IT outsourcing set for growth

Friday 9 August 2013

IT contractors belong to one of the fastest-growing sectors in the UK, and one in which talent shortages are increasingly serious. These are the factors that make them so highly sought in the job market and are reflecting in the rates they can charge. It looks as though this will not be slowing down in the near future, either, since a new survey has shown that a large number of firms are looking to increase their outsourcing of IT projects.

A study by Whitelane Research has found that as many as 37 per cent of the businesses spending the most on IT in the UK are looking to increase their practice of IT outsourcing. A similar proportion said they anticipated no change in the amount of outsourcing that was carried out, meaning that the vast majority of major clients are offering either stability or growth for contractors with IT expertise.

The survey took in 230 firms and 700 unique IT contracts, together worth more than £15 billion. But in spite of the value of these lucrative deals, seven out of ten firms said that the main appeal of outsourcing was actually cutting costs. Still, there were other drivers of outsourcing. Almost half of all firms said that either focusing on their core business or improving service quality and access to resources was pushing them to seek external parties to meet their technological needs.

For the most part firms seem happy with the service they receive from contractors, too. Among the organisations surveyed, 85 per cent said they were at least “somewhat” satisfied with their external IT support, testament to the high number of skilled and talented professionals working as contractors in the the UK today. In turn, this has meant that a remarkably high proportion of contract renewals have been achieved. Just 22 per cent of businesses decided not to renew one or more of their contracts with their existing suppliers, a figure which translates to less than seven per cent of all contracts.

Indeed, the desire to cut costs combined with good existing working relationships has resulted in widespread renegotiation with contractors. Just under half of respondent organisations had agreed new terms with vendors in the last year. In fact, 80 per cent of these firms had managed to reduce the costs of their contracts even further and secure more favourable terms and conditions.

Just last month Iain Monaghan, IT contract expert at law firm Pinsent Masons, told Out-Law that companies should never feel that they cannot update existing agreements with contractors.

“Contracts need to change to reflect customer circumstances, the economic environment and developments in technology,” he said. “That requires a degree of engagement between buyers and suppliers so buyers can keep suppliers informed of their business needs, and suppliers can best deliver services to their clients and inform them of the limits of what they can supply at the price customers are willing to pay.”

Easing the financial pressures on firms is the key to forging better relationships, it appears. According to Whitelane, contractors looking to improve the satisfaction levels of their clients can do so by taking a proactive, creative approach to seeking out opportunities to make businesses more efficient and less expensive to run.

By Victoria McDonnell

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