Public sector outsourcing spend plummets

The public sector accounted for just 7% of the UK’s total spend on business process outsourcing (BPO) and IT outsourcing (ITO) in the first three months of this year.

Brexit uncertainty continues to subdue the market, according to research conducted by NelsonHall for customer relationship management (CRM) supplier Arvato’s Outsourcing Index.

According to the findings, only £51m of the £699m spent in the first quarter of 2019 was invested by public sector organisations. In the same quarter last year, the public sector spent £91m on ITO and BPO.

Total outsourcing spend was 15% down on the same quarter a year earlier.

The biggest spenders were the telecoms sector (£446m) and the financial services sector (£105m).

IT services spending dominated investment in the quarter, accounting for 86% (£601) of the total spend, with £97m invested in BPO.

“Overall, we’ve seen a more subdued market in the first quarter of 2019,” said Debra Maxwell, CEO of Arvato CRM Solutions UK. “Ongoing Brexit uncertainty and the impact of GDPR [General Data Protection Regulation] implementation is continuing to influence and delay purchase decisions, so it is to be expected that procurement teams will put buying decisions on hold, particularly in the public sector.”

Brexit uncertainty had a major impact on spending in 2018, according to an Arvato Outsourcing Index for that period. It found that UK businesses spent 60% less on ITO and BPO in 2018 than in 2017 because of the uncertainty around Brexit.

In contrast to the latest quarterly findings, however, the Outsourcing Index for the whole of last year saw a 68% rise in public sector IT and BPO spending (£2.9bn) compared with 2017.

Peter Schumacher, CEO of management consultancy the Value Leadership Group, said IT service spending in the UK was still strong, as evidenced by suppliers such as Tata Consultancy Services (TCS) experiencing over 22% growth in the UK last year.