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Everyone is happy so why are outsourcers so worried?

Our latest UK IT outsourcing survey found most customers are happy with what they get from their service providers. Almost nine in 10 rated their outsourced relationship as satisfactory or better – up two per cent on 2017.

Many industries would kill for a rating that high – so why are outsourcers so worried?

The answer, of course, is in the details of the numbers. Yes, customers are generally happy with the service they get, but they’re damning of service providers’ ability to innovate. Three quarters of respondents don’t turn to their outsourcers to drive innovation – preferring to insource it instead.

But is this really a big issue? After all, the UK outsourcing market is worth tens of billions of pounds every year – and spending on innovation is only a fraction of that revenue.

The reason service providers are worried is that they’ve invested hundreds of millions of pounds into disruptive and innovative technologies such as artificial intelligence. Every conference I go to, every presentation from an outsourcer I attend, the first thing I hear about is the opening of the latest tech lab or centre of excellence.

That’s because innovation is the best way for service providers to prove value to their clients. It lets them reach further across and up the organisation, make more money and make themselves indispensable to their customers. If they’re seen as bereft of innovative ideas, they’re destined to be relegated to supplying ‘utility computing’.

That’s the elephants’ graveyard for outsourcers, the dark corners of procurement. It’s a place where competition is fierce, prices are low and margins are thin, where suppliers are interchangeable and brand loyalty is non-existent.

To be seen as innovative, it seems youth is key. The companies that respondents to the survey ranked as most innovative are relatively new. But size doesn’t seem to be a factor, with young digital giants sitting alongside smaller outsourcers in the top five. So even the ancient behemoths of outsourcing should be able to innovate.

It seems, then, that outsourcers are right to worry about high satisfaction. They’re gaining marks for the things that make them less and less money each year while being ignored for the things they hope will make them money in the future.

To remain relevant, service providers need to invest in technical innovations with clients, set up commercial models that share risk and reward, and proactively offer innovative solutions to clients’ business challenges.

Meanwhile, teams looking to outsource need to explore providers’ ability to innovate. Have you visited your top suppliers’ innovation centres? Have you co-hosted innovation days? And are your colleagues given the opportunity to work with service provider teams on innovative developments?

With innovation being key to future success, both service providers and organisations looking to outsource need to focus on it. By being honest with each other about the importance of original ideas, both sides will be able to evolve and drive genuine satisfaction.

2018 UK IT Outsourcing Study: UK’s most comprehensive client study covering IT outsourcing and IT service provider performance.

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