Spending on customer service deals surged as the overall UK market remained stable, according to the Arvato Outsourcing Index
The overall UK outsourcing market remained largely stable in 2016, according to the research. The findings revealed a seven per cent year-on-year rise in the number of outsourcing deals procured across the UK last year, despite the overall value of the market falling by five per cent over the period. Outsourcing deals worth a total of £6.2 billion were agreed in the UK over the period.
The research partners say there has been a shift away from the traditional large, multi-process contracts towards procuring smaller, more focused deals. Overall, average UK contract values fell by 11 per cent year-on-year in 2016, with the average length of deals signed remaining constant at 53 months.
Technology Investment Boost Across Local Government
The analysis shows that local authorities across the UK ramped up their investment in technology in 2016, with council spend on outsourced IT reaching £463 million – a 75 per cent year-on-year increase.
The rise in IT spend contributed to an eight per cent year-on-year rise in overall local government outsourcing spend, which totalled £814 million in 2016.
Debra Maxwell, commented: “The sustained growth we’re witnessing across the sector reflects the growing pressures on local authorities to transform their operations, cutting costs while providing better services for citizens.”
“While technology is already playing a key role through the digital by default agenda, investments in new innovations, such as automation and cognitive systems, are underpinning more fundamental change.”
Outsourcing Growth Among Financial Services Businesses
The financial services sector saw strong growth in outsourcing activity in 2016, with the value of contracts procured reaching £769 million, up 11 per cent on the previous year.
According to the research, the rise can be attributed to a sharp increase in BPO spending as businesses turned their attention to deals in policy services, HR and property and casualty claims processing. The findings show BPO contracts worth £621 million were signed across the sector last year, up 87 per cent on 2015.
Patrick Quinn, CEO of Arvato Financial Solutions UK & Ireland, said: “The financial services industry remains under pressure to transform, both in terms of improving services for customers and finding new cost savings.”
“It’s clear from the research that a growing number of companies across the industry see outsourcing as a viable strategy to address these challenges through introducing new innovations and ways of working. There are some very positive signs for the sector’s health looking forward, with a high proportion of first-time outsourcing deals (57 per cent) procured last year.”
The Arvato UK Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm Nelson Hall, in partnership with Arvato UK. The research is based on an analysis of all outsourcing contracts procured in the UK market during 2016.