Outsourcing agreements worth £718 million were signed between January and March, according to the Arvato UK Outsourcing Index.
• Financial services firms accounted for 51 per cent (£363 million) of the total contract value procured in the UK in Q1.
• Retail companies signed contracts worth £140 million in the first quarter of this year.
• Customer services was the most popular BPO service line procured between January and March, accounting for £152 million (20 per cent of total contract value).
• Market activity in Q1 represents a slowdown from what was a record year for the outsourcing sector in 2017.
Outsourcing contracts worth £718 million were signed in the UK between January and March, with financial services and retail businesses the most active buyers, according to the Arvato UK Outsourcing Index.
The research, compiled by business outsourcing partner Arvato and industry analyst NelsonHall, found that deals worth £363 million were signed in the financial services sector, accounting for 51 per cent of the total UK outsourcing market in Q1 and more than double the value agreed in the previous quarter (£153 million).
Retail companies agreed outsourcing deals worth £140 million in the first quarter of this year after three months of no activity in October to December 2017, according to the findings.
The rise in spending across retail and financial services contributed to an eight per cent increase in total contract value compared with the last quarter of 2017.
Customer service agreements continued to factor highly in UK outsourcing activity, accounting for over 20 per cent of all spend (£152 million). This, combined with HR and payment processing contracts, saw Business Process Outsourcing (BPO) deals account for £256 million of spend – up from £179 million agreed in Q4 2017.
IT Outsourcing (ITO) contracts worth £462 million were signed in Q1, with procurement focused on cloud computing, and asset and infrastructure management.
Despite the rise in activity quarter-on-quarter, the value of outsourcing contracts signed in Q1 represents a more subdued start to the year compared with 2017 which was a record year for the industry. The research found that spend on outsourcing deals between January and March has fallen 75 per cent year-on-year from Q1 2017.
Debra Maxwell, CEO, CRM Solutions UK & Ireland, Arvato, said:
“Following a strong year for UK outsourcing in 2017, we’ve seen a more subdued market in the first quarter. With Brexit uncertainty continuing to influence buying decisions and the imminent implementation of GDPR taking up internal resources, it is to be expected that fewer deals would make it over the line in this period.
“Yet, our findings show there remains strong appetite from businesses to work with outsourcing partners to bring in external expertise for key operational areas such as customer services, and to invest in maintaining a robust IT infrastructure.”
Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking, said:
“In what has been a challenging start to the year for the outsourcing sector, the growth in spending by financial services and retail businesses goes to show how outsourcing can be used as both a tactical and strategic tool to help deliver for companies experiencing material change in their sectors.
“Whether due to regulatory reform, subdued trading or structural reforms through digitalisation, both sectors are under pressure to improve performance while delivering long-term cost savings. This is exactly where outsourcing can help.
“Meanwhile, we don’t expect the slowdown across outsourcing to be anything more sinister than a pause for both sides to draw breath.
“Given the events of this year, some commissioning organisations will review their vendor contingency plans. At the same time, some providers might want to use this period to boost flexibility for unforeseen events.
“However, while that could lead to a slightly fallow year for outsourcing, we ultimately don’t see any reason to fear anything more severe. Outsourcing can offer a competitive choice and bring innovation to firms seeking to divest non-core activities and focus on their core business.”
The private sector dominated the UK outsourcing market in Q1 as businesses accounted for 90 per cent (£645 million) of the total value of contracts signed, according to the findings.
The research found that public sector organisations agreed deals worth £73 million over the period, down from £229 million in the previous quarter. Government departments focused on securing contracts for cloud computing and application and infrastructure management.
Additional Information
The Arvato UK Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm NelsonHall, in partnership with Arvato UK. The research is based on an analysis of outsourcing contracts procured in the UK market between January and March 2018.
Arvato is a trusted global business outsourcing partner to the private and public sectors in the UK and Ireland. With more than 50 years of experience in outsourcing, Arvato combines expertise in business process outsourcing (BPO), financial solutions, customer relationship management, supply chain management, and public sector and citizen services to deliver innovative, individual solutions. Arvato has long-term partnerships with some of the most respected companies in the UK and globally, as well as innovative public sector clients. Internationally, Arvato is a leading global BPO provider with over 70,000 people employed across almost 40 countries worldwide. Arvato has annual revenues of €4.8bn contributing over a quarter of the Bertelsmann group annual revenues of over €17.1bn.
For additional information on Arvato visit their Website
