UK public sector shunning offshore IT

Outsourcing market gets big boost from the public sector this year, market watcher reports

The UK outsourcing market has enjoyed a big boost from the public sector in 2014, with contracts big and small remaining in this country.

Market watcher ISG reports, in a research note from its north Europe president, John Keppel, that "the UK public sector has continued its outsourcing journey", with spending levels reaching nearly double the amount laid out in the commercial sphere.

Spending has been driven upwards by large big-ticket deals. But there has also been a surge in mid-market government business, which has come "as a result of the complexity of the services rquired and a lack of appetite for utilising cheaper, offshore resources", Keppel believes.

IT outsourcing (ITO) has seen a "resurgence" across EMEA s a whole in 2014, he states, with the number of contracts inked in Q3 rising 16 per cent annually. However, business process outsourcing has seen a "pronounced decline" in activity.

"BPO ACV grew steadily through the global downturn as companies looked to save costs across the organisation, but as the economic outlook has brightened, BPO values have fallen," said Keppel. "In general, EMEA has not been quick to adopt large HR, F&A and other BPO towers, but the growth of cloud and other new technologies could see a wider take up of business-process-as-a-service in the next couple of years."

There has been a notable proliferation of outsourcing deals in Spain, Italy, and France in 2014, with the latter seeing annual contract value (ACV) increase by 250 per cent year on year. Southern Europe as a whole has posted its highest-ever ACV total. The more mature UK market, meanwhile, has "broadly remained stable".

ISG foresees continued growth for the EMEA outsourcing market, particularly as firms grow more confident in the health of the economy.

"The challenge for buyers will be to understand how they can get the most value from their outsourcing efforts, and to understand the real business impact," concludes Keppel. "We believe that this will start to gain momentum next year."