Off-Shore Data Capture Outsourcing-Is the pendulum swinging in favor of keeping in-house?

TAWPI and HSA have recently completed our 2006 Forms Processing and Data Capture Study which is a follow up study to our 2000 research. Like all research we uncovered some very interesting industry findings. The study reached out to 15,000 end-users (over 200 respondents in the US) in the forms processing/data capture industry from the financial, healthcare, service bureau, government, and other capture industries.

One finding was alarming that outsourcing data capture off-shore may have reached it's peak. And it could be because of the increased sophistication of automated character recognition tools being deployed.

Here are some details from the study on this particular issue: When asked about off-shore labor, respondents said they were outsourcing off-shore, with over one third of them processing high volumes of documents (over 10,000 per day). A majority had peak volumes that were in excess of 3 times their average daily volumes, but only a small number claimed they are using off-shoring exclusively to handle peak volumes.

Predictably, the ratio of those wanting to reduce costs vs. handling peak volumes was higher when off-shore outsourcing was cited as currently being used, than for respondets claiming on-shore outsourcing was being used. Nearly half (43%) are sending less than 25% of their work off-shore with just 13% sending more than 75% of their work.

So despite claims that off-shore outsourcing is being used to reduce costs, it seems that a major reason is to manage varying peak volumes at different times of the year. 16% of these respondents performed scanning while 59% performed key entry offshore, 24% verification, and 14% outsourcing back-end processes.

The low rate of scanning is logical as scanning requires physically shipping the paper off-shore, which is time consuming and expensive, while key entry is a manual procedure that can operate from images. We were surprised at the low rate of verification, which we would have assumed would be higher to reflect the higher rate of OCR – but it seems that heavy users of OCR are using less off-shore.

As would be expected, nearly 50% of the respondents, who were sending key entry overseas, were Service Bureaus who have the most pressure on costs, with 20% being Banking & Finance companies.

Considering the publicity regarding outsourcing, we were surprised to find that the majority of the respondents do not seem to be outsourcing at this time. But it fits with our previous survey in 2000 where 80% reported that they were not using outsourcing and 74% who said they did not plan on doing so. It is possible that some respondents were hesitant to honestly report outsourcing due to its various stigmas.

Out of those who are outsourcing 56% said that it was in order to reduce costs, which represents a substantial increase over our 2000 study (29% cost). Most currently using off-shore respondents said they would increase the volumes outsourced off-shore, whereas only a small percentage of on-shore outsourcers expect to increase volume.

We believe this shows that most users of off-shore processes have gotten through any teething start-up problems and these operations are satisfactorily delivering on their commitments.

Are these findings suprising to you?

For more information or how to order this study contact jglass@tawpi.org.