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UK IT sourcing study 2022

Outsourcing market continues to grow as war for talent intensifies

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The outsourcing market continues to grow: Over the next two years, 32% of UK businesses are predicting they’ll outsource more, down only slightly on last year. For the first time in the UK, cost reduction is no longer the number one driver for outsourcing, with the need to focus on core business the primary driver, followed closely by access to resources and talent.

Organisations planning to insource have increased slightly this year to 18%. Similar to last year, this is predominantly driven by the need to build and retain own Intellectual Property to drive business. Compared to the rest of Europe, the UK has one of the highest percentages of organisations planning to insource.

When it comes to cloud services, more than 50% of respondents predict that over half of their application portfolio will be in the cloud within the next two years, driving further need for IT support.

32%

will outsource more

About the survey

Now in its tenth year, the 2022 UK IT Sourcing Study, conducted by Whitelane Research in collaboration with PA Consulting, investigates more than 660 unique IT sourcing relationships and more than 575 cloud sourcing relationships held by over 270 participants of the top IT spending organisations in the United Kingdom, making it one of the most representative IT outsourcing studies in the market. These participants provided feedback on 26 of the largest IT service providers.

The report uncovers insights into the UK IT sourcing market, highlighting future trends and opportunities for clients and providers in this space.

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The outsourcing industry has used the pandemic years as an opportunity to transform its operating model and has emerged stronger. The war for talent has reached unprecedented levels and will only intensify in the short term, however the industry has the unique opportunity to drive global workforce transformation. As the world economy enters a potentially turbulent period, winners will be those that are able to meaningfully co-create with clients, help them reduce time to market and contribute to both the top line and the bottom line.

Manish Khandelwal,
PA IT transformation expert

Future trends within the sourcing industry

Satisfaction with outsourcing providers is the highest to date

Average client satisfaction with outsourcing providers is the highest to date, rising one percentage point this year to 73%. Overall, satisfaction remains stable, with 91% of all relationships rated as satisfactory.

Clients struggling with cloud integration

Clients are struggling with transition and change management and cloud integration, with more than 80% indicating either some or significant improvement required in their internal capabilities.

 

Cost reduction, no longer number one driver

For the first time, cost reduction is no longer the number one driver for organisations planning to outsource more. This year a focus on core business is the primary driver with 57% of organisations citing it, followed by access to resources/talent (56%).

 

More scalability to business needs

The manufacturing and chemicals sector predicts most outsourcing, followed by financial services. Across most of the sectors, two out of three organisations are planning to outsource as much or more in the next two years.

Insource more

Respondents planning to insource more have increased slightly this year (16% to 18%), predominantly driven by the need to build and retain their own intellectual property to drive business (74%). A faster time to market and/or improved quality outcomes (55%), and ability to focus more on innovation (47%) were also cited as drivers of this change.

Adoption of public cloud services

Satisfaction remains high for cloud providers with 95% of all relationships being evaluated by clients as satisfactory.  Amazon Web Services (AWS) achieves first place (80%) for infrastructure cloud platforms, whereas for software cloud platforms, Microsoft 365 remains top of the ranking with 81%.

Future developments in sourcing partnerships

Cloud adoption continues and is driven by the need to improve agility and scalability

More than half of respondents predict that 50% or more of their application portfolio will be in the cloud in the next two years. Most organisations (86%) are planning to move to the public cloud to achieve more agility and scalability, while 54% cite improving continuity and stability. Cost benefits also are cited as an incentive to move to the cloud by 53% of respondents.

Focus on transformation requires specific skillsets

Clients continue to drive digital transformation with pace. This requires continuously evolving competencies and talent that organisations are struggling to attract and retain, resulting in an increase to their dependency on the IT provider community and driving further outsourcing.

Clients need to invest in capabilities

Both clients and providers agree that clients need to invest to improve internal capabilities to get the most out of relationships.  Transition, change management and cloud integration are the main areas of concern for both clients and providers.

As organisations drive the IT transformation forward, they need to:

  • Reassess the balance in the IT supply chain between insourcing and outsourcing

  • Take a pragmatic long-term view of the relationship with key suppliers

  • Bolster internal skills in business critical areas

  • Build attractive employee value propositions and career journeys to attract and retain the best talent

  • Design and transition to new operating models that support value stream delivery

  • Adopt cloud for new applications to minimise integration complexities and leverage the expertise of the cloud providers

  • Ensure contracts with suppliers recognise and facilitate new ways of working, such as Agile and DevOps, and actively work to integrate approaches

  • Leverage hybrid working to access global talent through a combination of on, near- and off-shoring

Uncover more insights into the UK sourcing market

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Related Insights

Contact us

Manish Khandelwal

PA IT transformation expert

Ciby Yohannan

PA IT & business transformation expert

Steve Lewis

PA transformation expert

Yoon Chung

PA defence and public services sourcing expert