Private sector dominates UK outsourcing market in first quarter

Businesses signed deals worth £648 million between January and March, according to the Arvato UK Outsourcing Index.

The private sector dominated the UK outsourcing market in Q1, with contracts worth £648 million procured between January and March, according to the Arvato UK Outsourcing Index.

The research, compiled by business outsourcing partner Arvato CRM Solutions UK and industry analyst NelsonHall, showed that spending by businesses accounted for 93% of the total contract value procured in the UK over the period.

Customer service contracts accounted for a third of private sector deals, according to the research. The majority (80%) were procured for omnichannel customer relationship management (CRM) systems, with the remainder focused on specialist financial customer service and billing services.

The findings show that energy and utilities firms were the most active buyers of customer services in Q1, accounting for 60% of the total volume deals signed.

Business spending on outsourcing was dominated by telecoms and financial services firms, with companies in these sectors agreeing deals worth £446 million and £104 million respectively.

Overall, outsourcing contracts worth £699 million were signed in Q1 across the UK market, according to the research. IT outsourcing (ITO) accounted for contracts worth £601 million between January and March, representing 86% of the total spend, with deals for business process outsourcing (BPO) amounting to £97 million.

The total value of contracts signed between January and March represents a slower start to the year when compared with the same period last year, with the total deal value falling by 15%.

Debra Maxwell, CEO of Arvato CRM Solutions UK, said: “Businesses recognise that providing outstanding customer service across every channel has become a crucial differentiator across almost every sector. As companies continue to invest, it’s clear that firms see significant value in partnering with specialist providers to ensure they have the expertise and technology needed to deliver the highest quality service.

“Overall, we’ve seen a more subdued market in the first quarter of 2019. Ongoing Brexit uncertainty and the impact of GDPR implementation is continuing to influence and delay purchase decisions, so it is to be expected that procurement teams are putting buying decisions on hold, particularly in the public sector.”

Public sector outsourcing spend softens

Government organisations procured deals worth £51 million between January and March, down from £91 million in Q1 2018.

Government departments which procured contracts in Q1 focused spending on technology and digital services. Data centre outsourcing and application management were the most popular services, according to the research.

Overall, the findings showed that 64% of all government deals were to enable access to technology through new frameworks, a key strategy for delivering efficient digital transformation.

The Arvato UK Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm NelsonHall, in partnership with Arvato CRM Solutions UK. The research is based on an analysis of outsourcing contracts procured in the UK market between January and March 2019.