Canadian Outsourcing Trends
Summarized from A Study of Outsourcing Trends in Canada (2000) a report published by the
Canadian Federation of Independent Businesses

In the context of intense competition currently characterizing our economic system, outsourcing appears to be a widespread strategy used by companies that are constantly looking for ways to remain competitive. As the literature and this report's findings demonstrate, this mode of industrial organization has many advantages for business, such as increased flexibility (being able to meet just-in-time requirements), access to advanced technology and expertise, specialization of companies in fields of real competitive advantage and a decreased costing structure.

Although many studies have presented the advantages, particularly for large companies, of using subcontractors to carry out certain activities, very few studies have examined the impact of outsourcing on the subcontractors. In order to determine the effects of outsourcing on the myriad of small and medium-sized businesses that perform outsourcing contracts for large work providers, the CFIB conducted a survey among nearly 2,000 Canadian companies in June and July 2000.

This study reveals that a large majority of companies carry out outsourcing contracts for work providers, but also that these companies themselves outsource in great numbers. Overall, outsourcing-i.e., awarding outsourcing contracts to others or performing outsourcing contracts for large work providers-is a business strategy adopted by nearly 80% of Canadian businesses (in the manufacturing and transportation sectors, as well as in certain service sub-sectors).

Of the 1,952 businesses that participated in the CFIBstudy, 41.6% were located in Quebec, 34.5% in Ontario, 6.0% in Atlantic Canada and 17.9% in Western Canada.

The average number of employees in the businesses surveyed is 45. Overall, 95.6% of the respondents have fewer than 100 employees. By sector, only 19% of the 626 respondents from the service sector have 20 or more employees (overall, these businesses also have lower sales figures than those in the other sectors), whereas 40% of the respondents from the manufacturing sector and 40.4% of the 151 respondents from the transportation sector are in this situation.

Sales statistics reveal that 44.8% of all businesses surveyed post sales of under $500,000, which corresponds to 39.0% in Quebec, 43.7% in Western Canada, 51.8% in Ontario and 53.0% in Atlantic Canada.

To begin with, one of the most interesting findings of this study is that Quebec enterprises (as well as those in Atlantic Canada, at a comparable rate) use upstream outsourcing less often than businesses in Ontario or Western Canada to meet their production/operations objectives (Table 1).

Moreover, over 25% of businesses in Atlantic Canada do not engage in any subcontracting activities (upstream or downstream), whereas the comparable percentage for Ontario is only 15.6% and hovers around 20%-21% for Quebec and Western Canada.

Table 1

As the report's results have revealed, Quebec businesses seem to be much more dependent on outsourcing performed for certain clients than their counterparts in other provinces. This is readily understandable given that 39.31% of their sales (in the last number of years) come from outsourcing contracts. This percentage is lower in other provinces (33.24% in Ontario, 29.97% in Atlantic Canada and 32.97% in Western Canada).

In fact, 33.9% of Quebec businesses derive over 50% of their sales from outsourcing, whereas this percentage drops to 27.8% in Ontario, 27.9% in Atlantic Canada and 26.5% in Western Canada
(Table 2).

Table 2

In light of the CFIB's findings, it becomes clear that outsourcing performed for a work provider seems to work to increase both the number of employees and sales of the businesses in the sample, regardless of the province of origin (Table 3). The only element that should be highlighted here is that Quebec businesses are much more likely to maintain that such an increase (in the number of employees and sales) is a significant one, compared to businesses in the other provinces. A similar phenomenon can be observed among large enterprises in terms of increases in their number of employees and sales.

Table 3

This section provides a brief outline of the percentage of Canadian businesses that use the various forms of outsourcing to ensure commercial success. It can be seen that 21% of Quebec businesses subcontract less than 5% of their activities15, while for the whole of Canada, the percentage of businesses drops to 16.4% (11.4% in Ontario, 15.9% in Atlantic Canada and 16% in Western Canada). CFIB sees that among the activities outsourced, a large percentages of Canadian businesses contract out the following on a permanent basis: transportation (64.8% of respondents contract this out all the time), cleaning services (77.2% of respondents) and payroll administration (76% of respondents)
(Table 4).

Table 4