Cook says that some of the tasks are so small that when he has approached UK-based suppliers they are either not interested in the work, or it goes to the end of a very long queue. There are, however, instances when he has chosen to stick with domestic providers.

‘When I have a more complex database to outsource I have not yet used an Indian firm to do this because I do not have enough confidence to trust an organisation outside the UK for such work,’ he says.

Such reservations manifest through a combination of reasons: language, billing – Cook normally has to pay for services up front – and geographical separation. ‘I realise that some of these issues may be unfounded, but in my experience, I know that if I receive poor service from a local company then I am confident of how to complain and get issues resolved,’ he says.

B.G. Mahesh, chief executive of Greynium – a software and web development company in Bangalore – echoes Cook’s sentiments, suggesting that the offshore service provider has to act more like an extended department of the client company.

‘The outsourcing partner will work in line with the goals of the client and be an even more integral part of the SME than a similar large company outsourcing arrangement,’ he says.

Though it remains difficult to create an effective SME to SME outsourcing relationship, many smaller businesses have started exploring the external service provision option.

And with such a large number of firms looking for assistance, growth in the sector is likely to be the major outsourcing trend over the next few years.

Mark Kobayashi-Hillary is co-author of Global Services: Moving to a Level Playing Field and a director of the National Outsourcing Association. Read his blog at: http://markkobayashihillary.computing.co.uk.

SME outsourcing growth

Research group Evalueserve recently analysed the potential for outsourcing to offshore partners on a small scale.

The process is referred to as person-to-person offshoring (PPO), in a belief that the trend is moving more towards a peer-to-peer model for skills rather than just a smaller version of large outsourcing contracts.

As the business schools and globalisation gurus such as Thomas Friedman have suggested for a long time, the internet offers a perfect market for skills and services – and now the theory appears to be approaching some credibility as a marked trend is developing.

PPO consists of services that can be offshored by entrepreneurs that are trying to kick-start their new organisation as efficiently as possible. With technological advances and the growth of the internet, small offices, home businesses and even individuals can use such services.

Risk and cost is low. And the kind of services that are already available include online tutoring, web site development, graphic design, database maintenance and software development.

The value of individual contracts is usually quite low – between $100 (£49) and $5,000 (£2,400) is considered normal – but since the number of consumers and small businesses is enormous, Evalueserve estimate that the potential market in the US alone easily exceeds $20bn (£10bn).

The research shows that between April 2006 and March 2007, the revenue from the small business sector was more than $250m (£122m) and is likely to grow to more than $2bn (£1bn) by 2015, representing a cumulative annual growth rate of about 26 per cent.

Furthermore, because SMEs – or individual consumers – have diverse requirements, the breadth of offshoring services offered is also likely to be fairly large.

Many of these offshoring trends are in the beginning of their lifecycles and others only have a few early adopters, so it is not clear that all of the services being offered will enjoy mass adoption in the long run.

Nevertheless, the value of receiving such services at a significantly lower cost and just in time is clearly irresistible, and therefore the overall sector shows the promise of rapid growth.

The small business market
  There were an estimated 4.3 million private sector enterprises in the UK at the start of 2005 and almost all (99.3 per cent) were small businesses (up to 49 employees).

  Only 27,000 (0.6 per cent) were medium-sized organisations (50 to 249 employees) and just 6,000 (0.1 per cent) were large companies (250 or more employees).

  SMEs together accounted for more than half of UK employment (58.7 per cent) and business turnover (51.1 per cent).

Source: Office of National Statistics