Anti-SME bias is a challenge to outsourcers

Small businesses and outsourcing are not always obvious bedfellows, but new research has revealed a prejudice against smaller enterprises that has implications for the outsourcing industry, not to mention the economy as a whole.

As the UK’s economic woes deepen, with inflation heading towards five percent, BT Business and Cisco have commissioned independent research among procurement managers within 250-plus employee businesses to determine what they look for from small-business suppliers (companies with fewer than 250 employees) when awarding contracts.

The research has revealed a bias against small business suppliers in favour of their larger competitors, especially in economically turbulent times.

Top-line statistics from the research include these findings:

• 40 percent say they would be less likely to choose a small business supplier in a slowing economy;

• 42 percent would select a larger supplier over a smaller one, believing that big enterprises are a safer option in the long run - even though both may offer the same products or services;

• Almost half (48 percent) have lengthened their payment periods or would consider doing so as a result of slowing economic conditions;

• 52 percent of private sector businesses believe that SME suppliers are less competitive than their larger counterparts;

• 53 percent expect a better overall service from SMEs than they do from larger business - increasing the pressure on small suppliers.

The research also investigated procurement managers’ attitudes to outsourcing and how this might impact on their decision-making when selecting a new supplier.

Of significant interest to the outsourcing industry are the following key findings:

• Forty percent of those questioned admitted that what a supplier chooses to outsource would be a major factor in their decision.

• Just over one quarter (26 percent) claimed they would prefer to work with a company that does everything in house;

• One in four said they would be concerned if a supplier outsourced its customer service.

So, with smaller businesses both powering the economy and feeling the sharpest pinch from rising costs, and with many outsourcers seeing the downturn as an opportunity, we have a more highly combustible situation than many realise.

If small businesses choose to seek third-party help or customer service to cut their own costs and hedge against uncertainty, but major customers walk away because of it, then this area of high pressure could worsen ‘the perfect storm’.

Posted by on 08/12 at 04:07 PM

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