Research into the UK outsourcing sector in 2010 found that 7.4% of the UK’s total production came from outsourcing, and about a third of that – some £38.7bn – was IT outsourcing. It is a sector that adapts to market conditions, reshaping itself to give customers what they want.
The past year has seen the public sector feature heavily in outsourcing news. The government wants to cut costs, so it has been trying outsourcing models. At the same time, it is putting pressure on its suppliers to do more.
In the light of the economic slowdown, private sector companies have been taking advantage of the economies of scale that outsourcing suppliers offer, as well as the ability to receive services from lower-cost regions. But perhaps the decision by outsourcing pioneer General Motors to abandon outsourcing was more noteworthy.
The 10 articles below are an indication of the evolving nature of the outsourcing sector.
General Motors insourcing: One off or trend?
One of the big stories recently concerning outsourcing IT is one about doing the opposite. GM is in the process of insourcing its currently heavily outsourced IT. The plot gets even thicker when you look at GM's outsourcing CV. It is the company that basically created EDS. GM originally bought EDS as its internal IT department before spinning it out as a separate company. It continued to buy services from EDS. Then EDS was acquired by HP, and now, a few years down the line, GM is bringing almost everything in-house.
Businesses in Europe and the US will transfer about 750,000 jobs, including IT, to lower-cost locations over the next four years, taking the total number of jobs offshored to 2.3 million by 2016. But offshoring could stop in the next decade when there are no more roles to go, according to research from The Hackett Group, which looked at 4,700 businesses with annual revenue of more than $1bn.
The number of UK workers employed in the IT outsourcing sector has dropped, as has its total contribution to the UK economy, according to research by Oxford Economics. Research into the UK outsourcing sector in 2010 found that total outsourcing was worth just under £199bn in total sales – 7.4% of the UK’s total production. IT and data-related services was the biggest sub-sector of outsourcing, contributing £38.7bn of the total for the outsourcing sector.
A Fujitsu troubleshooter in Scotland faced a barrage of criticism and questions related to a troubled IT services contract at a meeting of The Highland Council’s resource committee, which has warned Fujitsu to sort out the problems without delay. Brodie Shepherd, Scotland country director at Fujitsu, appeared before the committee to answer questions about delays to parts of the £70m contract, which includes supplying IT services to schools and the council’s corporate operation.
The Cabinet Office has blacklisted Fujitsu and another IT supplier from tendering for government IT contracts because they constitute too high a risk. According to FT.com, Fujitsu will not be considered by the Cabinet Office for new government projects for the time being.
The Atos team in control of the complex IT environment supporting the London 2012 Olympic Games is about to recreate the live environment for a week in the final dress rehearsal before systems go live. This is one of the final hurdles at the end of a journey that began in 2005, when Atos was appointed integrator for the London Olympics 2012. With the start date in the diary, Atos knew delays were not an option.
Cornwall Council leader Alec Robertson lost a confidence vote 63 to 49 and stepped down over a controversial proposal to outsource shared council services that split the council. The Conservative party that leads the council is looking for a new leader.
Duncan Tait took the helm at Fujitsu at the height of the economic slowdown and all the upheaval it triggered, but revenues and orders are on the rise again. Fujitsu is the world’s third biggest IT service provider, after it overtook CSC in Gartner's rankings following a 10% increase in sales in 2011. Only IBM and HP sell more IT services than Fujitsu globally.
HP has confirmed it is writing off about $8bn after the drop in value of EDS, as the result of internal decisions combined with the global economic climate. Hewlett-Packard (HP) had previously warned that it would write off $8bn after the business it acquired in 2008 for $13.9bn was devalued.
Regional outsourcing venture Southwest One obscured the true extent of its financial losses with a highly unusual combination of understated costs and post-dated credits in its 2010 accounts, according to an analysis of the firm's accounts by Computer Weekly.