Are we about to see a massive outsourcing boom?

Outsourcing is set to see the fastest growth since the 1980s with the sector worth up to £5bn by 2015, say city analysts.

According to an article in the Financial Times over £4bn worth of tenders are being negotiated this year, according to the Official Journal of the European Union and supplier pipelines. There are lots of contracts involving prisons, police forces, defence and health up for grabs this year. Obviously this is outsourcing and not IT outsourcing, although there might be some in there.

Equities analyst at investment bank Jefferies, Kean Marden, told the FT that this is as exciting as outsourcing gets.  “We haven’t seen a wave this big since the 1980s when they introduced competitive tendering for public services,” he is reported as saying.

But is it that exiting for IT outsourcing?

The article doesn’t really mention IT outsourcing specifically but I have had some positive reaction from the industry in regard to IT outsourcing.

Steve Cardell, president at IT services HCL-Axon, said:

“With the halt on public spending now being released, this step-change marks a fantastic time for outsourcing providers. This gives them the ability to benefit from the pent-up need to deliver transformation and efficiencies on reduced budgets for both central and local Government.

“We¹ve seen an increase in more complex, multi-sourced or second-generation projects since the Government opened up its procurement processes further to give niche providers the opportunity to deliver services. This new approach is fuelling much-needed innovation in the UK IT sector, creating lucrative opportunities for Indian offshore providers who have previously been excluded from the market. In addition to paving the way for new entrants, this renewed focus on innovation will also lead, crucially, to a more significant investment in IT skills from the UK Government.”

Martyn Hart chairman at the National Outsourcing Association said:
“Pressure on the public sector to make cost reductions has made for a healthy pipeline for many outsourcing suppliers, particularly now that tender costs have been reduced through ‘de-formalisation’ of the bid process. Having learned to engage suppliers earlier in the process, expect more business process outsourcing, as the public sector learns how to get itself a better deal. Commoditised IT can save around 10% annually, but only accounts for 5-6% of government spend   – BPO can offer savings on a much grander scale. Expect those companies that offer both ITO and BPO services to be most coveted by City investors. And, to ensure Outsourcing Works, the government must invest the time to up-skill its people. Only through proficiency, experience and knowledge-sharing can the public sector maximise the cost and service benefits of this outsourcing boom.”

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