THE 2021 UK IT Sourcing Study, conducted by Whitelane Research in collaboration with PA Consulting, the consultancy that’s bringing ingenuity to life, investigates more than 600 unique IT sourcing relationships and more than 800 cloud sourcing relationships held by over 250 participants of the top IT spending organisations in the United Kingdom.
The findings reveal that once again, cost reduction comes out top as the key driver for UK organisations wanting to outsource and a third of all organisations are looking to outsource more. Research also found that cloud service provider satisfaction is higher than the percentage of respondents that are satisfied with their IT service providers. COVID-19 has made a huge impact in the world; however, it has not had a knock-on impact on service delivery quality which has been largely unaffected, and one third of participants even feel that during the past year it is improved to a degree.
Key findings from the 2021 study include:
- Over the next two years, 65% of all respondents confirm they will outsource at the same rate or more, with one third citing they are planning to outsource more. Insourcing plans remain stable in the UK with 16% of organisations planning to outsource less, driven predominantly by the need to build and retain Intellectual Property to drive business.
- By industry, the manufacturing and chemicals sector, and the financial services sector, are planning to increase their outsourcing the most, scoring 59% and 46% respectively. In contrast, only 21% of public sector participants are planning to increase their level of outsourcing, while the sector also has the highest percentage planning to insource, with 36% (up significantly by 17% from 19% in 2020 and more than double the overall UK average).
- Cost reduction is once again the number one driver for organisations in the UK planning to outsource more (cited by 66%). More scalability to business needs is ranked second with 56%, (up 10% since last year), followed by focus on core business with 51%.
- Overall, respondents are satisfied with their IT service provider(s), with 89% of all 628 IT sourcing relationships being rated as satisfactory. Of the 27 IT outsourcing service providers, TCS achieves first place on the ranking for general satisfaction with a score of 83%, jointly followed by Hexaware, Mindtree and Coforge (NIIT) (all three at 80%). The average satisfaction has increased by four percentage points from 68% to 72%, with the majority of service providers seeing their scores rise.
- Cloud provider satisfaction is higher compared to the IT service providers, with 96% of all 878 cloud sourcing relationships being rated as satisfactory. Amazon Web Services (AWS) is ranked number one for infrastructure cloud platforms with 80% while Microsoft 365 remains top of the software cloud platforms ranking with 82%. All the cloud providers have seen their scores increase significantly since last year with the average satisfaction for both domains increasing by 9% overall, suggesting providers have done a good job meeting the unique challenges presented over the last year during the pandemic.
- Service delivery quality has been largely unaffected by COVID-19, with 54% of participants confirming there has been no change to the quality; one third said it had improved to a degree. Across the nine key performance indicators (KPIs) the survey uses to evaluate and rank IT service providers, account management has the highest average score with 78% (up 7% from 2020) with over half of the providers seeing significant improvements of 5% or more. In contrast, innovation continues to be the lowest performing KPI with an average score of 62%.
- 35% of participants currently outsource managed (cyber)security services, with two thirds declaring themselves to be satisfied to very satisfied with their providers. Use is higher in the energy and utilities sector with 62%, while the public sector indicates the lowest level of outsourcing with 24%. More than half of service providers (57%) suggest that clients can make very significant improvements to their (cyber)security management skills, with only a small minority (4%) suggesting no improvement is necessary (compared to the client self-assessment of 30%).
Manish Khandelwal, IT Transformation expert at PA Consulting, says: “It is evident that industry has embraced the changes that have come about since COVID-19 and used the opportunity to reduce Opex, introduce new ways of working, focus on innovation and improve productivity. COVID-19 accelerated the pace of digital transformation and customers, service providers and employees have all have come together and demonstrated unprecedented agility and resilience. As businesses look to grow post-pandemic the demand is expected to increase, digital transformation across all industries will speed-up and the war for talent will only intensify. This is good news for those that can differentiate – particularly those that can seamlessly integrate core IT outsourcing solutions with cloud platforms and build attractive employee value propositions to hold and attract the best talent.”
The UK study is part of Whitelane’s annual IT sourcing studies. We interview sourcing executives (CIOs/CFOs or their direct reports) about their outsourcing plans and their opinions on service providers. The studies are conducted in 13 different European countries and provide a comprehensive overview of the IT outsourcing landscape in each country. The survey shows the main outsourcing trends, evaluates and ranks the main IT service providers based on a set of key performance indicators (KPIs), and analyses trends in outsourcing governance and the impact of new technologies.