By Richard Gamble

Outsourcing buyers are poised to pull the trigger.

A majority of them report that they are currently at the earliest stage in the outsourcing process. But, when they finally commit to spending, they will not be motivated solely to save money. Rather, they will be seeking out top-notch technology or talent, or buyers will be freeing up peripheral resources so their companies could focus on what they are all about.

And they are planning to outsource a wide variety of functions. While large companies are still mostly interested in farming out their huge information technology operations, small and mid-size companies are looking to hand off disparate tasks ranging from logistics, to real estate/facilities management (to read more click here) to finance and accounting.

These are the key findings from The Outsourcing Institute's Sixth Annual Outsourcing Index, which captures data from 1,911 members who have visited its website in the past year. This is roughly 75% more than the 1,110 individuals who responded to the survey in 2002.

"Interest in outsourcing has been high for several years, but now companies are learning what and how and why to outsource," notes Bill Marshall, senior vice president for operations at Business Engine, a provider of enterprise application software. "Expertise is growing fast. With expertise come results and significant increases in volume. There will be a lot more of it in the next few years."

The Outsourcing Institute recognizes four phases of an outsourcing venture: Assessment, RFP, selection and governance. Currently, 57% of the companies mulling an outsourcing arrangement are only at the initial assessment phase. And most of these buyers at the assessment stage are still defining their outsourcing strategy while others are still deciding which functions to outsource.

Another 10% are at the vendor-questioning, RFP stage. This means more than two-thirds of the buyers in the survey still haven't pulled the trigger on a particular supplier of outsourcing services.

While just 12% have completed the selection stage, 22% have moved onto the governance stage.

Among the smallest companies-defined as those with fewer than 1,000 employees-nearly 60% are still at that initial assessment phase.

Companies that scrambled to outsource in the past are starting to outsource smarter and more globally, the 2003 survey suggests. For years, most companies simply farmed out tasks to reduce expenses. Period.

But, as we noted for the first time in last year's index, these days outsourcing is no longer simply about saving money. This year, an equal number of respondents (55%) said they outsource to save money and to increase their company's focus. This is consistent with last year's results, when 55% cited the focus issue and 54% singled out the cost savings issue, the first time that saving money was not the primary reason given for outsourcing.

Small companies were much more likely to single out the focus appeal over the cost-saving benefits. For example, 58% of buyers from companies with fewer than 500 people said they outsourced to improve their company's focus versus 45% who cited the appeal to reduce and control operating costs. And 59% of buyers from companies with 500-999 people singled out the focus factor versus 54% who cited the cost benefits.

Alas, the largest companies are still obsessed with that bottom line benefit, with 66% of buyers from companies with more than 10,000 employees citing this factor versus 49% who said they outsource to improve focus.

Other popular reasons for outsourcing: Gain access to world-class resources (37% of total respondents), free up resources for other purposes (36%), and the resources are not available internally (24%).

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