Businesses make a strong return to investment in outsourced services

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Three recent reports, relating to each of the US, the UK and the EMEA region, revealed that the private sector has increased its spending on outsourced services during 2010 and the first quarter of 2011.

A report by Gartner on US businesses’ IT spending indicates that 3.1% more was spent in 2010 than 2009, and in the UK, a recent CFO World report has revealed that the outsourcing industry represents a massive eight percent of the UK economic output, with 20% of outsourcing revenues attributable to IT and data-related outsourcing. The third report indicates that throughout EMEA, sales of BPO services during the first quarter of 2011 were 65% higher than in the same period last year.

The extent of recent investment has been hailed as a sign of businesses’ willingness to invest in outsourced and IT services despite an uncertain economic outlook. In 2009, IT-related spending had been 5.1% down from 2008, but during 2010, each of the top five global IT service providers saw revenue growth, with Indian service providers in particular seeing big increases to their bottom lines and collectively increasing their market share.

In the UK, despite the ratio of public to private sector outsourcing being 40:60, IT and data-related outsourcing turnover saw only 16% of its revenues from the public sector. Gartner’s report reveals that Government spending globally showed the lowest increase in IT services spending in 2010, at 1.6%. In our previous blog post, we noted the UK Government’s stated ambition of investing in new technologies and innovative services, widening the number and type of suppliers from which it procures, and streamlining the process of applying for government investment in order to promote growing UK businesses. We wait to see if and when this initiative will trickle down to the bottom lines of UK IT and technology providers.

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