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UK IT outsourcing still buoyant thanks to mega-deals in H109

15 июля 2009

The UK IT outsourcing (ITO) market continues to present opportunities for large providers at the top end of the market, according to new research from global advisory and consulting firm Ovum. However smaller and niche suppliers are facing the toughest of conditions as opportunities fall into the hands of the largest players.

Ovum’s report titled, “UK IT outsourcing: opportunities in a recession”,shows that the ten biggest UK ITO providers have boosted their total contract value (TCV) of ITO deals signed in the first six months of the year by an impressive 31%. This is due to a combination of some new megadeals entering the market (BT’s £500m contract at the National Health Service, IBM and CSC’s c£300m deals at the Government’s Identity and Passport Service, and a £685m deal for HP-EDS at insurance giant Aviva) as well as many smaller sized deals that are increasingly encompassing a broader range of services.

John O’Brien, senior analyst and author of the report says: “The UK public sector in particular continues to let significant contracts such as for ID cards, with others such as the Environment Agency still to come. However this is more a culmination of existing procurements than new initiatives.”

Other vertical sectors such as financial services, pharmaceuticals/life sciences, retail and travel are showing active interest in ITO too. They are also under heavy financial pressure as a result of the recession. Recent £20m+ ITO deals with IBM at the Carphone Warehouse, CSC at Virgin Atlantic, and with Xerox at nationalised bank Northern Rock, are encouraging signs of such activity coming to market.

O’Brien continues: “The UK ITO market has some residual opportunities that are reaching sign-off in 2009 – hence the continued buoyant demand in the first half of the year. But beyond that demand is holding up well as outsourcing becomes a top priority for many end users grappling with the impact of recession.”

While this is all good news for the top tier, the second and third tier players are struggling. Amid an increasingly consolidating supplier landscape (HP/EDS, Fujitsu/Fujitsu Siemens) the available deals are falling into the hands of fewer and fewer players, which have immense spending power and reach.

To succeed in the current market, suppliers are going to need to have deep pockets and resilience. Offering more for less by restructuring contracts, offering new technologies such as virtualisation and cloud computing, and providing innovative approaches to drive out further cost for their customers are key to winning and retaining business. This will require significant time and financial investment on the part of suppliers, and will be a challenge to even the most financially stable vendors.

Without a clear understanding of, and a strategic response to the challenges faced, this has the potential to spell the end for the second and third tier UK ITO market.


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