Channel cashes in on public sector outsourcing boom

Computacenter and Capita among winners of largest contracts in increasingly lucrative public sector market

The UK's public sector is spending almost twice as much on outsourcing as the commercial sector, according to new research, which shows channel giants are cashing in.

A new study by Information Services Group (ISG) shows that over the past two years, UK public sector outsourcing deals totalled £51bn, while in the commercial sector the bill stood at just £30bn.

Over the past two years, seven public sector deals worth upwards of £600m were handed out, with another three ranging between £300m and £599m. Tech giants Computacenter, Capita, Telefonica and BT were among those bagging the massive deals.

Pressure on the public sector to do more with less has driven the outsourcing boom, according to Luke Mansall, partner at ISG.

"The recession and the subsequent focus by the public sector on cost reduction and value for money has driven a renewed interest in outsourcing and its role in helping deliver efficient, cost-effective services," he said.

Over the two-year period, 585 public sector outsourcing contracts were signed – up threefold since before the recession, but much lower than the number of deals awarded in the commercial sector – 726.

ISG said the fact represents a move to larger contracts in the public sector but added that initiatives such as G-Cloud could see a flurry of smaller deals come to fruition in the future.

"While the commercial sector has moved to smaller contracts over the past two years, the public sector has seen a rise in mid-market contracts, mainly as a result of the complexity of the services required and the lack of appetite to utilise cheaper, offshore resources," Mansell added.

"It will be interesting to see, over the next two years, whether the drive to procure services from small to medium-sized enterprises via the G-Cloud will cause a shift to smaller contracts."