Consulting & Business Services: Coping With Outsourcing Overload

As more companies look to pare costs and focus resources on their main lines of businesses, market data indicates that many are turning to services firms to provide everything from human-resource management to high-level accounting.

Through 2006, sales of business-process outsourcing services will grow 13.7% annually, compared with 7.7% for the overall IT industry, according to Soundview Research.

Businesses are more likely to work with several outsourcers. As a result, service providers say customers are demanding new tools to more easily stay on top of the many business functions they've outsourced. Human-resource outsourcer Hewitt Associates LLC has created an advanced portal from which HR executives can get a real-time picture of staffing levels, turnover rates, benefits costs, and the like. "The information we provide to them has to be at least as good as what they would have if they were running operations internally," says Ed Rumzis, technology leader at Hewitt's workforce-management practice.

Adecco Employment Services also is rolling out systems to control outsourced HR. It used the J2EE development language and BEA Systems Inc.'s WebLogic Server to build in just three months AdeccoClub, a Web-based portal that gives users access to a full range of HR data.

Service providers themselves are turning to outsourcing to keep a lid on costs. Bowne & Co., a document-management-services provider, has moved much of the typesetting and document preparation work it does for clients to a service provider in India. To ensure quality, Bowne gave the service provider intranet access to its own tools. It's the first time Bowne has let a third party access its proprietary software.

Service companies can expect growing demand for their offerings. Service-sector activity surged in July, the fourth straight month of gains and the best reading on the sector in six years. The Institute for Supply Management reported its nonmanufacturing-business index jumped to 65.1, the highest level since the gauge was introduced in July 1997, from 60.6 in June. Readings above 50 indicate growth in activity, while those below point to contraction. The index's previous high occurred in October 1997, when it hit 63.2.

INDUSTRY LEADERS Rank Company Revenue in millions Income (loss)
in millions IT
employees 18 Adecco Employment Services $17,900 $259 905 28 Hewitt Associates LLC $1,720 $190 2,040 63 Bowne & Co. Inc. $1,003 -- 305 67 Maritz Inc. $1,440 -- 850 73 Lanier Worldwide $1,053 -- 155 86 Volt Information Sciences Inc. $1,488 ($33) 200 99 Equity Office Properties Trust $3,613 $770 90 108 Spherion Corp. $2,116 ($903) 267 115 Ogilvy & Mather Worldwide -- -- 290 118 BearingPoint Inc. $2,368 ($27) 132 126 Manpower Inc. $10,611 $113 1,200 132 Ernst & Young LLP $10,124 -- 1,100 143 Cintas Corp. $2,690 $249 200 190 Waste Management Inc. $11,142 $822 346 205 Iron Mountain Inc. $1,318 $58 400 220 Xerox Corp. $15,849 $91 1,085 251 Wheels Inc. $1,500 -- 78 276 Booz Allen Hamilton $2,200 -- 186 286 ABM Industries Inc. $2,182 $47 75 294 BBDO Worldwide $1,063 -- 130 322 Towers Perrin -- -- 1,520 351 Pitney Bowes Inc. $4,410 $476 610 361 Day & Zimmerman Group Inc. $1,400 -- 141 399 Battelle $1,176 -- 590 403 Administaff Inc. -- -- -- 437 CDI Corp. $1,170 ($9) 135 445 American Management Systems Inc. -- -- 6,625 459 CH2M Hill -- -- 360 476 Kelly Services Inc. $4,323 $19 -- 497 Monster Worldwide -- -- -- Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Employee data is from InformationWeek 500 qualifying survey.

SNAPSHOT INSIDE COMPANIES Average portion of revenue spent on IT 4% Average percentage of industry applications and business processes that have Web-based front ends 53% Companies with real-time business processes in place 76% HOW COMPANIES DIVIDE THEIR IT BUDGETS Hardware purchases 16% Services or outsourcing 16% Research and development 3% Salaries and benefits 32% Applications 22% Everything else 11% INDUSTRY FINANCIALS Average year-over-year revenue change 4% Average year-over-year net-income change 1% DATA: INFORMATIONWEEK RESEARCH
See year-over-year shifts in business-technology practices for this industry. Compare and contrast this year's data with last year's.

Return to the 2003 InformationWeek 500 homepage