UK IT outsourcing spend up by 15 per cent to £3.44bn, says arvato report

Energy and utilities sector leads the way, with most jobs staying in the UK

IT outsourcing is on the up, with total spend on these services up 15 per cent year-on-year to £3.44bn, a new report has revealed.

According to the UK Quarterly Outsourcing Index 2014 by business outsourcing provider arvato, the most in-demand IT outsourcing service is multi-scope infrastructure management, which received £899m in spending.

The rise in external contracting comes despite warnings from IT leaders that outsourcing IT teams can harm a business.

Application management saw £772m worth of spending during 2014 while network management contracts saw firms spending a total of £485m on network management contracts. The report also reveals that the biggest industry for IT outsourcing contracts was the energy and utilities sector, with deals worth £1.05bn.

The arvato report also found that only eight per cent of outsourcing contracts signed by UK firms over the 12 months involved services being transferred offshore.

"Outsourcing has mistakenly become synonymous with offshoring, yet our research demonstrates that UK delivery is continuing to play a fundamental role in the industry as customer requirements become more sophisticated," said Debra Maxwell, managing director of arvato UK.

"This sophistication is perhaps most easily recognised in the field of customer services. Traditionally typified by voice and email communication, in 2014 it became the norm for these functions to be integrated with more sophisticated digital services like web chat and social media management," she continued.

"Offshoring will always have a role to play in meeting certain business' needs but the demand for more sophisticated solutions, combined with salary inflation in traditional offshore locations, means UK-based delivery is set to continue to dominate," Maxwell added.

In total, £6.65bn worth of outsourcing deals were signed across the UK public and private sectors last year, the report said.

Writing for Computing in November, Kit Burden, partner and global co-chair of technology sector at law firm DLA Piper, explained how outsourcing contracts can be designed to promote innovation.