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Transformation feeds outsourcing surge

New contracts and renewals to see 10% increase

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Public sector spending on ICT and business process outsourcing (BPO) is ready for a surge in 2008, according to research from Kable.

New contracts and renewals are set to produce a 10 per cent increase in business to £5.79bn in 2008, followed by growth rates of 6-8 per cent over the next four years, to take the total to £7.53bn in 2012.

In its latest report, ICT and business process outsourcing in the UK public sector to 2012, Kable says that while 2007 is a slack year for new business, it is proving critical for beginning the sales and buying process for future outsourcing.

The near term growth will be driven by major national projects in the security area and by the move to outsourcing in local government.

In the longer term, criminal justice is expected to exert a strong influence as more police forces look to outsourcing. Indeed, the sector will surpass healthcare as the third most important in the market, accounting for £1.26bn in 2012.

Central government will remain the largest sector, however, with business totalling £2.04bn at the end of the period, with local government second with £1.79bn.

The campaign for the transformation of public sector business is also expected to create a big shift in the balance between the outsourcing of ICT functions and business processes. The former is much more important this year, accounting for £3.71bn of business against £1.56bn for BPO. But up to 2012 the growth rates for ICT will be more modest, taking it to £4.48bn against £3.04bn for BPO.

The report says the exceptionally high growth rates in transformational outsourcing will not be sustained as the market matures, but that in the longer term there will be further moves towards shared services, particularly in central government.

Kable associate director Seyi Agboola commented: "This is a cyclical market and things are relatively quiet compared to how they have been and how they will be. So the decisions that suppliers take over the next two years will determine the next generation of leaders in this market."

Anyone interested in obtaining a copy of the report can contact Rachel Colby on 020 7061 3240 or rachel.colby@kable.gov.uk.

This article was originally published at Kablenet.

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