Public sector dominates outsourcing but private sector shows it the way with small contracts

The latest figures from ISG show that the UK public sector has spent a lot more on IT outsourcing and BPO that the private sector over the last two years.

This makes sense because the government has been pushing public sector organisations to cut costs, by giving them smaller budgets. So the public sector has gone from a sector that ISG didn’t even do a specific outsourcing report about, to one that dwarfs the private sector.

But what was interesting was that although the public sector spend was some 70% higher than the private sector at £51bn compared to £30bn, the private sector signed a lot more deals. I think traditionally I would expect the reverse. The private sector signed 726 contracts compared with 585 in the public sector.

This is because the private sector has been signing lots of smaller deals. The public sector has been doing mid-sized deals according to ISG.

Why is this? There are a lot of smaller private sector businesses outsourcing these days and there are a lot of existing deals in the private sector in their 3rd, 4th and 5th generations, which are being broken up and shared between different suppliers.

So maybe the government could take a leaf out of the private sector’s book and break up deals even more. After all that is one of the ambitions of the government. But this could be a few years away given the less mature out sourcing sector.