A survey by business advisory services provider EquaTerra claims that outsourcing is now a cornerstone of UK business, spearheaded by the services and financial services sectors, which remain at the forefront of growth in the economy.
The survey, UK Services Provider Performance 2007-2008, shows the UK outsourcing market growing and becoming a key part of the executive toolkit rather than a mere “management fad” among 110 of the largest IT spenders in the UK, across both commercial and public sectors. “The UK is continuing to lead Europe, both in the size and maturity of its outsourcing market”, says the report.
In all, fifty-four percent of organisations surveyed said they were looking to outsource more in the future – a finding made all the more likely by the prospect of a downturn in the economy during 2008. Core to this uptake of outsourced services has been global sourcing, with the proportion of businesses using it rising to 57 percent from 47 percent last year.
In four in ten organisations, more ICT services are delivered by external providers than by an internal function, and in 15 percent of companies three-quarters of the IT budget is spent with outsourcing providers.
Seventy-nine percent of all respondents said they will continue to outsource at the same rate or higher. Just over 20 percent said they would outsource less, or were not in a position to say.
Infrastructure management and application management are the most commonly outsourced areas, but the report suggests that there remains a significant opportunity within business processes such as HR and finance.
India remains “the undisputed champion of UK offshoring”, with 100 percent of all participants that source globally using India as a location. Indian providers “frequently outscore their established global counterparts in the rankings for customer satisfaction”, says the report.
Among other locations, Eastern Europe is a distant second to India, used by just 25% of respondents. South Africa, Malaysia, China, Spain and the Baltic states are each being used by less than 10% of organisations.
Rapid globalisation, facilitated by high-bandwidth communications, are helping drive the acceptance of outsourcing as an established business aid. “The message is clear,” says the report, “offshoring has moved beyond acceptance to become a given when it comes to sourcing the elements needed to support a business.”
As the market matures, cost is no longer the only impetus for a decision to outsource, says EquaTerra, with quality, innovation and flexibility coming increasingly to the fore and, ultimately, influencing the level of customers' satisfaction with their service providers. True dissatisfaction with contracts is low – reported by only 14% of respondents.
One of the report's more controversial findings is that multi-sourcing leads to higher satisfaction rates, which suggests that the days of the big, 'marquee' contract may not continue indefinitely.
Implicitly, then, the ones to watch this year may be smaller, more nimble specialist providers who are carving out niches of their own. Of course, these will become acquisition targets in time, and a flagging economy might encourage the outsourcing giants to pick up a bargain or two should there be a flight to the big names in uncertain times.
EquaTerra advises the outsourcing industry that "in a rapidly changing world outsourcing providers not only need to provide a service that meet immediate customer needs today, but must be able to flex service at high speed to suit the customer's needs tomrrow".
