According to the recently released Arvato UK Outsourcing Index₁, the public sector outsourcing market soared to a three-year high in 2018 as government organisations signed contracts worth £2.9 billion,
The research, compiled by business outsourcing partner Arvato and industry analyst NelsonHall, showed that the total value of deals signed by public sector bodies rose 61 per cent year-on-year, from £1.8 billion in 2017 and £2.5 billion in 2016.
A surge in technology investment was behind the strong performance, with spending on IT outsourcing (ITO) agreements reaching £2 billion in 2018 – an 84 per cent year-on-year rise, according to the findings.
Central departments accounted for 95 per cent (£1.9 billion) of the ITO spend as they focused on procuring deals for data centres, cloud infrastructure and application management services.
However, the average value of central government contracts fell by eight per cent last year to £35.4 million. The report maintains that these organisations focused on smaller, more productised deals for technology.
Furthermore, local government buyers remained less active in 2018, with total contract value falling to £176 million from £258 million in the previous year.
Debra Maxwell, CEO of Arvato UK and Ireland, said: “The government’s focus on technology investment marks an acceleration towards delivering digital by default, and demonstrates that public sector bodies recognise outsourcing as a key strategy to deliver much-needed efficiencies and to boost productivity.
“Our findings show that procurement teams are increasingly moving away from long-term, high-value contracts, choosing instead to access services through new government frameworks, such as G-cloud, to deliver the transformation they need at speed.“
The strong performance in the public sector resulted in a sharp increase in the number of deals signed across the UK outsourcing market last year, with 148 procured compared to the 104 in the 12 months previous. Government departments accounted for more than half (58 per cent) of these.
The analysis shows that customer service outsourcing contracts accounted for 43 per cent of all BPO deals signed in the UK last year, as organisations focused on enhancing the customer experience.
Businesses and public sector bodies spent a total of £491 million on this type of contract, investing in webchat and online customer support systems, call centre facilities and social media customer management.
Source: ₁ https://www.arvato.com/uk/insights/outsourcing-index/2018-full-year-review.html