NEWS
UK PUBLIC SECTOR OUTSOURCING MARKET OUTSTRIPS COMMERCIAL SECTOR
Public Sector Spend of £51 billion almost double that of UK Commercial Sector W
ith government entities seeking to do more with less, the UK public sector is spending almost twice as much on outsourcing as the commercial sector, a new study by Information Services Group (ISG) (NASDAQ:III), a leading technology insights, market intelligence and advisory services company, has found.
New ISG research reveals that the total contract value (TCV) of public sector outsourcing agreements reached £51 billion in the latest two-year period, compared with £30 billion for the commercial sector.
In that time, a total of 585 public sector contracts were awarded. Although volumes are lower than those of the commercial sector (726 contracts), this number represents nearly a threefold increase in public sector activity since the pre-recessionary period (2006-2007). While the commercial sector has seen a shift toward smaller contracts over the past two years, the UK public sector has seen a contraction in the number of smaller contracts, from 46 percent of the market in 2010-2011, to 40 percent in the period since 2012. While the number of large contracts remains steady, growth in the sector is largely in “mid-market” contracts, those valued at between £15 million and £30 million. Indeed, 22 percent of public sector outsourcing awards now fall in this category, compared to 18 percent in the prior two-year period.
The largest public sector contracts awarded since 2012 are: Client
Staffordshire County Council Birmingham City Council
Department of Energy and Climate Change Ministry of Defence
Oxfordshire County Council Lancashire County Council Leicestershire NHS Trusts Ministry of Justice
Criminal Records Bureau Foreign and Commonwealth Office
Service Provider
Capita Carillion Telefonica CSC
Carillion BT
Interserve Capita TCS
Computacenter
Mansell concluded, “The UK public sector is a significant market in its own right and is the largest public sector market outside of the United States. Looking ahead, we expect to see continuing growth in public sector outsourcing activity as initiatives like Value for Money
Total Contract Value (£)
600M+ 600M+ 600M+ 600M+ 600M+ 600M+ 600M+
300M-599M 300M-599M 300M-599M
Scope
Industry-specific BPO Industry-specific BPO Infrastructure ADM and HR Facilities Management Infrastructure Facilities Management Industry-specific BPO Industry-specific BPO Infrastructure
make outsourcing a more attractive proposition, while the Government’s G-Cloud initiative opens the market to a greater number of specialist service providers.”
For additional information, visit
www.isg-one.com
Luke Mansell, Partner, ISG, said: “The recession and the subsequent focus by the public sector on cost reduction and value for money has driven a renewed interest in outsourcing and its role in helping deliver efficient, cost effective services. While the commercial sector has moved to smaller contracts over the past two years, the public sector has seen a rise in mid-market contracts, mainly as a result of the complexity of the services required and the lack of appetite to utilize cheaper, offshore resources. It will be interesting to see, over the next two years, whether the drive to procure services from small to medium enterprises via the G-Cloud will cause a shift to smaller contracts.” The G-Cloud framework is an online marketplace that allows the UK public sector to purchase cloud services covering infrastructure, platform, software and specialist services.
The ISG data also show a shift in the pattern of contract awards within the public sector; Central Government now accounts for 42 percent of public sector TCV, followed by Local Government (30 percent) and Healthcare (13 percent). In the period prior to the recession (2007 to 2008), these three segments each made up around 28 percent of the total market. Although Healthcare has seen its market share fall as the size of the public sector market has increased, the amount of actual spend in that segment has increased.
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PUBLIC SECTOR ESTATES MANAGEMENT • JULY/AUGUST 2014
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