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2019 UK IT Outsourcing Study

As businesses across sectors focus on technology-driven transformation, the UK IT outsourcing market is growing and showing promise. Business stakeholders are increasingly involved in driving the technology decisions, and Agile is firmly established as the preferred delivery approach.

The 2019 UK IT Outsourcing Study confirms that the UK market establishes the direction and major trends that continental Europe follows. The UK market looks set to grow over the next two years as clients signal that they plan to increase their use of suppliers so they can focus on their core businesses and access resources they don’t have in house.

“Technology-driven challenger organisations are transforming the way services are delivered and consumed across sectors. Technology investments are growing, presenting significant opportunities for established service providers and new entrants with differentiated offerings. Service providers that are able to transition from traditional delivery and commercial models without compromising the service quality are looking at an exciting future ahead.”

Manish Khandelwal,
PA transformation expert

About the survey

The 2019 UK IT Outsourcing Study, conducted by Whitelane Research in collaboration with PA Consulting, investigated more than 760 unique IT outsourcing contracts. This represents more than £15 billion of annual IT spend across more than 240 of the largest users of IT services in the UK.

It’s the UK’s most comprehensive client study covering IT outsourcing and IT service provider performance.

SNAPSHOT OF FINDINGS

Over the next two years, outsourcing will continue to increase in the United Kingdom with 71 per cent of organisation planning to outsource at the same rate or more. The percentage of organisations planning to outsource more is up five percentage points compared to last year.

For the first time since 2015, the number of clients planning to insource has dropped from 22 per cent to 16 per cent. Because the UK IT outsourcing market is generally considered to be the most mature market in Europe, it will be interesting to see how the content follows in the years to come.

However, young businesses are increasingly intending to insource and so are large organisations for specific activities. The clients indicate the main rationale for insourcing is “the need to retain and own their own intellectual property” (75%) together with a shift towards more “agile ways of working” (75%).

Clients are increasingly seeking more innovation from their providers and outsourcing contracts, but almost 80 per cent say they aren’t achieving, or are only partly achieving, innovation. This also applies to business transformation, where almost three out of four clients say they aren’t achieving, or are only partially achieving, the objectives.

Overall, the market will continue to grow, with 32% of UK clients planning to outsource more and 16% planning to outsource less.

The top reasons for outsourcing are cost reduction (68%), focus on core business (57%) and access to resources (51%).

Almost 60% of organisations are already using Agile as their preferred delivery model, with another 27% planning to use it.

Mature clients continue to rebalance their in-house and outsourced services with 22% of respondents planning to outsource less

Insourcing is fuelled by a need to drive innovation (74%) and to build and retain intellectual property (74%)

Automation, artificial intelligence (AI) and robotics present a significant opportunity, with 44% of clients not yet capitalising on the technology.

Cloud providers, such as Amazon, Salesforce and Microsoft, score highly on customer satisfaction as clients value the flexibility and savings, while ERP providers suffer across a range of factors including flexibility, proactivity and price.

A significant minority of clients consider their sourcing strategy (25%), transition (28%) and integration (25%) capabilities to be unsatisfactory, risking significant loss of benefits through poor execution

Established providers (TCS, Accenture, HCL) have been joined at the top of the satisfaction table by newcomers (Amazon, Hexaware and NIIT), although some traditional organisations are seeing sustained decline.

Future trends

Agile has become mainstream

The adoption of agile approaches continues to grow, supported by product-based teams and operating models. Some of the traditional, large organisations are struggling to drive the cultural change and there are opportunities to improve.

Organisations continue to fine-tune the technology supply chain by balancing insourced and outsourced services

Clients are increasingly keen to maximize the value of technology investments. The insource vs outsource debate has moved on to the long-term outcomes clients want. Organisations are balancing the supply chain and building in-house capabilities, particularly for areas where they’re keen to build and own their IP and drive sustained innovation to drive growth.

Entry barriers are reducing for new service providers

Niche service providers that have innovative offerings are winning the right to compete with large, established players. Mature organisations are increasingly open to work directly with smaller service providers. These providers offer innovative ‘plug and play’ solutions, helping to reduce time to market.

Automation, robotics and AI present a huge opportunity

A significant proportion (78%) of clients are planning to increase their usage of these technologies in the next year. Service providers have an opportunity to address clients’ growing need for innovation to stay competitive.

Integration with existing or legacy systems remains the main barrier to cloud adoption

Clients are continuing to lean on competent service providers to overcome the barriers to transition to cloud.

What do outsourcing clients in the UK do to succeed?

  • Design an IT delivery organisation that supports both the bottom-line efficiencies and top-line growth agenda of the business
  • Reassess the balance in the IT supply chain between insourcing and outsourcing
  • Embrace new ideas and technologies from both established and new service providers
  • Expose the service providers to business representatives to help drive innovation
  • Maintain a long-term view of the relationship.

Our insights

Contact us

Manish Khandelwal

PA IT transformation expert

Martin Tennant

PA IT transformation expert
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