Public sector increases outsourcing in first half of 2018

The amount of money spent on IT outsourcing (ITO) and business process outsourcing (BPO) in the UK public sector in the first six months of this year was more than a third higher than the same period last year.

In total, £2.61bn was spent on IT outsourcing and BPO across all sectors during the period, according to research from NelsonHall, which was commissioned by outsourcing service provider Arvato.

A total of £998m of the spending was by the UK public sector, which was a 39% increase on last year. More than three-quarters (79%) of the public sector spend was in IT outsourcing. The total spend put the public sector on a near par with the biggest spending sector, financial services, which invested £933m in ITO and BPO.

Central government departments accounted for most the government spending at £921m, which was up 27% on the previous year. Meanwhile, local government spending fell from £136m in first half of last year to £77m this year.

Despite an overall fall in private sector spending, financial services firms were responsible for the highest proportion of outsourcing procurement in the UK market, representing 36% of the total during the researched period.

Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking, said political and business uncertainty is stalling an outsourcing deal.

“Despite the uncertainty, the economic backdrop is relatively robust and both central government and financial services businesses in particular are knuckling down and getting on with the job in hand,” he said.

“The good news is that organisations in a variety of sectors still see outsourcing as a long-term strategic tool and as a tactical means of delivering much-needed cost savings. Where that continues, these figures suggest there is little to fear during the second half of this year at least.”