UK leads Europe in outsourcing

Outsourcing is moving towards a trend of more, smaller deals; and the UK accounts for over half of Europe's market

The UK IT outsourcing market is relatively stable despite a significant downturn in deals globally, according to the latest industry figures.

The quarterly index, by outsourcing advisers TPI, shows a forward pipeline of deals down 40 percent from 34.6bn euros last quarter to 20.8bn euros this quarter. When the figures are broken down by region, Europe's is the healthiest picture with a drop of just 0.2bn euros to 2bn euros, with the UK accounting for almost half of that market.

Duncan Aitchison, managing director of TPI, said: "In Europe we are seeing the number of contracts remain steady."

So-called 'mega-deals' of over 1bn euros are also showing a fall, with none in Europe this quarter and the total contract value of IT outsourcing deals is also down.

Jack Benton, marketing director at TPI, said: "The trend seems to be towards a larger number of smaller deals."

Businesses are rushing to complete deals with the total length of time to sign contracts down significantly from 292 days last year and 283 last quarter to just 224 days.

But cost reduction is no longer the main driver, according to TPI, which claims companies are using outsourcing as an opportunity to overhaul business processes.

Benton said: "The ability to make fundamental changes in technology and business processes is more important than cost savings. Cost reduction is always an important part of outsourcing but the next generation is driven by process reorganisation."

Business process outsourcing (BPO) is on the increase although deals remain relatively small, with the manufacturing sector accounting for 58 percent of BPO deals that TPI is advising on.

According to Benton, six service providers are now beginning to dominate the market -- with CSC, EDS and IBM now joined by Accenture, ACS and HP when bidding for contracts.

He said: "What was once the domain of three IT infrastructure providers has become much more competitive."


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