UK IT Sourcing study 2021
Two-thirds of organisations plan to continue or increase IT outsourcing in the next two years
As businesses across sectors focus on technology-driven transformation, the UK IT outsourcing market continues to grow. The 2021 UK IT Sourcing Study explores the trends behind this growth through the most comprehensive UK survey to date.
Snapshot of findings
Over the next two years, 33% of UK businesses are predicting they’ll outsource more, up 2% since last year. This stability could be due to organisations currently not looking to make any changes due to uncertainty caused by COVID-19.
Insourcing also remains stable, with 16% of organisations planning to outsource less compared to 15% last year. The main driver of insourcing is the need to build and retain ownership of Intellectual Property.
Overall, respondents are satisfied with their IT service providers, with 89% of all 628 IT sourcing relationships rated satisfactory.
The Manufacturing and Chemicals sector is predicting the largest increase in outsourcing, with 59% of organisations planning to outsource more, 26% above the average for the UK. This is in sharp contrast with the public sector, where only 21% plan to increase their level of outsourcing and almost 36% will outsource less.
Despite a decrease of 5% in importance since last year, cost reduction remains the main driver for organisations planning to outsource more in the UK (66%), but there are some variations across sectors. In Manufacturing & Chemicals, 60% say cost reduction is their main drive, while 50% of public sector respondents feel the same.
This could be because public sector clients believe focusing on cost is impacting service quality, reflected in their consistently lower satisfaction scores compared to the private sector. Yet overall, satisfaction is high, with 96% of all 878 cloud sourcing relationships rated satisfactory.
At the same time, use of cloud looks set to continue to grow in the UK as two-thirds (67%) of organisations predict that more than half of their new applications will be running on public cloud in two years’ time. Yet only 28% predict at least half of their legacy applications will be on cloud. This is due to organisations believing cloud migration won’t be straightforward or even possible, with potentially significant risks that might not be economically viable.
Key findings from the research
How outsourcing clients can succeed
- Seamlessly integrate core IT outsourcing solutions with cloud platforms and build attractive employee value propositions to hold and attract the best talent
- Adopt cloud for new applications to minimise integration complexities in the future and leverage the expertise of the cloud providers
- Exploit lessons learnt from COVID-19, which proved remote working doesn’t affect quality or productivity, and benefits the environment and minimises wasteful commuting time
- Design an IT delivery organisation that supports both bottom-line efficiencies and top-line growth while recognising the skills needed to effectively manage business and supplier relationships
- Reassess the balance in the IT supply chain between insourcing and outsourcing
- Ensure contracts with suppliers recognise and facilitate new ways of working, such as Agile and DevOps, and actively work to integrate such approaches
- Be realistic about what key suppliers can achieve in the long-term and plan accordingly.