Outsourcing overtakes business process in public sector

Research from Kable on public sector outsourcing shows more is spent on IT outsourcing than business processes.

Research from Kable on public sector outsourcing shows more is spent on IT outsourcing than business processes.

The research has highlighted a massive increase in public sector outsourcing, with IT contracts
driving the increase in value.

Kable’s report, Public Sector Outsourcing – 2000-06, reveals that by 2005-06, the total value of all UK public sector IT and business outsourcing will probably reach £46.5bn. This represents a growth of 228% in the market since 2000-01.

IT’s proportion of the total spend on outsourcing share of the outsourcing spend has increased also has increased significantly.

In 2003-04, IT accounted for 56% of the total market, followed by communications outsourcing and business process outsourcing, each of which account for 19%. But managed services has the lowest proportion of spending, accounting for a total of just over £2bn.

Karen Swinden, Kable’s head of forecasting, said, “There seems to be a general consensus that business process outsourcing is fuelling the outsourcing market, but Kable’s analysis of public sector contracts clearly demonstrates that IT is playing the leading role. This is forecast to continue for the next few years.”

Harrow council has provided a recent example of this trend. On 17 June the borough tendered for a strategic partner to help it to enhance its IT services in a 10-year deal worth £100m.

The council said it regarded a strategic partner as an “essential element” in the delivery of its IT strategy. It plans to develop an ERP environment, implement a CRM system and introduce standardised management information systems. 

And in February, Birmingham council embarked on the largest local authority IT outsourcing programme in the UK, with a scheme worth more than £500m to cover business transformation, the running of a contact centre and other IT services. 

Kable’s research shows that the biggest rise in outsourcing has been in the health service, where the value of outsourcing contracts rose by almost 600% from £1bn in 2002-03 to just under £6.9bn by the end of 2003-04, mainly as a result of the NHS National Programme for IT.

This article was part of Computer Weekly's managed services business channel, sponsored by Computacenter.


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