UK slips from outsourcing top spot
France, Germany and Sweden overtake UK in TCV in Q1
European uprising: The UK's status as top dog of European outsourcing is under threat
The UK is in danger of losing its crown as Europe’s largest outsourcing market, despite reports from channel players of an uptick in “co-sourcing” deals.
France, Germany and Sweden moved ahead of the UK for the first time in Q1, based on the total contract value (TCV) of large commercial outsourcing deals, according to sourcing data and advisory firm TPI.
UK TCV almost halved year on year to €800m (£691m) in the three months to March, compared with more than €1bn in Germany and almost €2bn in France.
TPI president Duncan Aitchison said the UK was hit by the lack of large restructuring and renewal contracts during the quarter.
But he argued the country’s long-term status as the rich man of European outsourcing was under threat.
“Until last year the UK was a €20bn per annum market, compared with €2-3bn in France and €6-7bn in Germany,” he said. “But somewhere such as Germany has the capacity and latent demand to transcend the UK in terms of signings this year.”
The slump may signal that the UK is becoming a victim of its own success, according to Aitchison.
“It may be a market maturity issue,” he said. “The UK has traditionally been the largest market and is maybe reaching a stage where less new activity is driving the numbers.”
TPI’s research only covers deals with a worth of €20m or more.
Des Leckerman, joint managing director of Eurodata, argued that the wider outsourcing market is being propped up by smaller agreements where customers have cherry-picked which functions to farm out.
“I don’t think the market has fallen,” he said. “In the last year we have seen a lot of customers co-sourcing specific areas of IT functionality that have commoditised, such as IT helpdesk. No one wants fixed overheads for commodity-based services.”
Jonathan Pickering, managing director of Block Solutions, agreed: “Both public sector and private sector organisations are much more open to discussing the outsourcing model, be it for the whole or part of their [IT functions].”