UK businesses are facing “outsourcing turmoil”, with nearly £7bn worth of outsourcing deals up for renewal by March 2008, advisory firm, Morgan Chambers has warned.
Morgan Chambers predicts that high-value contracts with the big outsourcing providers will be broken up between smaller firms over the next two years, in what it says will be the biggest shake-up the industry has seen since the 1990s.
In a report, Outsourcing Service Provider Performance 2006, based on a survey of 500 senior managers at client companies across Europe, the advisory firm identifies a UK trend away from single provider deals, towards “multisourcing”, with smaller, specialist providers fulfiling shorter-term contracts.
UK outsourcing contracts are worth an average of £28.5m each. But the report says only 37% of client companies in large contractual agreements worth more than £25m are satisfied with what they are getting, compared with 67% satisfaction with smaller contracts worth less than £3m.
Morgan Chambers chief executive Phil Morris said, “The outsourcing market has matured and clients are becoming smarter in the way they contract. Businesses are beginning to drop the ‘offshore’ or ‘nearshore’ labels, moving instead to ‘global sourcing’, with no geographical boundaries. This opens up the market to a new wave of providers and contracting models.”
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