UK companies are stepping up their outsourcing to cut costs during the recession.
Last year British businesses spent 12 percent more on IT outsourcing and six percent more on business process outsourcing than they did in 2007, according to a report by the National Outsourcing Association.
Commenting on the report, published yesterday, NOA chairman Martyn Hart said in a statement: "Outsourcing has traditionally been seen as a cost-saving mechanism for business, so in times of economic turbulence it is not surprising that the industry is continuing to grow."
The uptake in new contracts was echoed by a separate study by Pierre Audoin Consultants, which found that software and IT services revenues from the UK in 2008 had increased by three percent over 2007. Unfortunately when the fall in the value of the pound was taken into account it worked out as an 11 percent fall in revenues.
Nearly 20 percent of the 50 outsourcing suppliers surveyed by the NOA said the length of contracts had decreased over the last 12 months, while 70 percent said the average value of contracts had stayed the same.
Hart expressed concern that increased demand for quick-win cost-cutting projects could increase the number of "higher-volume low-cost contracts, over shorter time frames", which he said were more likely to fail.
The main source of revenue for 40 percent of suppliers was expanding business with existing clients.
Looking ahead, 40 percent of outsourcing vendors told the NOA they were more confident in the market than they were in 2008.
Talkback
Difficult economic times predictably result in firms looking for quick cost saving solutions. Therefore outsourcing is often seen as offering an ideal means of reducing costs. But companies need to be cautious about the almost inevitable customer backlash as levels of service are not guaranteed. Business leaders need to look closer to home for cost savings, streamlining their businesses with simple, cost effective, automated systems which can have a dramatic effect on the bottom line.
Many UK businesses are lacking behind in their back office processes. The extremely labour intensive procedure of account reconciliation for example is still done manually in large parts but is precisely the type of process that is ripe for automation - and cost saving.
Michael Coppack, Adra Match (www.adramatch.com)