Credit crunch fuels more UK outsourcing

Steady growth as businesses try to save cash

UK companies are stepping up their outsourcing to cut costs during the recession.

Last year British businesses spent 12 per cent more on IT outsourcing and six per cent more on business process outsourcing than they did in 2007, according to a report by the National Outsourcing Association.

Commenting on the report, published yesterday, NOA chairman Martyn Hart said in a statement: "Outsourcing has traditionally been seen as a cost saving mechanism for business, so in times of economic turbulence it is not surprising that the industry is continuing to grow."

The uptake in new contracts was echoed by a separate study by Pierre Audoin Consultants, which found that software and IT services revenues from the UK in 2008 had increased by three per cent over 2007. Unfortunately when the fall in the value of the pound was taken into account it worked out as an 11 per cent fall in revenues.

Nearly 20 per cent of the 50 outsourcing suppliers surveyed by the NOA said the length of contracts had decreased over the last 12 months, while 70 per cent said the average value of contracts had stayed the same.

Hart expressed concern that increased demand for quick-win cost cutting projects could increase the number of "higher volume low cost contracts, over shorter time frames" which he said were more likely to fail.

The main source of revenue for 40 per cent of suppliers was expanding business with existing clients.

Looking ahead 40 per cent of outsourcing vendors told the NOA that they were more confident in the market place then they were in 2008.