New EquaTerra Research Reveals Key UK Outsourcing Trends for 2010
Indian Service Providers Reassert Dominance
London (1 December, 2010) – UK IT outsourcing buyer organisations ranked Wipro (80%), Mahindra Satyam (78%) and Cognizant (77%) as the top three performing service providers for client satisfaction in EquaTerra’s 2010 UK IT Service Provider Performance Study. The top quartile of all the key performance indicators (KPIs) is formed of service providers with mixed heritages; offshore providers (Wipro, Mahindra Satyam Cognizant), broad based onshore providers (Capgemini, Siemens) and best of breed providers (Computacenter). Last year, many western-based service providers gained ground against Indian service providers, but this year, the Indians are back at the top again and are beginning to offer increasingly more infrastructure management outsourcing services that were previously seen as the last part of the retained portfolio of onshore providers.
Overall, general satisfaction levels with outsourcing increased again compared to last year. This is especially impressive given the strong focus buyers had on cost savings and low price. However, the average scores for most KPIs (except flexibility) have either been stable or declined, especially risk (down five percent) and strategic relationship (down four percent). The risk KPI has decreased as we see more service providers robustly reviewing their positions towards existing accounts and sales pursuits as a result of both the recession and the desire to ensure the sustainability of their own businesses. The decrease of the strategic relationship KPI may be due to service providers being more tactical in how they manage their accounts. Meanwhile, the increase of the flexibility KPI is likely an indicator of many service providers’ proactive engagement with clients to renegotiate in 2009 at which point issues relating to flexibility will likely have been addressed.
This year’s UK study investigated over 650 outsourcing contracts held by over 220 of the top IT spending organisations in the UK. The total annual value of the contracts included in this study is over £14 billion, accounting for around two-thirds of the total UK outsourcing market in terms of annual contract value. All commercial sectors are represented in the study, as is the public sector, including both central and local government organisations.
Lee Ayling, EquaTerra’s Managing Director, IT Advisory UK, commented, “As in previous years, the 2010 study provides deep insights into the changing dynamics of the UK outsourcing market. One of the many points of note is that outsourcing contracts which deliver cost savings alone do not lead to higher client satisfaction. But successfully delivering cost savings plus another driver, such as access to skills or time to market, does positively impact general satisfaction – highlighting that both end users and service providers should not focus on price alone before and during an outsourcing relationship.”
Further trends identified:
1. The economic climate continues to increase the demand for outsourcing in the UK
Overall IT outsourcing demand continues to grow in the UK market, fuelled by buyers’ needs to respond tactically to recessionary economic conditions by cutting current operating costs. It is also driven strategically by ongoing shifts in preference for how core IT services are delivered in the organisation. Eighty-seven percent of all respondents involved in this study confirmed that they will continue to outsource at the same rate or more, with 61 percent saying they will ‘probably’ or ‘certainly’ outsource more.
2. Cost reduction and flexibility goals dominate, but other drivers become more important
Creating cost savings remains the main driver for future outsourcing efforts, but enabling greater financial flexibility continues to be a prevalent second choice (with an increase of 15 percent compared to last year).
3. Global sourcing remains a dominant element in organisations’ sourcing strategies
Global or ‘offshore’ sourcing is a dominant element in UK organisations’ sourcing strategies with 75 percent of the respondents using offshoring. India remains by far the most dominant offshore IT outsourcing destination. The majority (65 percent) of respondents that are not offshoring, are public sector organisations.
4. The rise of multi-sourcing
On average each respondent has evaluated more service providers than in previous years, showing an increase in multi-sourcing. Larger monolithic contracts (with an annual contract value of over £50 million) often relate to lower satisfaction.
Notes for editors
Each year, EquaTerra undertakes an investigation into organisations’ satisfaction with their outsourcing service providers. The research results are recognised as the most extensive and representative 'perception study' on the issues of Information and Communication Technology (ICT) sourcing in the marketplace today. This comprehensive research study is conducted in a number of European countries using a common format to enable Europe-wide analysis and conclusions.
Further information from this year's UK focused study is available in the management summary. For a copy of the UK Outsourcing Service Provider Performance and Satisfaction Study 2010 Management Summary, or to schedule an interview please contact:
Europe/Asia Pacific Media Contact:
Melissa Gardiner
Director of Marketing
Europe and Asia Pacific
+44 (0) 20 7347 5101
mailto:melissa.gardiner@equaterra.com
About EquaTerra
EquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported more than 2,000 transformation and outsourcing projects across more than 60 countries. Supporting clients throughout the Americas, Europe, Middle East, Africa and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement, Real Estate & Facilities Management and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions. For more information, see www.equaterra.com.
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