This blog usually explores opportunities in Eastern Europe, but given that it is the first month of 2011, it’s worth exploring some of the key trends taking place in the most mature European outsourcing market – the United Kingdom.
Outsourcing advisory firm Equaterra just published their key trends for the UK market in 2011, based on examining 650 outsourcing contracts with over 200 companies, worth around £14 billion. Given that so many UK contracts have been examined, it was possible for the Equaterra researchers to draw some conclusions about how Western European customers are behaving, and what they will want in 2011.
Trend 1: Economic conditions are still tough, forcing companies to consider more offshore outsourcing. Eighty-seven per cent of companies will continue offshoring at present or higher levels, but sixty-one per cent will increase offshoring.
Trend 2: Cost reduction continues to be the key driver for offshoring, but financial flexibility is becoming far more important – up fifteen per cent on the previous year.
Trend 3: Global sourcing of services is far more accepted – with over seventy-five per cent of all companies using outsourcing applying some kind of offshore delivery model.
Trend 4: Multisourcing is increasing – with large-scale single-supplier contracts usually linked to low satisfaction with the contract.
Lee Ayling, EquaTerra’s Managing Director, IT Advisory UK, commented: “As in previous years, the 2010 study provides deep insights into the changing dynamics of the UK outsourcing market. One of the many points of note is that outsourcing contracts which deliver cost savings alone do not lead to higher client satisfaction. But successfully delivering cost savings plus another driver, such as access to skills or time to market, does positively impact general satisfaction – highlighting that both end users and service providers should not focus on price alone before and during an outsourcing relationship.”
For the European supplier community, the message is clear, cost remains important, but flexibility is the key. If outsourcing can create more flexible service levels and improve cash flow through more flexible financial models then it will be regarded a success.