The key findings of this year’s UK Study include:
• There is still an appetite for outsourcing among UK companies. 72% of all respondents in the study confirm that they will continue to outsource at the same rate or more (an increase of 3% from 2015). This is a good indication that the UK market still has some growth potential.
• It is clear that the pace of outsourcing is slowing down. 40% said last year that they would outsource more. This has declined to 31% this year. Last year we noted a trend towards selective insourcing, which appears to be accelerating. It is notable that 21% of UK organisations are planning to outsource less and insource more, up 6% on last year. The driver for insourcing is that some organisations are looking to in house capabilities to support business initiatives such as Digital Technology adoption and Agile Transformation. Significantly, cost reduction is the biggest motive, in spite of the transformational aspirations of many firms. We may be out of the depths of recession, but cost pressures have not let up for the CIO.
• After two years where business transformation and a focus on core business were the primary reasons quoted for outsourcing, cost reduction has returned as the pre-eminent driver for companies who are planning to outsource more (cited by 60%). This ‘return to normal’ where outsourcing is seen a cost containment approach is subtle but clear.
• The service provider community continued to show a strong overall performance, with clients remaining satisfied with 86% of contracts (unchanged from last year’s impressive figure). However, inevitably, there were significant differences between the suppliers assessed.
• TCS retained its position as the supplier with the highest level of satisfaction, joined by Cognizant (up from fifth last year), after three years of identical satisfaction levels, and new entrant Hexaware. Those providers delivering predominantly network and telecommunication services continue to remain at the bottom of client satisfaction scores. In 2015 we noted “expectations on the customer side need to be adjusted” and this remains true; but large telco providers continue to struggle with matching their service provision to customer need and this threatens the non-telco components of their businesses.
• The continued rise of public cloud usage is marked, with 67% of all UK organisations planning to increase their usage of these services. Satisfaction with cloud vendors such as Microsoft, Google, Amazon and Salesforce.com is generally high.
• Comparing customers’ perceptions of suppliers with suppliers’ perceptions of customers is always revealing. The service providers suggest that around 35-50 percent of their outsourcing clients can still significantly improve their transition skills and governance and supplier management capabilities, while the client perspective on their own capabilities is much more positive.
“Our survey with Whitelane highlights the changing nature of IT outsourcing in the UK for both customers and suppliers, with some interesting themes emerging around the key drivers, insourcing and service integration. As a leading advisor on sourcing, we continue to help our clients understand how these trends can be harnessed to gain the maximum value from the constantly developing market.” Alan Young, Global Head of IT Transformation, PA Consulting Group.
The UK study is part of Whitelane’s annual extensive IT outsourcing studies. We interview sourcing executives about their outsourcing plans and their opinions on service providers. The study is conducted in 13 different European countries and provides a comprehensive overview of the IT outsourcing landscape in each country. The survey also shows the main sourcing trends and positions of the main IT service providers based on different key performance indicators (KPIs), in addition to cloud computing and governance trends.