Lee Ayling, Managing Director,EquaTerra UK Information Technology Advisory
Twice yearly, each March and September, EquaTerra polls the UK market’s leading IT and business process service providers and advisors to get a “pulse” on outsourcing and third party services market trends. This UK market study is a component of the overall global Pulse research programme and compliments the annual UK ITO Service Provider Performance and Satisfaction study.
Results from the latest survey, for the first quarter of 2010, show that the UK IT Outsourcing (ITO) market continued its recovery. While there were signs of some deal flow disruption it was not as pronounced in the UK market as we saw in the 1Q10 global Pulse survey. Overall I’m positive on the trending and activity level in the UK ITO market. We are seeing mature users of outsourcing in industries such as banking and financial services experience increased deal flow – which is often an early indicator of demand picking up in other sectors. Interestingly, we’re seeing large ERP deals and data centres and infrastructure deals become more prevalent – probably due to the hiatus of activity in this portfolio segment in 2008/2009 and hence the investment that is now needed in this space – as well as large scale enterprise application deals, such as SAP upgrades, illustrating that the business appetite to tackle areas that may need capital investment has grown from its low point in 2009.
This being said, buyers are cautious with their ITO efforts and are sensitive to making any major upfront investments or entering into any deals that do not have timelines or early benefits clearly and realistically defined. We are seeing some continued elongation of deal decision timescales, however, this is a natural result of what is being sourced – which is more complex than the tactical buying seen in 2009.
Looking to the balance of 2010 we expect to see ITO demand continue to grow. While the UK economy continues to improve it is far from stable and buyers continue to closely scrutinise any IT areas to reduce current operating and future investment costs. Further, as buyers need to make more investments in IT hardware and software, after two years of minimal investment, they are looking more closely at how outsourcing can support bringing in these new investments. So while we see IT budgets growing slightly in 2010, the proportion of IT spend going to outsourcing and other forms of third party services will continue to grow faster than overall budgets.
The full UK Pulse survey results report and webcast are available to download now by clicking here.