Years of IT staff cuts drives outsourcing resurgence

The IT outsourcing sector in the UK is going through resurgence as businesses realise they no longer have the staff to harness the latest technologies

The IT outsourcing sector in the UK is going through resurgence as businesses realise they no longer have the staff to harness the latest technologies.

According to KPMG's research on 490 IT outsourcing contracts worth £10 billion, demand for the latest technologies is fuelled by businesses attempting to improve customer satisfaction with their IT-based services.

“The impact of a marketplace dominated by customers demanding more for less, combined with a decline in the number of staff able to meet these high standards, means that the pressure to deliver is stronger now than at any time in the past few years,” said Jason Sahota, director in KPMG’s Shared Services and Outsourcing Advisory team. “Against this backdrop there is little wonder outsourcing looks set to remain a large part of IT spend in the UK.”

The research also revealed that businesses are less focused on getting the lowest price possible. Almost half (48%) base decisions to outsource on a desire to improve service levels, while 56% said the need to access skills influenced their decision to outsource.

Almost double the number of businesses want to increase IT outsourcing over the next year with 45% claiming they will ‘certainly’ or ‘probably’ do so. This was 19% in the same study last year.

KPMG also said there will be less global outsourcing of customer services. Only 23% intend to expand global outsourcing for customer service management compared to 39% in last year’s study.

“The temptation may be to shift key services beyond the walls of an organisation, but there is a growing realisation that this does not shift accountability,” said Sahota. “On the contrary, many organisations want to see aspects of outsourced operations happening closer to home, particularly when it comes to trying out new technologies.  This way it is easier to monitor and adjust actions if customer needs change, and quicker to make changes if things go wrong.”

The cloud is also changing IT outsourcing. A total of 64% of businesses said they have either adopted cloud technologies already, or will do so before the end of 2014. Almost three quarters (72%), for example, see cloud as complementing traditionally outsourced services.

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