NOA predicts public sector outsourcing surge

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The National Outsourcing Association (NOA) thinks the public sector will be a hot spot for outsourcing this year.

This comes in the organisation's predictions for 2010. But what does the industry think.

It says pressure on managers to cut costs will lead to increased outsourcing contracts in the public sector.

This could be the only sector that benefits from public sector IT spending this year with spending expected to be slashed in the second half of next year.

Bernard Brown, head of business services at KPMG, warned this week that public sector spending cuts could dampen the recovery.

"The prospect of possibly extensive public sector job cuts in the second half of 2010 casts a long shadow over everything. The jobs market has been cushioned in recent years by continued public sector expansion. If this is put into reverse post-election, it could have a significant effect on employment figures."

The NOA predictions in full are listed below and click here for predictions made to Computer Weekly by industry experts.

1- Goodbye recession - The UK will technically be out of the recession in 2010, joining those European countries that have already returned to growth, and leading to a boost in confidence. For this reason many will be asking their outsourcing suppliers for increased capacity to support renewed growth

2- Mini-Multisourcing - 2010 will see a further revision of multisourcing or multivendor deals as end-users try to create simplicity in their outsourcing. Focusing on a smaller pool of suppliers will also help companies reduce governance costs - a common bugbear in multivendor arrangements

3 - Green with a vengeance - Environmental concerns will come back to bite those who thought they had been forgotten in recession. Some parts of CRC will become law and suppliers will need to understand it and be aware of the supply chain implications.

4- Business Process Outsourcing booms - It currently only makes up around three percent of the entire market so there is lots of room for growth as the recession weakens. BPO growth will be driven by the need to rebuild companies flexibly without taking on a large amount of risk through full time staff.  And now that organisations have a taste for BPO then expect them to use more, the drivers wont be just cost and we'd expect it to break through the 5% barrier by the end of this year.

4- High as a cloud - The move towards cloud computing will become more noted as more traditionally outsourced services (from CRM to infrastructure and storage) are delivered via this technology. However, given that outsourcing arrangements are based on relationships and change more than technology, it's possible that the "cloud" just becomes (in outsourcing terms) another way of deploying the technology, in a similar way to thin client.

5- Freed from captivity - Those end users with their captive outsourcing centres will increasingly divest to reduce management costs and move towards true outsourcing. As a result of this, back office outsourcing companies will increasingly diversify and expand service offerings through acquisition.

6- SME sourcing - the SME sector will increasingly recognise the benefits of outsourcing and even offshoring as it looks to growth opportunities whilst reducing overheads. Locations offering outsourcing services to smaller businesses such as Mauritius and Sri Lanka will continue to grow in strength and prominence as they learn to target the SME sector in countries like the UK for potential customers

7-Location, location, location - China will see a growth in call centres and continue to eat away at the share of established outsourcing locations. The Philippines, Brazil and Russia will see an increase in business as they grow in prominence on the world stage. While Brazil will see increased competition from Chile, it will continue to grow in strength IT-wise if not in BPO as it already has over two million IT workers. Many locations will also start to specialise more in recognition that global outsourcing cannot continue to grow interminably more noted as more traditionally outsourced services (from CRM to infrastructure and storage) are delivered via this technology. However, given that outsourcing arrangements are based on relationships and change more than technology, it's possible that the "cloud" just becomes (in outsourcing terms) another way of deploying the technology, in a similar way to thin client.



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Just this week, a study was released which indicates public sector spending cuts in 2010 could lead to schools outsourcing more frequently this year, in spite of the education system's previous resistance to do so. It seems the public sector could really be one to watch this year..

http://www.sourcingfocus.com/index.php/site/newsitem/2069/

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This page contains a single entry by Karl Flinders published on January 8, 2010 11:02 AM.

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