Public sector spends up on outsourcing
Outsourcing has increased massively in the public sector, due to IT contracts, according to new research.
New research shows that public-sector buying of outsourcing is concentrated more on IT outsourcing than business processes
The latest research from Kable has highlighted a massive increase in public sector outsourcing, with IT contracts driving the increase in value.
Kable's report, Public Sector Outsourcing 2000-06, reveals that by 2005-06, the total value of all UK public sector IT and business outsourcing will reach £46.5bn. This represents a growth of 228 percent in the market since 2000-01.
IT has increased as a proportion of the total spend on outsourcing. In 2003-04, IT accounted for 56 percent of the total market, followed by communications outsourcing and business process outsourcing, each of which account for 19 percent of the market. Managed services has the lowest proportion of spending, at just over £2bn.
Karen Swinden, Kable's head of forecasting, commented: "There seems to be a general consensus that BPO is fuelling the outsourcing market, but Kable's analysis of public sector contracts clearly demonstrates that IT is playing the leading role. This is forecast to continue for the next few years."
LB Harrow has provided a recent example of this trend. On 17 June, 2004, the borough went to tender for a strategic partner to help it enhance its ICT services in a 10 year deal worth £100m.
The council said it regards a strategic partner as an "essential element" in the delivery of its ICT strategy. It plans to develop an enterprise resource planning environment, implement a customer relationship management system and introduce standardised management information systems.
In February, Birmingham CC embarked on the largest local authority IT outsourcing programme in the UK, with a scheme worth more than £500m to cover business transformation, the running of a contact centre and other IT services.
Kable's research shows that the biggest rise in outsourcing has been in the health service, where outsourcing contracts rose by 54 percent from 2002-03 to reach just under £35.5bn by the end of 2003-04, mainly as a result of the National Programme for IT.
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