2015 UK IT Outsourcing Study: 10 Key Insights

As technology continues the advance at a rapid speed, it’s no wonder that IT outsourcing (ITO) is one of the fastest-growing industries in the world — and it’s no exception in the UK.

A recent study of ITO customers and contracts in the UK conducted by Whitelane Research in collaboration with PA Consulting Group shows how and why demand for ITO services in the UK will grow. The researchers surveyed top executives from 260 of the UK’s biggest consumers of ITO services that hold more than 800 unique contracts with a collective value of more than £15 billion — almost 75% of the UK market by value.

Here are 10 of the key statistics and insights from the study.

1. Majority of UK businesses will continue to outsource…

The market of outsourcing companies in the UK is expected to grow. A significant 69% of all respondents in the study say that they will continue outsourcing at the same rate or even more. Further, companies who indicated that they will outsource more (40%) said that the UK market has a significant growth potential.

2. …But some will outsource less

However, 15% of the surveyed organizations said that they will outsource less. “[A]necdotal evidence suggests that some organizations are selectively insourcing some ‘close to the customer’ functions (including some aspects of service desk and end-user support),” the report from Whitelane & PA Consulting said.

3. Focus on core business is the main driver for outsourcing

When asked for the main drivers of employing ITO services, 68% of the respondents cited a need for their companies to focus on core businesses. Organizations looking to outsource more this year are also returning to investing to support the business, after sweating existing assets during the economic downturn in the late 2000s.

4. Access to better business resources is another key driver for ITO

However, respondents who outsource/want to outsource also expressed the need for access to new or better resources (up by 8% compared to Whitelane’s study in 2014). This shows that as investments start to come in again, companies hit resource constraints that drive them towards ITO service providers.

The need to access new/better resources shows that as investment starts to flow again, companies are hitting resource constraints in their slimmed down organizations — this is then driving them further towards the outsourcers.

5. Nearshoring or offshoring is an upward trend

Over 70% of the 260 organizations surveyed use nearshoring or offshoring. The authors of the study said that this number is expected to further increase in the coming years.

6. UK organizations want in on the cloud

More than half of all UK organizations surveyed are using, or planning to use, public cloud vendors. The satisfaction with these cloud vendors, such as Amazon, Google, Microsoft, Oracle, Rackspace, Salesforce.com and SAP is generally high.

7. Organizations value SaaS

Growth in the usage of Software as a Service (SaaS) in UK companies is also significant, with almost 85% of organizations use some form of SaaS. While the volume of usage differs from one company to the next, the statistic is a clear indication that the service model is way past its early adoption phase.

8. Clients are generally happy with providers…

The service provider community shows a strong overall performance with clients being satisfied with an impressive 86% of all contracts. While clients have some complaints about pricing and contract flexibility, these factors do not appear to be deal-breakers, especially if the quality of service is good.

9. …But clients may still need to be more selective

The study, however, reports that some respondents expressed frustration with service provider shortcomings on innovation, proactivity, and ability to drive change. While choosing a service provider should always be a careful decision, companies that intend to rely heavily on ITO providers should do their due diligence and consider the strengths and weaknesses of various vendors.

10. Telcos need to up their ITO game

Of the various sectors of the IT outsourcing market studied, telecommunications companies are the ones languishing at the bottom of the satisfaction chart. The authors argue, however, that customers may need to adjust ‘unrealistic expectations’ of low prices, customized services, and service levels from providers of commoditized, large-scale IT services.

Originally published at www.blog.infinit-o.com.

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