- IT outsourcing increases as organisations test new technology as economy improves
- ‘You pay for what you get’ as 68 percent say market prices are fair
- Absence of tech skills contributes to drive towards IT outsourcing
A study of more than 490 contracts worth £10 billion suggests that the desire to improve customer satisfaction is a major factor behind many organisations’ decisions to outsource key technology-based services. Detailed analysis of current corporate IT spend also goes on to reveal that, as the economy improves, organisations are determined to invest in emerging technologies if they believe it will boost customer services.
Published today by KPMG, the 7th annual ‘Service Provider Performance and Satisfaction’ study reveals a 20 point increase in the ‘search for quality improvement’ since the issue was first raised in 2009, as 48 percent of respondents admit to basing decisions to outsource on a desire to improve service levels. With many organisations still short of key staff due to cutbacks over the past 5 years, it appears that organisational capability to deliver improvements remains impaired and this is why 56 percent also cite ‘the need to access skills’ as an influential factor behind their decision.
“The impact of a marketplace dominated by customers demanding more for less, combined with a decline in the number of staff able to meet these high standards, means that the pressure to deliver is stronger now than at any time in the past few years. Against this backdrop there is little wonder outsourcing looks set to remain a large part of IT spend in the UK, but the fact that organisations are delegating operational activities does not give them an excuse to delegate accountability,” says Jason Sahota, director in KPMG’s Shared Services and Outsourcing Advisory team.
It is clear from the study that UK organisations are concerned about their long-term ‘technological know-how’. According to the latest findings, 77 percent of respondents confirmed they intend to continue to outsource at the same rate as current levels or increase levels of outsourcing. Almost half (45 percent) claimed they will ‘certainly’ or ‘probably’ increase IT outsourcing over the next 12 months, a figure that has more than doubled from 19 percent, last year.
Yet KPMG’s report suggests that as IT outsourcing expands, there will be an end of ‘out of sight’ agreements as business mindsets shift from a determination to ‘find the cheapest market at all costs’ to one of having closer control over outsourced functions. This year, for example, just 23 percent intend to expand global outsourcing for customer service management programmes – down from 39 percent in 2012.
It seems that the shifts in attitude stem from a desire to see IT service levels improve. Asked to rate the performance of their IT service provider, overall satisfaction remains high at 79 percent, but the latest figure represents an 8 percent drop on this time, last year. It is not enough of a fall, though, to prevent organisations from recommending their providers to industry contacts, with 47 percent saying they’d be happy to promote their suppliers to others Satisfaction levels were also assessed according to price. At 68 percent, the proportion of those accepting that market prices were ‘about right’ was broadly similar to 2012 (69 percent), suggesting that buyers have moved away from the belief that the lowest price always represents best value.
This year’s study also considers the growing impact of cloud-based technologies on the IT outsourcing market. Findings show that organisations are increasingly adopting cloud strategies in addition to established outsourcing activities. 72 percent, for example, see cloud as complementing traditionally outsourced services. A further 64 percent of organisations say they have either adopted cloud technologies already, or will do so before the end of 2014.
Sahota concludes: “The temptation may be to shift key services beyond the walls of an organisation, but there is a growing realisation that this does not shift accountability. On the contrary, many organisations want to see aspects of outsourced operations happening closer to home, particularly when it comes to trying out new technologies. This way it is easier to monitor, adjust actions if customer needs change and quicker to make changes if things go wrong.”
Mike Petrook, KPMG Press Office
020 7311 5271 (t), 07917 384 576 (m) or email@example.com
Notes to Editors:
About the study
£10bn valuation of outsourcing industry based on 490 contracts outlined by respondents sharing their actual contract value for outsourcing projects and also how much their total IT spend is each year. All the actual contract value figures were added together to identify £10bn as a total figure and all the IT spend responses were accumulated, reaching a figure of £29bn for total IT spend.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.