Public sector outsourcing spikes in Q3 2017

The public-sector outsourcing market experienced its strongest quarter in 2017 between July and September, as government bodies renewed investment in transforming back-office services, according to the Arvato UK Outsourcing Index.

The research, compiled by business outsourcing partner Arvato and industry analyst NelsonHall, found that local authorities and central government departments procured contracts worth £723m in Q3, more than the first two quarters of the year combined (£722m).

Large back-office business process outsourcing (BPO) deals accounted for the majority of spend, as average contracts values rose to reach £42m, up from £8m in the same period last year. The research revealed that revenues and benefits, HR and finance and accounting were the most popular functions outsourced across local and central government in the quarter.

The increase in public sector activity means government buyers accounted for 70% of all outsourcing spend in the UK between July and September, according to the findings.

Overall, deals worth £1.04bn were agreed across the UK public and private sectors between July and September, representing a six per cent year-on-year rise.

Despite the rise in public sector activity, the third quarter saw a slowdown in overall outsourcing spend, after a strong performance in the first six months of the year. Outsourcing agreements worth £2.83bn and £2.84bn were procured across the public and private sectors in Q1 and Q2 respectively.

Debra Maxwell, CEO, CRM Solutions UK & Ireland, Arvato, said: “Government spend on transformation has buoyed what is traditionally a more subdued period of the year for the UK outsourcing market.

“This reflects the continuing pressures government bodies are facing. Delivering meaningful transformation in the back-office is a clear objective for both central departments and councils in terms of freeing up the resources they need to strengthen public facing services.”

The Arvato UK Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm Nelson Hall, in partnership with Arvato UK. The research is based on an analysis of all outsourcing contracts procured in the UK market during Q3 2017.

Other headlines from the Q3 2017 Index include:

  • A total of £774m was spent on business process outsourcing (BPO) deals, representing 75 per cent of the overall UK outsourcing spend.
  • The value of ITO contracts accounted for 24% of the UK market, with contracts signed worth £244m.
  • Combined BPO and ITO agreements signed during the period were worth £18m, accounting for 1% of the overall spend.

Related reading