THE DEVELOPMENT OF CONTRACTING-OUT 1 You may not be familiar with the term

Man: Good morning, ladies and gentlemen. I’m honoured to have this opportunity to talk to you. My name is Jonathan Hargreaves, and I’m Chief Executive of the Institute of Corporation and Marketing Research.
    I wonder how many of you here today have heard about a business practice which is becoming increasingly popular today. I am referring to the practice of contracting-out.
    You may not be familiar with the term  "contracting-out" —it involves calling in professional help to carry out activities which don’t form the central core of a particular business.
    Contracting-out is now being used increasingly in special partnership arrangements with individuals and other companies. Contracting-out is popular because it makes it possible for other companies and individuals to perform functions previously done by a company’s own staff.
    Several years ago contracting-out was restricted to non-essential functions such as office cleaning, catering or garden maintenance. However, it has now spread into areas that include accounting—as I mentioned in the example I’ve just given—information technology, quality assurance, recruitment and marketing.
    The consulting company which I represent is Anderson Consulting, one of the biggest consultancies specialising in contracting-out. Recently, we broke new ground when we formed a partnership deal to take over the accounting services of a well-known international oil company. The agreement was drafted by a working party consisting of representatives from  both companies.
    The arrangement meant our company absorbing more than 200 of the international oil company’s staff as part of our own staff. And the result was a 30 per cent reduction in operating costs for the oil company.
    At Anderson Consulting we’ve just published the results of an interesting survey carried out for us. We wanted the survey to explore how 200 British organisations were reacting to contracting-out.
    From this survey we found that ordinary contracting-out, that is, going to service organisations for cleaners, security staff, and so on—was the most common way for organisations to reap benefits. But the newer kind of contracting-out that I’ve described seemed to be gaining ground—that is, the kind that people from outside are brought in to participate in certain important functions—accounting, marketing and so on. The survey showed that nine out of ten firms which completed our questionnaires have contracted out one or more functions.
    Well, the main reservation about contracting-out was the possibility of losing control over vital activities in a particular company. It is only natural that most companies would at first experience some concern about another company taking over the responsibility for doing their accounts or their recruitment. But once they’ve overcome this concern and experienced all the benefits of contracting-out, they’re usually hooked on the idea. Contracting-out is certainly a very big market now, and the predictions are that it will grow rapidly over the next few years.