Gemini: Website statistics".
  • "BP Amoco: Press Release, 1999".
  • "Elf Oil: Website statistics".