UK outsourcing market hits six-year low
Move to cloud is denting enthusiasm for IT outsourcing, according to analyst ISG
The UK outsourcing market had a stinker of a 2015, new figures suggest.
The annual contract value (ACV) of IT and business process outsourcing deals in this country dipped 19 per cent last year to hit the lowest total since 2009, mirroring a wider global slump, according to market watcher ISG.
ISG's data encompasses only commercial outsourcing deals with an ACV of $5m (£3.5m).
On a worldwide basis, the ACV of deals ISG tracked also declined by eight per cent to $23.7bn, as the IT outsourcing sub-sector was dented by the move to cloud.
Despite this, a record 1,445 contracts were signed during the year as the trend towards bitesize deals continued.
The exception to this was Q4, when ACV rose five per cent year on year to $7bn on the back of "nine mega-relationships" worth $100m or more. ISG described this as an "anomaly that runs counter to the prevailing trend away from large deals and towards a higher number of smaller contracts".
Similarly, the EMEA market also enjoyed a Q4 bounce, as the signing of five "mega-relationships" boosted the quarterly total to $3.9bn.
That wasn't enough to make up for a sluggish first half in the region, however, as annual EMEA ACV fell eight per cent to $11.7bn.
ISG noted that the outsourcing decline was felt across all industries in 2015, with global telecoms ACV down 13 per cent, financial services down four per cent and travel and transport dipping 15 per cent. Boosted by one large award, manufacturing rose eight per cent in ACV.
The trend witnessed in 2015 towards bitesize deals is not necessarily a bad thing for the market, ISG president John Keppel said.
"The data this quarter and this year confirms more enterprises are sourcing than ever before, and they are paying less for those services, which encourages them to participate in the sourcing market even more," Keppel said.
"They are buying flexibility with cost variability; utilising smaller deals more than ever as they revamp their processes around cloud, digitalisation and automation. Outsourcing continues to have a strong value proposition as we exit 2015 and enter 2016."